Market Rundown July 20 - 26

From the last week, volatility remains elevated as tensions in the Middle East and strait of Hormuz are a concern to investors. Oil prices have increased from the low $80s to near and above $100 a barrel which is also leading to an increase in gas prices. This is having a negative effect on the average consumer. The is real concern on the feasibility of a cease-fire in the region. This has also led to treasury yields are at multi-year hights. The 2-year treasury yield rose above 4.3% for the first time in over a year

The week started off rocky in the market as breakthrough in Chinese AI models, the Kimi K3 by Chinese startup Moonshot AI, performed competitively against leading US AI frontier models. This pushed the Philadelphia Semiconductor Index into bear-market territory as it was down over 20% from its June peak.

Wednesday saw a rally as bank-led earnings got off to a strong start. However, concerns remain for the capex spends of the technology sector. OpenAI raised its projected computing spend to roughly $750 billion through 2030, AMD signed a multibillion-dollar chip deal with Anthropic, and Alphabet dropped 7% on higher capex guidance. Investors are beginning to worry about the large capex at the Mag7 and the delayed pay-off for these expenses. Inversely, Apple continues to reach new highs as they are seen as a main beneficiary of these capex spendings. They are going to be the consumer facing beneficiary of AI as they have a large user base with their iphone and apple products.

The labor market remained a consistent bright spot, with jobless claims repeatedly cited at their lowest levels since 1969 even as equity volatility picked up. Finally, housing coverage pointed to a market in slow recalibration – nationally soft but stabilizing, with builders leaning on price cuts, incentives, and rate buydowns, waning buyer confidence cited as the main demand constraint, and continued consolidation (Sumitomo-Tri Pointe, Berkshire-Taylor Morrison) suggesting patient capital sees value where public markets do not.

Themes to Watch:

• Small caps as a lower-correlation, more AI-diversified complement to a Big-Tech-heavy S&P 500

• Cheap valuations in Energy, a rotation of capital out of overbought Semis and into lagging Software/Big Tech names