Markets had plenty to digest last week. Headline inflation cooled more than expected, marking the largest monthly drop since April 2020. But the relief was short-lived as renewed U.S.–Iran hostilities unsettled global markets, sending oil prices higher and pressuring AI‑linked semiconductor stocks. At the same time, Q2 earnings season kicked off on a strong note, leaving investors to weigh solid corporate results against rising geopolitical risk.
Stock Index Performance
The S&P 500 declined 1.55% last week. The Nasdaq 100 slumped 4.13%. The Dow Jones Industrial Average edged down 0.93%.
Inflation Cools, but the Fed Remains Cautious
June’s Consumer Price Index (CPI) came in at 3.5% year-over-year, giving markets a bit of breathing room. The economy continues to show resilience, with growth tracking near 2.3% for the year. Still, Federal Reserve officials are divided on the pace of future inflation declines, and policy rates are expected to remain steady for now. The latest geopolitical developments add another layer of uncertainty to the outlook.
Oil Prices Rise Amid U.S.–Iran Tensions
Renewed conflict between the U.S. and Iran disrupted shipping through the Strait of Hormuz, pushing Brent crude toward one‑month highs. Domestically, gas prices rose roughly 10 cents a gallon during the week. Some policymakers worry that higher energy costs could slow the progress on inflation, even as longer‑term demand forecasts point to possible relief ahead.
Strong Bank Earnings, Stumbling Semiconductor Stocks
Major banks delivered solid earnings, signaling a healthy consumer and stable credit conditions. Mid‑week, markets saw a lift from both earnings results and softer inflation data. Retail and travel stocks helped lead the gains. Meanwhile, semiconductor and AI‑linked stocks experienced sharp declines later in the week as investors took profits and re‑evaluated elevated valuations.
The Week Ahead
Investors will receive key U.S. economic data in the coming days. Weekly jobless claims are due Thursday, July 23, followed by flash business activity readings and June new home sales on Friday. These releases will help shape expectations around how long elevated interest rates may persist. Q2 earnings season also continues, offering insights into whether profit growth and market leadership are extending beyond the AI‑driven mega‑cap technology sector.
Please feel free to reach out if you have any questions or would like to discuss these developments further.