Global stock markets are heading toward a weekly decline on Friday, with US equities taking a brief pause after experiencing their largest single-day drop this month. This reprieve comes as Brent crude oil prices retreat below $100 per barrel and bond yields stop their upward climb.
As of writing, Dow futures are up 0.46%, S&P 500 futures have risen 0.25%, and Nasdaq futures are trading 0.15% higher.
The MSCI global stock index fell 0.3% and is on track for a second consecutive weekly loss. In Europe, the Stoxx 600 index rose 0.5%, led by software stocks after German software giant SAP reported better-than-expected cloud business sales. This followed a drop of over 1% in the previous session.
In Asian markets, the MSCI Asia-Pacific index (excluding Japan) tumbled 2.5%. Key market performances include: Japan's Nikkei 225 falling 2.7%; South Korea's KOSPI index plunging 5.7% for its fifth consecutive weekly decline; and Hong Kong's Hang Seng index dropping 1.7%.
AI Investment Returns Questioned
S&P 500 futures are up 0.3%, but the index is still on course for its first two-week losing streak since the early days of the Middle East war. Nasdaq 100 futures edged up 0.05% after the index suffered its worst day in a month on Thursday, falling to its lowest level since early May.
Intel Corp (NASDAQ: INTC) is up after reporting a strong revenue forecast, but most chip stocks are falling in pre-market trading. Large tech stocks, including Alphabet Inc (NASDAQ: GOOGL) and Amazon.com Inc (NASDAQ: AMZN), are staging a modest rebound after a sell-off on Thursday.
Ramjee from Pictet Asset Management noted, "These companies are undertaking more capital expenditure, which essentially makes the US large-cap tech sector more sensitive to interest rates, especially in an environment where bond yields, particularly real yields, are rising."
Tech stocks have been under sustained pressure this week as investors grow increasingly concerned that tech giants are spending tens of billions on artificial intelligence without sufficient evidence that these investments will generate corresponding returns.
Despite the market rebound, risk appetite remains low. Over the past week, global markets have been continuously impacted by the escalation of the Iran war and renewed investor worries about whether massive AI investments will yield adequate returns.
Critical Weekend Approaches
Investors are now entering a critical weekend, with fears that the Middle East situation could escalate further. Next week, earnings reports from several AI super-companies will also become a market focus.
Michael Hewson, senior market analyst at iForex, expressed surprise at the market's resilience despite the significant rise in oil prices.
He stated regarding the upcoming corporate earnings, "Next week will be a very important week that could determine the market's next direction. There is now a clear increase in concern about capital expenditure, especially in the AI field, with investors increasingly focused on: what kind of returns can these investments actually generate?"
Trump Threatens 'Major Military Punishment'
Earlier, Brent crude rose to its highest level since May due to safe-haven buying, but subsequently fell back below $97 per barrel. WTI crude oil futures dropped 1.75% to $90.62 per barrel.
An attack on a Saudi oil tanker in the Red Sea by Houthi rebels, who are closely aligned with Iran, has sparked concerns that global oil supplies could be disrupted again through this key shipping channel. Simultaneously, Iran's near-closure of the Strait of Hormuz further exacerbates energy supply risks.
US President Trump has threatened "major military punishment" against Iran and its Houthi allies. The US military launched strikes against Iran on Thursday night and Friday morning, marking the 13th consecutive night of military action.
Analysts at ING Group commented, "The key question is at what oil price level the pressure will force the Trump administration back to the negotiating table."
Analysts pointed out that, based on historical experience of oil price rises during early conflict periods, if Brent crude approaches $120 per barrel, the pressure to de-escalate the situation could increase significantly.
For Iran, a more pressing issue is not the oil price level, but how long it can withstand a sharp drop in oil revenues under US blockade measures.
European Economic Data Boosts Markets
European bond markets also experienced a moderate rebound after several consecutive days of decline. Market sentiment was boosted by S&P Global data showing that private sector activity in the Eurozone and UK improved more than expected in July.
However, escalating Middle East tensions could once again dampen market optimism.
ING Group economist Bert Colijn stated, "If not for the renewed escalation of the Middle East conflict, the economic outlook could look more optimistic. With uncertainty returning, new (though mild) stagflationary pressures are likely to continue weighing on the Eurozone economy this summer."
US Treasury Yields Retreat
US Treasury yields also retreated from their highs for the year. The yield on the 10-year US Treasury note rose to an 18-month high of 4.7135%, accumulating a gain of nearly 16 basis points this week.
The yield on the 30-year US Treasury bond continues to approach its highest level since 2007, while Germany's 10-year bond yield—the benchmark for the Eurozone—remains near highs not seen since 2011.
JPMorgan technical analysts suggested the market might attempt to stabilize near the next support level of 4.175%. However, they stated, "We want to see signs of seller exhaustion before suggesting a reversal of the current trend."
Market data indicates traders expect global central banks are more likely to raise borrowing costs.
Currently, the market sees roughly a one-in-three probability that the Federal Reserve could raise rates as early as next week, a significant shift from a week ago. Meanwhile, a September rate hike is now fully priced in by the market.
Trump's New Tariffs Fuel Inflation Concerns
In the currency market, most major currencies held steady against the US dollar, although the dollar index is on track for its largest single-week gain in about a month.
The dollar index remains near 101.4 after hitting its highest level this month on Thursday.
Shaniel Ramjee, co-head of multi-asset investments at Pictet Asset Management, commented, "The dollar has been rising for a few days, which clearly signals that risk is building up. After staying at high levels for several days, oil prices have started to influence other markets through cross-asset correlations."
Additionally, the US government announced it would impose higher tariffs on goods from 60 trading partners, further fueling inflation worries.
Regarding tariffs, the US will proceed with building new trade barriers after the Supreme Court weakened Trump's previous tariff system.
The US will impose tariffs of 10% to 12.5% on imports from most major trading partners, the largest action since the Trump administration began rebuilding its tariff system.
The Japanese yen continues to face pressure, with the dollar-yen pair reaching around 163.79, near 40-year lows. The US Treasury has warned that excessive volatility in the currency market is not ideal.
Japan's Finance Minister has repeatedly issued verbal warnings about possible intervention in the foreign exchange market and has already implemented yen-buying operations in April and May this year. However, these measures have had limited effect as the yen has clearly breached the 160 level previously thought by markets to potentially trigger official intervention.
Gold saw a modest gain, remaining below $4100, as rising real yields and bets on rate hikes diminished the appeal of the non-yielding asset.
Global Bond Sell-Off Intensifies on Oil-Driven Inflation Fears
Soaring oil prices have reignited inflation threats, leading to another violent sell-off in global bond markets. As Middle East tensions drive international oil prices above the $100 mark, inflation concerns have resurfaced, causing a fresh wave of selling in global bonds. Investors who had previously bet on the bond market correction bottoming out are facing further losses, and major global central banks are facing a key credibility test.
The intensity of this global bond sell-off is unprecedented. The average yield on the Bloomberg Global Aggregate Bond Index, which tracks investment-grade sovereign bonds globally, has surged to 3.68%, surpassing a three-year high and reaching its highest level since the 2008 global financial crisis.
This benchmark index is currently facing its largest monthly decline since March.
If the bond sell-off persists, it could trigger a chain of risks: global debt sustainability issues will become more prominent, financing costs for global companies will rise further, and market funds may begin to rotate from equities to other assets, causing cross-asset volatility.
Fractures Widen in AI Bull Market: Analysts Advise Shunning 'Bleeding' Tech Giants, Buying Chip Stocks
Amid the collective retreat of US tech giants, Ben Reitzes, head of technology research at Melius Research, advises investors to avoid hyperscale cloud service providers like Alphabet Inc (NASDAQ: GOOGL), Meta (META.US), and Amazon.com Inc (NASDAQ: AMZN) because these companies are failing to generate meaningful cash flow.
He stated in an interview, "I still don't like hyperscale data center operators. The reason is simple: they can't generate genuinely valuable cash flow. Who cares? Buy chip companies."
On Thursday, the US tech sector faced a sell-off, with the "Magnificent Seven" stocks collectively losing nearly $800 billion in market value in a single day. Among them, Alphabet's Google fell 7%, and Tesla plummeted about 15%, both recording their worst single-day performances in over a year. Both companies had just reported earnings, with massive capital expenditure raising concerns and free cash flow turning negative, drawing intense scrutiny from investors.
Reitzes believes investors should focus less on growing capital expenditure and more on the margin pressure these investments create.
Focus Stocks
Intel Corp (NASDAQ: INTC) shares rose 4%. The company reported its largest single-quarter revenue increase in nearly 15 years, with total Q2 revenue reaching $16.1 billion, up 25% year-over-year. Adjusted earnings per share of 42 cents also beat analyst estimates.
Deckers Outdoor Corp (NYSE: DECK) fell 3%. Q1 revenue was $1.02 billion, in line with the LSEG consensus estimate, but revenue from its Hoka and UGG brands fell short of Wall Street expectations.
Oracle Corp (NYSE: ORCL) shares rose nearly 3%. The company signed a 10-year software cooperation agreement with the US Department of Defense, with a total contract value of nearly $7 billion. It covers the on-premise deployment of Oracle software across multiple branches of the US military.
Robert Half International Inc (NYSE: RHI) shares tumbled nearly 7% after its Q2 performance fell short of market expectations. Earnings per share were 26 cents, in line with the FactSet estimate, while revenue of $1.34 billion slightly exceeded the consensus estimate of $1.32 billion.
Amkor Technology Inc (NASDAQ: AMKR) shares surged over 11%. The company announced a multi-year cooperation agreement worth $1.5 billion with NVIDIA Corp (NASDAQ: NVDA) to jointly develop advanced semiconductor packaging and testing technologies tailored for artificial intelligence.
Despite MaxLinear Inc (NYSE: MXL) reporting better-than-expected Q2 earnings and providing Q3 guidance above market estimates, the stock still plunged over 9%. Before the earnings release, the stock had already risen more than 400% year-to-date in 2026.
Boston Beer Company Inc (NYSE: SAM) shares rose 1%. Q2 revenue was $568.3 million, slightly beating the FactSet estimate of $566.7 million. The company reaffirmed its full-year earnings per share guidance range of $8.50 to $10.50, compared to the consensus estimate of $9.38.
Tenet Healthcare Corp (NYSE: THC) surged over 16%. Q2 adjusted earnings per share were $6.12, significantly above the FactSet analyst estimate of $4.26. Revenue also exceeded expectations, and the company raised its full-year guidance, surpassing market forecasts.
American Express Co (NYSE: AXP) fell 3% after Q2 revenue missed expectations. Revenue for the quarter was $19.64 billion, below the LSEG analyst estimate of $19.71 billion, although quarterly net profit was higher than expected.
SAP SE (NYSE: SAP) rose 5%. Q2 cloud backlog revenue increased by 27% year-over-year to €22.9 billion. Total revenue was €9.88 billion, slightly above the LSEG estimate of €9.86 billion.
Schlumberger NV (NYSE: SLB) shares rose 2% as both Q2 revenue and profit beat expectations. The company stated that driven by customers' focus on energy security and production expansion, quarterly revenue returned to positive year-over-year growth.
Charter Communications Inc (NASDAQ: CHTR) shares fell over 4%. Q2 adjusted EBITDA fell short of expectations, and free cash flow also missed the mark. The company maintained its capital expenditure plan unchanged through fiscal 2029.
Verizon Communications Inc (NYSE: VZ) shares rose 1% on a mixed earnings report: Q2 profit met estimates while revenue missed, but full-year guidance was above market expectations.
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