Key market movements ahead of the opening bell show a mixed picture for U.S. equity futures.
As of Thursday, July 9th, futures for the three major U.S. stock indices are moving in different directions. At the time of writing, Dow futures are down 0.13%, S&P 500 futures are up 0.15%, and Nasdaq futures have gained 0.64%.
In European markets, the German DAX is up 0.23%, while the UK's FTSE 100 has declined 0.61%. The French CAC 40 is up 0.28%, and the Euro Stoxx 50 has risen 0.59%.
Commodity prices are also on the move, with WTI crude oil up 0.57% to $73.94 per barrel. Brent crude has increased 0.68%, trading at $78.55 per barrel.
Market Overview: Tech Sector Under Pressure, Broader Concerns Emerge
A significant portion of U.S. technology stocks has entered bear market territory, raising questions about the sustainability of the AI-driven rally. Within the S&P 500 Information Technology sector, approximately 69% of its components have fallen more than 20% from their 52-week highs, meeting a common definition of a bear market. While the selling pressure is notable, some analysts do not view this as an inevitable trend reversal. They suggest that after substantial gains, investor profit-taking is a natural part of the market cycle.
It has been observed that technology shares often face pressure in the month following earnings reports, only to rebound ahead of the next quarterly announcement. Furthermore, a recent report from Goldman Sachs indicated that the AI-driven technology upcycle shows no definitive signs of peaking. The report argues that supply for semiconductors and electronic components has not yet outstripped demand, and the pace of technological advancement shows no signs of slowing. The investment bank views the recent market pullback as a healthy correction following rapid price appreciation, rather than a reversal of the tech trend. Goldman Sachs posits that this cycle has the potential to be one of the largest and longest technology upcycles on record.
Geopolitical Tensions and Monetary Policy Implications
Ed Yardeni, President of Yardeni Research and originator of the "bond vigilante" concept, has warned that the breakdown of a ceasefire in the Middle East has brought markets back to a critical juncture. The resulting surge in oil prices could potentially force the Federal Reserve to adopt a more hawkish monetary policy stance once again.
Yardeni stated that the resurgence of geopolitical crisis in the Middle East, leading to spiking oil prices, has brought inflation fears and the prospect of Fed rate hikes back to the forefront of market concerns. He warned that the end of the ceasefire puts investors back at "square one," and the Fed might be compelled to tighten policy further. In an interview, Yardeni noted, "Inflation concerns are back in play. As a result, the Fed is back in focus as well. The Fed is not only pivoting toward tightening, but they may actually have to hike." He described the situation as "a geopolitical crisis that is not going away, not ending." Yardeni observed that the Fed has already shifted from an accommodative stance to a hawkish one focused on price stability. While the labor market appears stable, he cautioned that "depending on what happens in the Middle East, all of that good momentum could completely go down the drain."
Fed Minutes Reveal Divergent Views
The minutes from the Federal Reserve's June 16-17 monetary policy meeting, the first chaired by new Chair Kevin Wash, revealed intense debate among policymakers regarding the future path of interest rates. Although the committee ultimately voted unanimously to maintain the federal funds rate target range at 3.50% to 3.75%, officials displayed clear disagreements on inflation trends and future policy direction. Some members even believed there was already a case for raising rates at that June meeting.
The minutes showed that a few participants judged that the Fed already had grounds to raise borrowing costs in June, though they ultimately supported holding rates steady at that meeting. Overall, most officials acknowledged scenarios where inflation could gradually return to the 2% target, but also recognized the risk of persistently high inflation. Nearly all officials holding the latter view indicated that if high inflation persists, further rate increases would be a necessary policy choice.
IMF Warns of Persistent Inflationary Pressures
The International Monetary Fund (IMF) has poured cold water on hopes for a swift resolution to inflationary pressures stemming from geopolitical conflict. In its latest economic outlook report, the IMF noted that while the actual economic damage from the U.S.-Iran conflict to the U.S. and global economy has been less severe than some market forecasts, the geopolitical turmoil is likely to generate a new wave of persistent inflationary pressures, making it difficult for price pressures to dissipate completely in the short term.
The IMF stated that following a fragile ceasefire, international oil prices have retreated faster than expected. However, the inflationary damage from the conflict has already been inflicted, and the repair process will require a lengthy period. Even if hostilities conclude entirely, U.S. inflation may not return to the Fed's 2% policy target until late 2027, making it difficult to approach that standard in the near term. The IMF also warned that the U.S. and global economy still face significant downside risks. On one hand, the unresolved conflict in the Middle East could re-escalate at any time, pushing energy inflation higher. On the other hand, excessive market enthusiasm for the artificial intelligence sector could lead to a deep stock market correction if expectations reverse.
Conflict Disrupts Oil Supply Recovery
The escalation of U.S.-Iran conflict has dragged shipping volumes in the Persian Gulf down by approximately 70%. Goldman Sachs has warned that the recovery process for Middle Eastern oil production could be interrupted. According to Goldman's estimates, crude oil production in the Persian Gulf region in June remained about 10.5 million barrels per day below pre-war levels. Analysts led by Yulia Zhetkova Grigsby stated in a July 8th report, "Although Middle Eastern oil producers have begun restarting idled wells over the past month, any disruption to navigation through the Strait of Hormuz could slow the pace of production recovery."
This week, global energy markets experienced significant volatility due to renewed escalation in the U.S.-Iran conflict, with Brent crude futures briefly climbing back above $80 per barrel. Following a second consecutive day of mutual attacks between the U.S. and Iran, maritime traffic through the Strait has nearly ground to a halt, testing the previously fragile peace agreement. The waterway has already witnessed several attacks on commercial vessels.
Pre-Market Movers: Tech Stocks Mostly Higher
U.S. technology stocks are mostly trading higher in Thursday's pre-market session. As of writing, Micron Technology (MU.US), Western Digital (WDC.US), and SanDisk (SNDK.US) are up over 4%, while Seagate Technology (STX.US) has gained more than 3%. Intel (INTC.US) is a standout, surging over 33%. AMD (AMD.US) and Broadcom (AVGO.US) are up more than 2%, and Qualcomm (QCOM.US) is up nearly 2%. Among the "Magnificent Seven," only Nvidia (NVDA.US) and Tesla (TSLA.US) are showing modest gains. Optical communication stocks are broadly higher: AXT Inc (AXTI.US) is up over 6%; Corning (GLW.US) and Marvell Technology (MRVL.US) are up more than 5%; Lumentum (LITE.US), Astera Labs (ALAB.US), Credo Technology (CRDO.US), and Coherent (COHR.US) have all risen over 4%; Nokia (NOK.US) is up more than 2%.
Corporate Earnings and Developments
PepsiCo (PEP.US) reported second-quarter revenue that exceeded expectations, though weakness in the North American market weighed on profitability. The Q2 report showed net revenue grew 6.4% year-over-year to $24.18 billion, beating market expectations of $23.95 billion. Operating profit was $4.02 billion, slightly below the expected $4.06 billion. Core earnings per share came in at $2.20, marginally better than the $2.19 consensus. Despite revenue growth, profit performance was somewhat lacking, primarily dragged down by the North American market. Management pointed to slowing sales in U.S. food and beverage segments, with inflation continuing to squeeze household budgets and forcing consumers to cut back on daily spending. Specifically, North American snack volumes were essentially flat, while beverage volumes declined 4%. In contrast, international markets continued to provide support, with robust demand for snacks and beverages abroad driving overall snack volume growth of 3% and beverage volume growth of 2%. This helped partially offset North American weakness. The company maintained its full-year 2026 forecast for organic revenue growth of 2% to 4%, with the midpoint of 3% exceeding market expectations of 2.76%.
Nvidia (NVDA.US) has unveiled its self-developed large language model, Nemotron 3 Ultra, touting significant cost advantages. Nvidia stated that its Deep Agents suite, specifically built for Nemotron 3 Ultra, can handle more tasks and achieve higher throughput at an inference cost that is 10 times lower per run than some "leading" closed-source models. Nvidia added that when benchmarked against LangChain's Deep Agents, Nemotron 3 Ultra performed on par with the highest-scoring models on business tasks. Nvidia's core objective in developing large models is not to directly compete with OpenAI or Anthropic by selling model APIs, but rather to consolidate and expand its dominant position in the AI industry chain. Nvidia's greatest moat is not its chips, but its CUDA software ecosystem. By launching its own large models like Nemotron 3 Ultra and packaging them into the NVIDIA NIM microservices framework, it enables enterprises to deploy and fine-tune models on Nvidia hardware with ease. Nvidia's move into large models aims to make its software stack (AI Enterprise) more attractive, thereby locking customers firmly into its hardware and software ecosystem.
SpaceX (SPCX.US), in collaboration with Cursor, has released Grok 4.5, a model focused on coding and financial tasks, launching a new challenge to Anthropic and OpenAI. SpaceX's AI unit, SpaceXAI, introduced a new artificial intelligence model built in partnership with AI programming startup Cursor. The model is designed to handle financial, legal, and programming tasks more proficiently, a move seen as part of Elon Musk's strategy to gain an edge against competitors. According to a blog post released Wednesday, the new model is intended to "handle difficult and long-running tasks," including software engineering, a core focus area for many top AI developers. However, unlike Cursor's previous models, Grok 4.5 is designed to tackle a broader set of workloads, such as legal and financial services. The blog post also stated that Grok 4.5 has enhanced cybersecurity capabilities.
Meta Platforms (META.US) is investing approximately $10 billion to build its first data center in Canada, creating its largest AI hub outside the United States. The data center, located in Sturgeon County, Alberta, will have a power capacity of 1 gigawatt—equivalent to the electricity usage of about 750,000 homes—and will primarily run on natural gas generation. The company is expanding its global data center footprint to secure more computing capacity. The Alberta project marks its 33rd data center. Meta plans to use this computing power for its own AI models and social media applications, including Instagram and Facebook. It is also exploring establishing a cloud business to sell some of this capacity to other companies.
Key Economic Data and Events Schedule
Scheduled for release at 8:30 PM Beijing Time: U.S. Initial Jobless Claims for the week ending July 4th.
Scheduled for 9:00 PM Beijing Time: Speech by FOMC permanent voter and New York Fed President John Williams.
Upcoming Earnings Reports
Scheduled for Friday pre-market: Delta Air Lines (DAL.US).
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