U.S. stocks are set to kick off their biggest week in several months -- and perhaps the most consequential of the year -- on a high note Monday as tensions in the Middle East give way to optimism over interest rates and the tech trade.
A third night of quiet in the U.S. war with Iran, alongside talks to bring the two sides back to the negotiating table, has crude prices in retreat, with Brent trading below the $90-a-barrel mark and some 14% south of last week's highs.
Those moves are holding down Treasury bond yields, and softening bets on a Federal Reserve rate hike this week as policymakers grapple with renewed inflation risks and an unsteady truce in the Gulf region.
Wednesday's Fed decision comes in a crucial week of earnings and data on Wall Street, with around 175 companies reporting second-quarter results, comprising around 35% of the S&P 500.
Among those will be four of the market's biggest tech names -- Magnificent Seven members Apple, Microsoft, Amazon, and Meta Platforms -- each of which will update on AI investment. The results will impact the market for chip and memory stocks that have powered indexes higher for much of the year.
Stocks have stalled recently, however, with the S&P 500 locked in a tight range since mid-May and the tech-focused Nasdaq down around 7.4% since the start of the second quarter.
An early read on second-quarter GDP, more employment data, a key inflation reading, and central bank rate decisions from the U.K. and Japan will cap a vital week for Wall Street just prior to the start of the traditional August lull.
Overnight advances in international markets have been muted, suggesting it may not be long before the positive sentiment is tested.
-- Martin Baccardax
Barron's Live: Almost everything in the economy and financial markets now relates in some way to explosive spending on artificial intelligence technology. Did someone say mania? Join Barron's Editor in Chief Ben Levisohn and Senior Managing Editor Lauren R. Rublin today at noon when they speak with Tom Essaye, founder and president of Sevens Report, about the implications for investors -- and how to prepare for the day when the great wave crests. Sign up here.
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The Early Earnings Loser Is Alphabet's Stock. What's Next.
Big Tech earnings season is just getting under way, with four more reports from Magnificent Seven members on their way. The early loser this earnings season is Alphabet's stock. Ironically, the winner comes out of Alphabet, too -- it's the company's soaring Google Cloud operation.
-- Investors are focused on massive and growing capital spending that Google
Cloud and its competitors need to support the rapid growth of AI.
Alphabet stock fell after it reported earnings last week. It's raising
its already sky-high capex estimate for this year with plans to spend
even more in 2027.
-- The money is paying for AI servers that Google Cloud rents out over the
internet. That business has taken Google from a money-losing also-ran in
the cloud to a major player. In the process, Google Cloud has grown to
become 21% of company sales and 22% of operating profit.
-- Google Cloud reported 82% second-quarter sales growth, more than double
the companies it's been chasing, Amazon Web Services and Microsoft Azure.
Second-quarter Google Cloud sales rose to $25 billion, 61% of the $40
billion that Wall Street analysts expect industry-leader Amazon to report
Thursday.
-- Just two years ago, Google Cloud was 39% the size of AWS. Even after all
the money is spent, Google Cloud still doesn't have enough AI servers to
meet demand, and it's renting out third-party capacity from SpaceX. And
the business' profit margins have risen steadily, to 36%, matching AWS.
What's Next: AWS has seen operating margin slowly erode since early last year, and Microsoft's Intelligent Cloud segment has seen its operating margin decline even faster as the lower margin cloud business eclipses the software portion of the segment. Oracle and CoreWeave are also fighting margin reduction.
-- Adam Levine
Trump Set to Propose New Tariffs, Replacing 10% Levies
Trade continues to be a major worry for companies. The Trump administration is set to roll out another set of tariffs to replace the temporary ones that expire on Friday -- and more levies are on the horizon.
-- The temporary 10% tariffs the Trump administration imposed after the
Supreme Court struck down its global tariffs in February expire on July
24. Administration officials have vowed to make back the revenue through
other tools, such as two Section 301 investigations into unfair trade
practices.
-- One inquiry -- targeting 60 economies that affect more than 90% of U.S.
trade -- has been completed, with the U.S. proposing a 10% tariff on
economies that have existing measures or provisions in the works to
target forced labor, but where the administration alleges the rules are
"under-enforced."
-- About 15 economies fall into that first group, including Canada, the
European Union, Mexico, Cambodia, and Malaysia. Others -- including China,
South Korea, and Japan -- will be hit with a 12.5% tariff.
-- The Yale Budget Lab expected the U.S. to bring in $2.3 trillion in
revenue over the next decade before the Supreme Court declared the global
tariffs illegal. If the U.S. replaces the 10% tariff with levies related
to forced labor, the group now expects the U.S. to bring in about $2
trillion in revenue.
What's Next: Trade lawyers see still more tariffs ahead. Companies have largely expected a baseline tariff of around 10% but there is continued uncertainty about what comes next, which goods could be excluded, and how trading partners will react to the continued tariffs and tariff threats.
-- Reshma Kapadia and George Glover
What the Fed Got Wrong and How It Can Fix Things
Federal Reserve Chairman Kevin Warsh repeatedly deflected difficult monetary policy questions at his first news conference in June. Five task forces he put together will make their recommendations later this year on the central bank's inflation and labor-market frameworks, communications strategy, balance-sheet policy, and data sources.
-- As it happens, these are the same topics that economist Jai Kedia has
been studying at the Cato Institute, a libertarian think tank in
Washington, D.C. Kedia co-wrote a nine-part report last year on what the
Fed got wrong regarding monetary policy, and the changes it could make.
-- The issues he identified conspicuously overlap with the focus areas of
Warsh's task forces. And, based on Warsh's statements about reforming the
Fed, it seems likely that the task forces' recommendations will also echo
Kedia's. In that way, his work could be seen as a road map for Warsh's
Fed.
-- Kedia envisions the Fed largely returning to its pre-2008 ways. That
would mean sharply reducing its public communication about the
interest-rate outlook and the scope of its work more generally. The "new"
Fed, in his view, would regulate banks less and shrink its balance sheet.
-- Kedia believes that the Fed should revert to a rules-based approach to
monetary policy, such as the Taylor rule, which establishes the ideal
federal-funds rate based on a formula incorporating inflation and
economic growth. The correlation has been weakening, and Kedia thinks
strengthening it should be Warsh's goal.
What's Next: Persistently higher than target inflation means the Fed may be poised to raise interest rates in the near term. The probability of the benchmark rate holding steady this week is 62%, according to CME's FedWatch tool. But there's a 37.9% probability of a quarter-point hike.
-- Emily Russell and Liz Moyer
Tesla's Stock Tumble Hints Musk Has Lost His Golden Touch
Tesla's 14% post-earnings stock tumble was more ominous than missing expectations: Has Elon Musk lost his golden touch? Owning the stock has always been less about fundamentals than a bet on Musk's ability to see and articulate the future. The market may have started to doubt his foresight.
-- Second-quarter earnings were lousy. Profit of $398 million was far below
the expected $1.7 billion even after Tesla's vehicle sales jumped 25% to
some 480,000, above expectations. Chalk it up to a combination of weaker
pricing, lower regulatory credit sales, rising costs, and higher research
spending.
-- Future Fund's co-founder Gary Black says investors "are losing patience
in hype followed by a lack of follow-through." There was plenty of hype
on the earnings conference call. Musk said the robo-taxi business is
seeing a very high compound growth rate and that robots will be the
"biggest product ever."
-- Musk insists the EV maker is working on the most ambitious buildout of
advanced infrastructure manufacturing capacity ever. Wall Street seems
united in the view that Tesla is spending more now to make more down the
road, and that higher spending typically squeezes profitability.
-- Still, the stock drop is a sign of waning investor confidence. Musk's
great gift has always been the ability to get credit for potential, and
it's a big reason Tesla stock trades for roughly 175 times 2026 earnings
while other Magnificent Seven stocks trade for an average of 24 times.
What's Next: The solution is easy: Musk needs to show results. Tesla needs more robo-taxis more than operating income right now, or humanoid robots that will become the next high-margin revenue stream -- something, anything, that will restore Musk's narrative-shaping power to full strength.
-- Al Root
Retailers Project Record Back-to-School Spending Despite Bargain Hunting
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July 27, 2026 06:41 ET (10:41 GMT)
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