Stocks Closed Lower Yesterday, Tech Was A Drag, Middle East Tensions Heat UpStocks closed lower yesterday with all of the major indexes ending moderately in the red. South Korean chip maker, Samsung, posted big earnings yesterday with Q2 up 1,800% from a year earlier. But, interestingly, it was short of expectations. And despite the huge growth rate, some worry it could signal 'peak earnings,' given the soaring spending on AI, and worries over the sustainability of that spending. They were down -7% yesterday on the Korea Stock Exchange. That weakness hit tech stocks here in the states, dragging many AI-related names lower and weighing on the Nasdaq, which gave up -1.16% yesterday. In other news, oil prices rose 5% yesterday after Iran attacked a Qatari tanker near the Strait of Hormuz. That comes on the heels of a reported tanker attack the day before. Even though the U.S. and Iran are negotiating a peace deal, the tanker attacks violate the Memorandum of Understanding, and the U.S. launched retaliatory strikes on Iran following those attacks. Additionally, they revoked Iran's oil sales license (waiver), which effectively puts Iran back under full oil sanctions. On the economic report front yesterday, the International Trade in Goods and Services report showed the deficit growing to -$77.6 billion for May, which was above the previous month's -$54.6B, but below views for -$78.7B. Today we'll get MBA Mortgage Applications and Consumer Credit. And we'll get the FOMC Minutes from June's Fed meeting. June's meeting was the first one for new Fed Chair Kevin Warsh. While he said he didn't participate in the Summary of Economic Projections (SEP), which provides an outlook for GDP, the unemployment rate, inflation, and the Fed Funds rate, the Minutes could shed further insight of what the other members were thinking. The Minutes from April's meeting (released in May) was the first time that a majority of Fed members considered that a rate increase could be warranted this year if inflation were to remain elevated or push higher. Rising oil prices, as a result of the U.S.-Iran war, were a factor at that time. And while oil popped yesterday, oil is down -38.6% from the conflict highs made in April. Falling oil, which in turn should lead to lower inflation, could cool the rate hike talk. But punting on a rate hike is different than a rate cut. And much will be determined on what the inflation numbers come in at for the rest of the year. We'll get another look at inflation next week when we get the Consumer Price Index (CPI – retail inflation), and the Producer Price Index (PPI – wholesale inflation) reports. In the meantime, all eyes will be on today's FOMC Minutes. And of course, developments in the Middle East. We'll also see if tech/AI-related names can consolidate, or bounce, or if more profit taking gives way. I will say, I'm looking forward to next week, as Q2 earnings season will unofficially begin when big banks start reporting. Earnings season is always and exciting time since stocks typically go up during earnings season. See you tomorrow,  Kevin Matras
Executive Vice President, Zacks Investment Research |
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