Weekly Newsletter: July 20, 2026
What are you going to do when the chips are down? Critical situations face everyone, and how to handle pressure is important. The chip stocks, for a brief moment, entered “bear market” territory, marking a decline of 20+% from their recent peak. SpaceX is now trading below its initial public offering price, and the US offering of South Korean chip maker SK Hynix may have marked the short-term peak in the technology sector. The tech sector has suffered many such declines only to bounce back to new all-time highs. Will investors, once again, buy chips to go with the dip? It was an interesting week outside of tech as well. Bank earnings kicked off earnings season, and inflation data surprised (in a good way!). Bank stocks have done well, but the key takeaway was a reading on the banking customers, who held greater deposits, reduced credit card debt levels, and looked to be in good overall shape. The inflation data confirmed that much of the inflation has been centered in the oil patch. The decline in headline inflation, as well as some of the core components that followed the decline in oil during June, was a welcome relief to bond investors and took the potential rate increase off the table until (maybe) year-end. The summer doldrums hit the economic data next week, while earnings releases heat up.
Economists had plenty to digest this week, from the inflation data to retail sales and Fed Chief Warsh chatting to Congress. During the month of June, West Texas crude prices fell from roughly $90 to $70 per barrel. Nationwide pump prices fell from $4.50 in late May to a low of $3.70 on the Fourth of July. It was noted in prior CPI reports that much of the gains were energy-related, so too with this release. Much of the decline is attributed to the nearly 20% decline in energy. That is beginning to reverse as the Iran war heats back up. Pump prices are up nearly 10% across the country and could spell higher CPI data when it is released in August. This is also why, in his testimony in Congress, Fed Chair Warsh cautioned against celebrating the decline in inflation data. It remains job #1 for the Fed in the months ahead. Maybe as a result of lower energy, retail sales popped up more than expected. Combined with the news from banks on their customers and still a low “hire/fire” job market, the Fed is not too worried about a deteriorating job market or lower spending from the consumer. In a slow week for economic data, the market focus will shift to earnings, and investors will be watching spending in the tech sector. Also, “consumer facing” businesses like consumer staples could provide further insight into the state of the consumer.
The treasury market was encouraged by the inflation data, and investors essentially changed their “betting” on an interest rate change until year-end. The bond market is beginning to reflect some of the equity market angst with technology stocks. As companies begin to mix up their “capital raise”, they are not only tapping the stock market by selling shares of the company, but they are also issuing debt to finance their expansion plans. If/when the companies generate sufficient profits and cash flow, the companies may be better positioned to service and repay the debt. If cash flows fall short of expectations, however, the value of the debt could decline. Today the spreads between treasuries and these bonds remain historically tight, but if concerns begin to rise about paying back debt, those spreads can widen quickly.
Momentum in the markets generally is beginning to wane as technology begins to struggle. The beneficiaries of that struggle have been nearly everything else. However, given the weight of the tech sector, it will have an outside impact on the “averages” rather than the “average stock”. Since the end of June, the SP500 has declined about 0.33%, while the broader tech sector has fallen by nearly 8% and the semiconductor index by over 18%. Meanwhile, the equal-weighted SP500, which treats all stocks equally, is up 0.25%. This disparity was reversed much of this year as the tech sector rose by over 30% through the end of May and the equal weight rose (a still respectable) 9.5%. Market history would argue that there is a reversion to the mean as investors get too excited about a portion of the market and push valuations well above historical norms. Over time, that excitement wanes, and a more normal (lower) valuation exists. Whether this summer marks the end of the dramatic tech run may get some answers from tech earnings over the next few weeks.
The economic calendar passes the baton to earnings this week. They will return in force next week. Keep an eye out for Google, Intel, and Tesla earnings as they will provide a window into the overall level of spending for the rest of the sector.
The opinions expressed in the Investment Newsletter are those of the author and are based upon information that is believed to be accurate and reliable but are opinions and do not constitute a guarantee of present or future financial market conditions.