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Market news
The Standard & Poor's 500 Index fell 1.55 percent, while the Nasdaq Composite Index declined 2.90 percent. The Dow Jones Industrial Average slipped 0.93 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, lost 0.80 percent.¹˒²
Chip Stocks Under Pressure
Renewed tensions in the Middle East gripped investors as the week kicked off. Stocks slid broadly as oil prices climbed.³
On Tuesday, investors cheered news of the first monthly decline in consumer inflation in six years. The following day, an unexpected drop in wholesale inflation prompted investors to rethink the Fed's next move on short-term interest rates.⁴˒⁵
But on Thursday, the S&P 500 opened lower as chip stocks once again dragged the broader market lower.⁶
As the week wrapped up, the S&P lost more than 1 percent on Friday, while the Nasdaq fell 1.4 percent as investors appeared to rotate out of chip stocks and other technology names in favor of other sectors.⁷
Inflation Declines
The Consumer Price Index (CPI) surprised Wall Street last week, falling 0.4 percent in June from the prior month. While month-over-month inflation has decelerated at times over the past six years, this was the first monthly decline in consumer prices since April 2020.⁸
Wednesday's Producer Price Index report showed that monthly wholesale inflation unexpectedly declined 0.3 percent in June. Later that day, New York Fed President John Williams said he believed inflation had likely peaked.
Connor's Insights
Jeff Hirsch of The Stock Trader's Almanac joined our radio program last Sunday.
Connor Mahoney
Investment Advisor Representative
We discussed this seasonality chart, which examines how the market has historically performed during each calendar year, in midterm election years, and during Trump presidency years—all of which provide historical data for backtesting.
Generally speaking, we can continue to expect choppy market behavior, something we've experienced quite a bit lately. We can look for the market to establish some type of bottom to this correction or consolidation in late summer or early fall, followed by the classic year-end rally (hopefully).
Coogle's Corner
China’s AI Token Price War: Excess Capacity Strikes Again
Bill Coogle
Vice President
China continues to pressure global pricing in industries where it has built massive excess capacity—from electric vehicles and batteries to solar, chemicals, mature semiconductors, and now, of course, AI models.
Rather than competing solely on innovation, Chinese firms are often competing on price, forcing Western companies either to accept lower margins or move further up the value chain.
They are doing it again with AI model token pricing. There are legitimate questions about how much computing power is really needed for some of these models.
Stock prices are ultimately the best voting machine.
It's often easier to follow the market than the headlines to identify who the long-term winners may be.
Wall St. Tip
With valuations elevated across many areas of the market, earnings season is likely to be less about whether companies beat estimates and raise guidance and more about how their stocks react afterward.
Strong companies whose stocks fail to rally on good news may indicate that expectations have become too high.
Conversely, stocks that rally despite mediocre earnings often signal that investors believe the worst is already priced in.
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