Stocks Fall on Weakness in Chipmakers and AI Stocks

The S&P 500 Index ($SPX) (SPY) today is down -0.47%, the Dow Jones Industrial Average ($DOWI) (DIA) is down -0.22%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -1.09%.  September E-mini S&P futures (ESU26) are down -0.40%, and September E-mini Nasdaq futures (NQU26) are down -0.99%. 

Stock indexes are under pressure today as chipmakers and AI stocks fall back after their sharp rally over the past two sessions.  Signs of a slowdown in the US labor market also weighed on stocks after the Jun ADP employment change rose by +98,000, showing a weaker labor market than expectations of +120,000.  Stocks remained lower after Fed Chair Warsh provided no guidance on interest rates at a meeting of central bankers in Portugal today.

US MBA mortgage applications were unchanged in the week ended June 26, with the purchase mortgage sub-index up +0.5% and the refinancing mortgage sub-index down -0.7%.  The average 30-year fixed rate mortgage fell -2 bp to 6.57% from 6.59% in the prior week.

The outlook for strong Q2 earnings is a bullish factor for stocks. Forecasts compiled by Bloomberg Intelligence suggest Q2 earnings may increase by 23%, close to Q1’s blowout earnings of 30%, which was more than double the 12% analysts had expected.  AI spending is expected to account for most of earnings, with AI infrastructure stocks set to contribute nearly 60% of the S&P 500's earnings-per-share growth in Q2.   

WTI crude oil (CLQ26) is down nearly -1% today and has posted a 4.25-month low.  Crude prices came under pressure today after a senior US administration official said US negotiators held positive discussions in Qatar and progress is being made on technical talks with Iran.  Also, the Wall Street Journal reported that President Trump had decided against resuming a broad military campaign against Iran and told his staff that he didn't mind if the negotiations extended beyond the August 18 deadline.  Energy supplies are picking up as Morgan Stanley said 35 oil and gas tankers exited the Persian Gulf through the Strait of Hormuz last Thursday, the first time the level returned to the 30-to-40 range typical before the US-Iran war started in February.

The markets are discounting a 36% chance of a +25 bp rate hike at the next FOMC meeting on July 28-29.

Overseas stock markets are mixed today.  The Euro Stoxx 50 is down -0.82%.  China's Shanghai Composite climbed to a 1-week high and closed up +0.4%.  Japan's Nikkei-225 Stock Average closed up +0.59%.

Interest Rates

September 10-year T-notes (ZNU6) on Tuesday are down -12 ticks, and the 10-year T-note yield is up +2.8 bp to 4.493%.  T-notes are sliding today amid strengthening inflation expectations after the 10-year breakeven inflation rate rose to a 1-week high of 2.255%.  Losses in T-notes are limited after the Jun ADP employment change came in below expectations.

European government bond yields are moving higher today.  The 10-year German bund yield is up +3.9 bp to 2.899%.  The 10-year UK gilt yield rose to a 1-week high of 4.817% and is up +3.6 bp to 4.793%.

Eurozone Jun CPI eased to 2.8% y/y from 3.2% y/y in May, weaker than expectations of 3.0% y/y.  Jun core CPI eased to 2.4% y/y from 2.6% y/y in May, weaker than expectations of 2.5% y/y.

The Eurozone Jun S&P manufacturing PMI was revised upward by +0.1 to 51.4 from the previously reported 51.3.

ECB President Christine Lagarde said that risks to inflation and growth are now more broadly balanced than a few weeks ago, due to the recent slide in crude oil prices.

Swaps are discounting a 6% chance of a +25 bp ECB rate hike at its next policy meeting on July 23.

US Stock Movers

Chipmakers and AI infrastructure stocks are under pressure today, leading the broader market lower.  SanDisk (SNDK) and KLA Corp (KLAC) are down more than -7%, and Lam Research (LRCX) is down more than -6%.  Also, Applied Materials (AMAT) and Micron Technology (MU) are down more than -5%, and ARM Holdings Plc (ARM) and Seagate Technology Holdings Plc (STX) are down more than -4%.  In addition, Advanced Micro Devices (AMD), Marvell Technology (MRVL), Intel (INTC), and Western Digital (WDC) are down more than -3%.   

Nebius Group NV (NBIS) is down more than -12% to lead losers in the Nasdaq 100, and CoreWeave (CRWV) is down more than -10% as cloud-computing stocks are falling on news that Meta Platforms is developing plans for a cloud infrastructure business to sell access to AI computing power and models.

Software stocks are climbing today, a positive factor for the overall market.  Atlassian Corp (TEAM) and Palantir Technologies (PLTR) are up more than +5%, and Salesforce (CRM) is up more than +4% to lead gainers in the Dow Jones Industrials. Also, Autodesk (ADSK), Datadog (DDOG), Intuit (INTU), ServiceNow (NOW), and Workday (WDAY) are up more than +3%, and Adobe Systems (ADBE) is up more than +2%.

Alcoa (AA) is down more than -9% after agreeing to acquire South32 Ltd.’s bauxite, alumina, and aluminum assets in a deal worth as much as $5.6 billion. 

Caterpillar (CAT) is down more than -2% after Scion Asset Management founder Michal Burry said he shorted Caterpillar shares for the first time. 

Kroger (KR) is down more than -1% after agreeing to acquire Giant Eagle Inc. for about $1.65 billion. 

General Mills (GIS) is up more than +8% to lead gainers in the S&P 500 after reporting Q4 adjusted EPS of 95 cents, stronger than the consensus of 80 cents. 

Meta Platforms (META) is up more than +7% after saying it is developing plans for a cloud infrastructure business to sell access to AI computing power and models.

MSC Industrial Direct (MSM) is up more than +6% after forecasting Q4 average daily sales up +6.5% to +8.5%, the midpoint above the consensus of +6.99%. 

FactSet Research Systems (FDS) is up more than +3% after reporting Q3 adjusted EPS of $4.53, better than the consensus of $4.43. 

Fox Corp (FOXA) is up more than +3% after Wolfe Research upgraded the stock to outperform from peer perform.

Oklo Inc (OKLO) is up more than +2% after announcing that the US Department of Energy approved the final Documented Safety Analysis for the company’s Isotopes Groves Isotope Test reactor in Texas. 

Earnings Reports(7/1/2026)

FactSet Research Systems Inc (FDS), Franklin Covey Co (FC), General Mills Inc (GIS), Greenbrier Cos Inc/The (GBX), MSC Industrial Direct Co Inc (MSM), UniFirst Corp/MA (UNF).