Stocks Set to Open Sharply Higher as Oil Prices Sink, Big Tech Earnings and Fed Meeting in Focus

September S&P 500 E-Mini futures (ESU26) are up +0.98%, and September Nasdaq 100 E-Mini futures (NQU26) are up +1.59% this morning, pointing to a sharply higher open on Wall Street as a slump in oil prices boosted investor sentiment at the start of a busy week.

The price of WTI crude cratered more than -8% on Monday after the U.S. and Iran refrained from attacking each other for a third consecutive night. The Wall Street Journal reported that President Trump has put off a major military escalation against Iran amid efforts to revive diplomacy aimed at reopening the Strait of Hormuz and ongoing debate over the impact of dwindling munitions stockpiles. Mr. Trump has consistently said “he prefers a diplomatic solution, but he continues to retain all options if Iran continues terrorist activities in the Strait of Hormuz or against allies,” a White House spokesman said in a statement. Meanwhile, Iran’s army said on Sunday that it has suspended its retaliation against U.S. bases and troops in the region following Trump’s decision to hold off on strikes.

Treasuries rose across the curve on Monday as a sharp drop in oil prices eased inflation concerns. The 10-year T-note yield fell four basis points to 4.64%.

This week, market participants look ahead to earnings reports from major tech names, the Federal Reserve’s interest rate decision, and a slew of U.S. economic data.

In Friday’s trading session, Wall Street’s major equity averages ended mixed. Paper stocks rallied after a report said prices for the containerboard used to make shipping boxes and packaging were rising, with International Paper (IP) jumping over +11% to lead gainers in the S&P 500 and Packaging Corporation of America (PKG) climbing more than +8%. Also, software stocks climbed after strong earnings from SAP eased AI disruption concerns, with ServiceNow (NOW) rising over +7% and Adobe (ADBE) advancing more than +6% to lead gainers in the Nasdaq 100. In addition, Digital Realty Trust (DLR) surged over +11% after the data center REIT delivered beat-and-raise Q2 results, prompting TD Cowen to upgrade the stock to Buy from Hold. On the bearish side, chip and AI infrastructure stocks sank, with Sandisk (SNDK) tumbling over -10% to lead losers in the S&P 500 and Arm Holdings (ARM) slumping more than -8%.

Economic data released on Friday showed that U.S. business activity expanded at its fastest pace in eight months in July, driven by a surge in services activity partly fueled by the FIFA World Cup and the USA’s 250th anniversary celebrations. The U.S. S&P Global services PMI rose to 53.6 in July, stronger than expectations of 51.3, while the S&P Global manufacturing PMI unexpectedly fell to 53.8, weaker than expectations of 54.4. Separately, U.S. June new home sales rose +1.6% m/m to 628K, stronger than expectations of 609K.

“As we have seen multiple times in the past few years, equity markets tend to overreact to war developments, partly because war events tend to create uncertainty. But these periods of risk-off have been buying opportunities in the past, and we expect this to be the case again,” said Thomas Lee at Fundstrat Global Advisors. Among the reasons for optimism, Lee cited a strong earnings season, with more than 86% of the S&P 500 companies that have reported results so far beating profit estimates, according to Bloomberg Intelligence.

Second-quarter corporate earnings season hits full throttle, with nearly one-third of S&P 500 companies set to report results this week. All eyes will be on four members of the Magnificent Seven—Microsoft (MSFT), Meta Platforms (META), Apple (AAPL), and Amazon.com (AMZN). The backdrop heading into their earnings is challenging as investors grow increasingly wary of the massive amounts of money Big Tech companies are spending to build out their AI infrastructure. Alphabet stock was hammered last week after the company raised its full-year capital spending guidance, and its Big Tech peers could face a similar fate. “We’re in a period where people are inclined to sell off on capex, and Microsoft and Meta and Amazon are all holding hands with Alphabet and jumping in to spend. We’re going to see scrutiny on all parts of their businesses as they keep spending,” said Willy Lee at Neostellar Capital. Lam Research (LRCX), Arm Holdings (ARM), Seagate Technology Holdings (STX), KLA Corp. (KLAC), Qualcomm (QCOM), Visa (V), Mastercard (MA), Coca-Cola (KO), Boeing (BA), ExxonMobil (XOM), and Chevron (CVX) are among other major names scheduled to deliver quarterly updates during the week. According to Bloomberg Intelligence, companies in the S&P 500 are expected to post an average +26% jump in quarterly earnings for Q2 compared to the previous year.

Market participants will also keep a close eye on the Fed’s interest rate decision. The central bank is widely expected to keep the Fed funds rate unchanged in a range of 3.50% to 3.75% after U.S. June consumer and producer inflation data came in much cooler than anticipated. However, the rally in oil prices this month, driven by renewed hostilities in the Middle East, has reignited inflation concerns, boosting expectations for dissent from some officials in favor of a rate hike. Fed Chairman Kevin Warsh is likely to emphasize at the post-policy meeting press conference that inflation remains too high. U.S. rate futures have almost fully priced in a quarter-point rate hike at the next FOMC meeting in September.

“We suspect that a brief FOMC statement and a press conference that once again avoids offering forward guidance will do little to challenge the market’s increasingly firm expectations for a 25 basis-point hike in September,” according to ING analysts James Knightley and Chris Turner.

In addition, market watchers will monitor a flurry of U.S. economic data. The advance estimate of second-quarter U.S. gross domestic product and the June core personal consumption expenditures price index, the Fed’s preferred inflation gauge, will be the main highlights this week. Other noteworthy data releases include the Conference Board’s Consumer Confidence Index, the S&P/CS HPI Composite - 20 n.s.a., the Richmond Fed Manufacturing Index, Initial Jobless Claims, Personal Spending, Personal Income, the Employment Cost Index, the Chicago PMI, and the University of Michigan’s Consumer Sentiment Index.

Today, investors will focus on U.S. Durable Goods Orders and Core Durable Goods Orders data, set to be released in a couple of hours. Economists expect June durable goods orders to rise +1.6% m/m and core durable goods orders to rise +0.9% m/m, compared to the prior numbers of -4.5% m/m and +1.3% m/m, respectively.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.64%, down -0.94%.

The Euro Stoxx 50 Index is up +1.29% this morning as a sharp drop in oil prices boosted sentiment after the U.S. paused military strikes against Iran. Technology stocks led the gains on Monday. Travel stocks also jumped amid a slump in oil prices. A survey released on Monday showed that sentiment among German firms improved slightly in July as business expectations strengthened. Separately, data from the European Central Bank showed that lending growth to Eurozone firms and households was unchanged last month, maintaining its steady, albeit modest, expansion. Meanwhile, ECB Governing Council member Peter Kazimir said on Monday that the central bank will need to raise interest rates at least one more time to curb inflation, adding that a worsening outlook could require more tightening than currently expected. “I remain of the view that at least one more hike will be needed as part of our measured adjustment to inflation risks. This is warranted even if the situation [in the Middle East] improves somewhat,” Kazimir said. Investor attention this week is on the monetary policy decision from the Bank of England. The BoE is widely expected to leave rates unchanged at 3.75%, with potentially seven members voting to hold and two voting for a rate increase. The central bank will likely signal its readiness to raise borrowing costs should renewed hostilities in the Middle East threaten a broad and sustained rise in inflation. Beyond monetary policy, attention will center on the initial estimate of second-quarter Eurozone GDP, July’s preliminary inflation data, and June’s unemployment rate. In corporate news, Vodafone Group Plc (VOD.LN) rose over +4% after the company raised its FY27 guidance to reflect the Safaricom deal, saying its key earnings metric is expected to come in at the upper end of the revised outlook.

Germany’s Ifo Business Climate Index was released today.

The German July Ifo Business Climate Index stood at 86.6, stronger than expectations of 86.1.

Asian stock markets today settled in the green. China’s Shanghai Composite Index (SHCOMP) closed up +1.15%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.50%.

China’s Shanghai Composite Index closed higher today as memory chipmaker CXMT’s surge on its debut boosted sentiment. CXMT spiked 466% in its Shanghai trading debut on Monday, becoming China’s largest onshore-listed company and boosting Beijing’s push to emerge as a global leader in semiconductors that power AI. CXMT’s spectacular debut was buttressed by strong retail investor demand, attractive valuations, and renewed signs of state-backed market support. Shares of chipmaking materials and equipment companies climbed on Monday on expectations they would benefit from CXMT’s investment. In addition, entertainment, biotech, and battery stocks advanced. Meanwhile, data released on Monday showed that China’s industrial profit growth eased slightly in June but remained in double digits, supported by robust demand across AI-related manufacturing sectors. Industrial profit increased 15.1% last month from a year earlier, easing from May’s 21.1% gain, according to the National Bureau of Statistics. In corporate news, Contemporary Amperex Technology gained more than +4% after the battery maker posted solid first-half results and announced an A-share buyback. Investor focus this week is on China’s official PMIs for July, which will offer fresh insight into business sentiment in the world’s second-largest economy. Economists expect the manufacturing PMI to slip into contraction territory, reflecting a pullback in major commodity prices earlier this month, while growth in the non-manufacturing sector is projected to stall due to adverse summer weather. Market participants also look ahead to an upcoming meeting of the Politburo, China’s top decision-making body, where policymakers typically review the economy and fine-tune policy to support growth.

Japan’s Nikkei 225 Stock Index closed higher today as oil prices sank after the U.S. and Iran refrained from launching further strikes, boosting appetite for risky assets. Software and videogame stocks outperformed on Monday. Also, chip-related stocks broadly advanced, although gains were limited amid investor caution ahead of a slew of earnings reports from tech companies in the U.S. and Japan. Data released on Monday showed that a key gauge of Japan’s service-sector inflation stood at 3.2% in June, signaling broadening inflationary pressures that will sustain expectations for further Bank of Japan rate hikes. Separately, data showed that Japan’s May leading economic indicators index, which gauges the economic outlook for a few months ahead based on data such as job offers and consumer sentiment, was revised downward. Meanwhile, Japanese government bond yields fell on Monday as a sharp retreat in oil prices eased inflation concerns. Investor focus this week is on the BOJ’s monetary policy decision. The BOJ is widely expected to leave its benchmark rate unchanged at 1.00% as policymakers assess the impact of their latest rate increase. The central bank will also release updated projections for inflation and economic growth. “The key focus will be whether the BOJ signals an intention to adjust the pace of policy normalization in response to changes in its economic and inflation outlook,” according to JPMorgan’s Ayako Fujita. Ahead of the BOJ’s decision, investors will scrutinize a batch of Japanese economic data, including June industrial production, retail sales, and jobless figures, along with Tokyo Core CPI for July. The Nikkei Volatility Index, which takes into account the implied volatility of Nikkei 225 options, closed down -1.43% to 32.41.

The Japanese June Corporate Services Price Index rose +3.2% y/y, weaker than expectations of +3.4% y/y.

The Japanese May Leading Index was revised lower to 116.5 from the preliminary estimate of 116.8.

Pre-Market U.S. Stock Movers

The Magnificent Seven stocks gained in pre-market trading. Meta Platforms (META) rose about +2%. Also, Alphabet (GOOGL), Tesla (TSLA), Amazon.com (AMZN), Microsoft (MSFT), and Nvidia (NVDA) advanced over +1%. In addition, Apple (AAPL) edged up +0.2%.

Chip and AI infrastructure stocks advanced in pre-market trading, rebounding from Friday’s selloff. Sandisk (SNDK) was up nearly +5%, Marvell Technology (MRVL) was up +4%, and Advanced Micro Devices (AMD) was up over +3%.

Airlines and other travel stocks climbed in pre-market trading as oil prices sank, with American Airlines Group (AAL) rising over +4% and Carnival (CCL) gaining more than +3%.

Forte Biosciences (FBRX) jumped over +39% in pre-market trading after Argenx agreed to acquire the company for $77 per share in cash.

Energy stocks slid in pre-market trading amid a slump in oil prices. APA Corp. (APA) was down over -4%, ExxonMobil (XOM) was down more than -3%, and Chevron (CVX) was down over -2%.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Monday - July 27th

Welltower (WELL), Cadence Design Systems (CDNS), Nucor (NUE), Celestica (CLS), Cincinnati Financial (CINF), Principal Financial Group (PFG), Brown & Brown (BRO), F5, Inc. (FFIV), Amkor Technology (AMKR), Sun Communities (SUI), UDR, Inc. (UDR), Sanmina (SANM), Rambus (RMBS), Brixmor Property Group (BRX), Universal Health Services (UHS), Element Solutions (ESI), Simpson Manufacturing Co. (SSD), Applied Digital (APLD), Noble Corporation (NE), Kilroy Realty (KRC), COPT Defense Properties (CDP), Bank of Hawaii (BOH), Alliance Resource Partners (ARLP), Agilysys (AGYS), NBT Bancorp (NBTB), Navitas Semiconductor (NVTS), H2O America (HTO), The Bank of N.T. Butterfield & Son (NTB), Northwest Bancshares (NWBI), Happen (HAPN), Hope Bancorp (HOPE), FirstSun Capital Bancorp (FSUN), Lakeland Financial (LKFN), Two Harbors Investment (TWO), Harmonic (HLIT), HBT Financial (HBT), Northeast Bank (NBN), Kforce (KFRC), OPKO Health (OPK), Peapack-Gladstone Financial (PGC), Bank of Marin Bancorp (BMRC), Commercial Bancgroup (CBK), Ranger Energy Services (RNGR), Value Line (VALU), Fulcrum Therapeutics (FULC), Citizens Community Bancorp (CZWI).