Welcome to earnings season (which never seems to end these days)! As a quick plug if you missed it last night we published our MAC Desk Q2 Earnings Preview: rAIsing the Bar, check it out! Ahead of this week’s major catalysts markets moved lower yesterday. Oil rose sharply as US-Iran hostilities reignited over the weekend, leading President Trump to reinstate the blockade and launch the GOTHS (“Guardians of the Hormuz Strait”). The move oil along with hawkish comments from influential Fed Governor Waller sent Treasury yields higher. He suggested he would support a rate hike in July if today’s CPI report came in hot, putting an even bigger spotlight on today's release.

Markets swiftly priced in a nearly 50/50 probability for a hike in July. This had ramifications sending the dollar higher, precious metals/cyrpto sharply as well as long duration equities all sharply lower. The equal-weight version of the S&P 500 only closed slightly to the downside with energy, defensive/yield-oriented sectors and financials moving higher. Small and mid-cap stocks were under a bit more pressure, but the real weakness was in tech and other speculative/thematic areas of the market. The S&P 500 fell just under 1% while the NYSE Semiconductor index was down nearly 5%. The tech weakness was well underway by the time Waller spoke partially an after shock from overseas weakness with memory stocks in South Korea falling sharply overnight, triggering yet another local market-wide circuit breaker.

Markets in Asia stabilized last night with S&P futures trading on either side of unchanged ahead of financial earnings and the inflation data despite oil prices continuing to move higher - as the US and Iran exchanged fire. Pretty much across the board the financial earnings were strong but right around 7:00 the complexion of the morning changed a bit after IBM negatively pre-announced taking the stock sharply lower. The company noted customers shifted spending at the end of June from its mainframe and infrastructure products to servers, storage and memory products to secure capacity and get ahead of price increases. The news sent software and consulting stocks sharply lower in the pre-market. That shifting of demand dynamic will be something to watch throughout earnings season (briefly discussed in our preview). The rising memory/component costs also showed up in Ericsson (>-10%) earnings, which noted this will weigh on profitability in the back half of the year and into 2027.