Pre-Market Market Trends

As of July 20 (Monday), U.S. stock index futures are all up before the market opens. As of the time of writing, Dow futures are up 0.48%, S&P 500 futures are up 0.59%, and Nasdaq futures are up 1.08%.

As of the time of writing, the German DAX index is up 0.52%, the UK FTSE 100 index is down 0.11%, the French CAC 40 index is up 0.56%, and the Euro Stoxx 50 index is up 0.46%.

As of the time of writing, WTI crude oil is down 1.81%, priced at $80.30 per barrel. Brent crude oil is down 1.33%, priced at $86.93 per barrel.

Market News

Escalating Middle East conflicts coincide with tech giants' earnings season! The market awaits giants to provide "quantifiable AI investment returns." This week, as the geopolitical situation in the Middle East escalates and the Philadelphia Semiconductor Index falls into a bear market, while the South Korean stock market continues to face severe deleveraging, investors will enter another intensely packed financial schedule of five trading days. Among the most watched are two major tech giants—Google (GOOGL.US) and Tesla (TSLA.US), which will announce their earnings after the U.S. market closes on Wednesday. Additionally, IBM (IBM.US), Intel (INTC.US), and Texas Instruments (TXN.US) will also release their latest earnings this week. Against the backdrop of escalating geopolitical turmoil and a sharp correction in AI trading, the performance and future outlook of these tech giants will be key pricing points to test whether "unprecedented AI computing power capital expenditures can be converted into actual revenue, cash flow, and return on investment," and will determine whether the current AI trading sell-off is nearing its end.

AI trading retreat combined with rising geopolitical risks! Wall Street bets that U.S. stocks may face a "high volatility storm" this summer. Momentum trading driven by rising stock prices is losing steam, and optimistic earnings expectations are being scrutinized, both of which indicate that the market may experience higher volatility this summer. As the risk factors faced by investors increase, it poses challenges to the overall bullish outlook, and index volatility is gradually rising. Crowded AI-related trades are experiencing sharp reversals, triggering large-scale capital rotations. Furthermore, although the current market remains calm in the face of escalating geopolitical tensions, if the situation further deteriorates, it will put pressure on the currently widely expected dovish monetary policy outlook. Meanwhile, the demand for risk hedging tools in the market is rapidly increasing The Nations SkewDex index has risen to its highest level since April—this index measures the cost difference between out-of-the-money put options and at-the-money options in the most liquid exchange-traded funds (ETFs) within the S&P 500, used to gauge market skewness—this may drive other volatility indicators higher.

Société Générale: The AI boom is driving individual stock volatility, but overall market risk is manageable. Société Générale strategist Gitesh Kumar pointed out that while the AI investment cycle may continue to elevate individual stock volatility, the macroeconomic environment still supports the stock market. The bank believes that resilient economic growth, a strong labor market, and proactive fiscal policies continue to limit overall market downside risks. Investors are increasingly distinguishing between individual corporate winners and losers, a trend that has heightened the volatility of single stocks while pushing correlations between stocks to historical lows. The report advises investors that market leadership may continue to concentrate on AI-related companies rather than broad market indices. Although leveraged ETF activity and crowded positions may trigger intermittent spikes in volatility, Société Générale expects such volatility to be temporary unless economic fundamentals deteriorate significantly.

Is the Middle East conflict spiraling out of control? Tankers attacked, oil infrastructure bombed, Brent crude briefly surpassed $90. The latest developments show that the U.S.-Iran military confrontation is indeed significantly escalating. The U.S. has struck Iran for nine consecutive nights, targeting the Revolutionary Guard's military capabilities, missile and drone systems, as well as transportation and power infrastructure. In response to U.S. attacks, Iran has been continuously targeting multiple U.S. military bases in the Middle East. However, this does not equate to an irreversible full-scale regional war; the critical watershed remains whether the facilities of major oil-producing countries like Saudi Arabia and the UAE are subject to sustained attacks, and whether the Houthis effectively blockade the Bab-el-Mandeb Strait. The escalating geopolitical hostilities in the Middle East have raised market concerns about supply shortages. A recent research report from JP Morgan indicates that excluding China, global oil inventories are at historically low levels, leaving the global energy market with "almost no margin for error."

Waller and the bond market reach consensus: The Fed's fight against inflation is far from over. The U.S. Labor Department's report showed that U.S. consumer prices fell month-on-month for the first time since 2020, providing some relief to financial markets—last week, investors quickly unwound bets that "the Fed might start raising interest rates later this month." However, this is likely just a temporary reprieve. Following the breakdown of the U.S.-Iran ceasefire agreement, oil prices have risen again. Despite bubble concerns impacting some tech stocks, massive spending in the AI sector continues to inject stimulus into the economy. Waller, who took over as Fed Chair two months ago, has made it clear that the central bank's top priority is to lower inflation—over the past five years, inflation has consistently exceeded the 2% annual target. Therefore, while traders currently see a low probability of a rate hike in July, they are still betting on a high likelihood of a 25 basis point hike in September or October, viewing a rate increase before December as almost a certainty

Individual Stock News

Chip stocks and optical communication stocks rise before the market opens. As of the time of writing on Monday, Micron Technology (MU.US) and SanDisk (SNDK.US) rose over 4%, Western Digital (WDC.US) and Seagate Technology (STX.US) rose nearly 4%; AMD (AMD.US) rose over 5%, Intel (INTC.US) and Qualcomm (QCOM.US) rose over 2%, Broadcom (AVGO.US) and NVIDIA (NVDA.US) rose over 1%. In the optical communication sector, Credo Technology (CRDO.US) rose nearly 4%, Coherent (COHR.US) and Lumentum (LITE.US) rose over 3%, AXT Inc (AXTI.US) and Astera Labs (ALAB.US) rose nearly 3%, Corning (GLW.US), Marvell Technology (MRVL.US), and Nokia (NOK.US) rose over 2%.

Apple (AAPL.US) price hike in Japan spreads to iPhone, with new models seeing a maximum increase of 20,000 yen. Apple has raised the prices of several iPhone models in the Japanese market, with some models in its smartphone series seeing price increases of up to 11%. According to prices published on Apple's Japanese online store, this price adjustment applies to the iPhone 17 series, iPhone Air, and iPhone 16. Depending on the model, prices have increased by 8,000 to 20,000 yen. Apple has not publicly explained the latest price changes, but exchange rate pressures may be a behind-the-scenes factor—the price increase coincides with the continued weakness of the yen against the dollar, which has reduced the value of overseas revenue when converted back to dollars. Meanwhile, Apple has also been dealing with higher component costs. Last month, the company raised prices on several other products, including Mac and iPad, but the price of the iPhone remained unchanged at that time.

AI supercycle ignites a capacity war: TSMC (TSM.US) increases investment in Arizona by $100 billion, pouring a total of $265 billion into the U.S. AI chip landscape. TSMC (TSM.US) Chief Financial Officer Jensen Huang stated in an interview that as customer "super trend of demand over the years" continues to emerge, the company is fully accelerating the ramp-up of capacity at its Arizona plant. In response to the sustained structural demand surge in the artificial intelligence sector, TSMC is significantly expanding its investment footprint in the U.S., committing an additional $100 billion to aggressively expand its chip manufacturing layout in the U.S. This new commitment raises TSMC's total investment in Arizona to $265 billion, highlighting the massive capacity construction driven by AI, while also prompting the company to raise its full-year capital expenditure expectation to a range of $60 billion to $64 billion. Huang stated that this new investment is driven by strong customer demand in the U.S. market and substantial government support.

Boeing (BA.US) capacity expansion reaches a critical turning point! FAA restores final release authority for 737 Max and 787 new aircraft. After a near-disastrous incident involving a 737 Max aircraft in 2024, regulators discovered a series of quality issues with Boeing Subsequently, the Federal Aviation Administration (FAA) restricted Boeing's aircraft production and revoked the company's authority to sign off on the final release of newly produced aircraft. The FAA stated that the decision to restore Boeing's related permissions will officially take effect on July 20, reflecting the company's progress in improving quality management and regaining the trust of regulators. This is crucial for Boeing to expand production capacity, improve its financial situation, and regain an advantage in competition with rival Airbus. Currently, this American aircraft manufacturer is working to stabilize production of its "cash cow" 737 series aircraft, aiming to maintain a monthly output of 47 units, with plans to gradually increase it to 63 units over the next few years. In addition, the FAA stated that regulators will continue to monitor the quality levels of this aircraft manufacturer.

Earnings Forecast

Tuesday pre-market: Novartis (NVS.US), Charles Schwab (SCHW.US), General Motors (GM.US)