Good morning,
Despite some sharp swings in equities last week, the broader picture—at least in retrospect—looks like a relief rally from the deeply oversold conditions reached in mid-July. The rebound registered beneath the surface, but not strongly enough to shift market momentum from risk-off to risk-on as we enter August—at least not yet.
That should not be entirely surprising as we approach a historically weaker stretch of the calendar. Record-breaking earnings reports have been offset by the continuing correction in the technology sector, and there are few signs that this narrative will change in the near term.
The week begins with futures up approximately 0.6% this morning, supported by a sharp pullback in oil prices. The cancellation of the planned attack on Iran is easing inflation concerns and providing a lift to both stocks and bonds.
Another heavy slate of earnings lies ahead, with semiconductor companies—particularly Micron and SanDisk—likely to command attention. Expectations for semiconductors and the broader AI trade remain elevated following Amazon’s 15% post-earnings surge on Friday.
Friday’s employment report will be the week’s pivotal economic release, particularly for interest rates and expectations surrounding the Fed’s next move. More broadly, uncertainty surrounding Fed Chair Warsh’s policy framework remains an important market overhang.
Have a good week. I am adjusting the Morning Note schedule for August and will see you again next Monday.
Be well,
Mike