Market Update: Stocks and Bonds Move Higher Amid Strength in Chipmakers and AI Stocks

The S&P 500 Index ($SPX) is up +0.43%, while the Dow Jones Industrial Average ($DOWI) is down -0.04%, and the Nasdaq 100 Index ($IUXX) is up +1.17%. September E-mini S&P futures (ESU26) are up +0.46%, and September E-mini Nasdaq futures (NQU26) are up +1.33%.

Stock indexes are moving higher today, led by strength in chipmakers and AI infrastructure stocks. This trend is supported by the growing demand for AI technologies, which is driving the growth of AI infrastructure stocks. The outlook for strong Q2 earnings is also a bullish factor for stocks, with forecasts suggesting that Q2 earnings may increase by +23%, close to Q1’s blowout earnings of +30%.

The S&P 500’s earnings-per-share growth in Q2 is expected to be driven largely by AI infrastructure stocks, which are set to contribute nearly 60% of the S&P 500’s earnings-per-share growth in Q2. This growth is expected to be driven by the increasing adoption of AI technologies across various industries, including healthcare, finance, and manufacturing.

Crude oil prices are lower today, which is easing inflation expectations and lowering bond yields. The 10-year T-note yield is down -2 bp to 4.46%, while the 10-year T-note yield is down -1.9 bp to 4.464%. The decline in crude oil prices is also supporting the overall market, as lower energy costs are expected to boost economic growth and increase consumer spending.

Overseas stock markets are moving lower today, with the Euro Stoxx 50 falling from a new record high and down -0.47%. China’s Shanghai Composite closed down -0.06%, and Japan’s Nikkei-225 Stock Average closed down -0.01%. The decline in overseas markets is largely due to the weakness in the US dollar, which is making imports more expensive and reducing demand for US exports.

Interest rates are also playing a significant role in the market’s movement today. The 10-year T-note yield is down -1.9 bp to 4.464%, while the 10-year UK gilt yield is down -0.4 bp to 4.779%. The decline in interest rates is supporting the overall market, as lower borrowing costs are expected to boost economic growth and increase consumer spending.

The markets are discounting a 24% chance of a +25 bp rate hike at the next FOMC meeting on July 28-29. However, the decline in crude oil prices and the growth in AI infrastructure stocks are supporting the overall market and reducing the likelihood of a rate hike.

The outlook for the US economy is also a key factor in the market’s movement today. The growth in AI infrastructure stocks and the decline in crude oil prices are expected to boost economic growth and increase consumer spending. However, the decline in overseas markets and the weakness in the US dollar are expected to limit the growth in US exports and reduce demand for US goods.

The markets are also responding to the latest earnings reports from various companies. Chipmakers and AI infrastructure stocks are climbing today, with the iShares Semiconductor ETF (SOXX) up more than +3%. Western Digital (WDC) is up more than +8% to lead gainers in the S&P 500 and Nasdaq 100, and Seagate Technology Holdings Plc (STX) is up more than +6%. Also, ARM Holdings Plc (ARM), Broadcom (AVGO), and ON Semiconductor (ON) are up more than +5%, and Advanced Micro Devices (AMD) and Qualcomm are up more than +4%.

Cybersecurity stocks are also rallying today, with CrowdStrike Holdings (CRWD) up more than +6%, and Palo Alto Networks (PANW), Okta (OKTA), and Fortinet (FTNT) up more than +4%. Also, Zscaler (ZS) is up more than +3%, and Cloudflare (NET) is up more than +2%.