Market Notebook

PRICE ACTION:
Equity prices, as measured by the ticker SPY, closed lower while bond prices, as measured by the ticker BND, closed fractionally higher over the last week.

SPY  -1.54%
BND +0.12%

TECHNICAL ANALYSIS:
Both SPY and BND prices suggest they may have entered an area of consolidation.

SENTIMENT:
The VIX closed the week above 18, up substantially from near 15 the prior Friday and its sharpest single-week spike in months, signaling that investors repriced near-term uncertainty even as the inflation data delivered a genuine positive surprise. The June CPI report, released Tuesday morning, triggered an initial wave of optimism: headline consumer prices fell 0.4% month-over-month (the largest single-month decline since April 2020) and rose approximately 3.5% year-over-year, while core CPI came in unchanged on the month and decelerated to 2.6% year-over-year, down meaningfully from 2.9% in May. Rate-hike expectations for the Federal Reserve’s July 29 meeting were trimmed on the release. That relief proved short-lived, however, as a broad technology and semiconductor sell-off through the latter half of the week lifted the VIX well above its recent lower-15s anchor.

ECONOMY AND FUNDAMENTALS:
The week opened with eyes on Tuesday’s June CPI print, and the data largely delivered. A 0.4% monthly headline decline, driven by falling goods and energy prices, pulled the annual rate to approximately 3.5%, and the flat core reading reinforced the disinflation narrative that had been muddied by stickier figures in prior months. 

Bank earnings were the week’s other defining story, and they were uniformly excellent. JPMorgan Chase posted a record $21.2 billion in net income ($7.70 reported diluted EPS; $6.14 adjusted), with equity markets revenue surging 86% year-over-year and investment banking fees up 30%, the strongest quarterly haul since 2021. Goldman Sachs matched with record revenues of $20.34 billion and EPS of $20.98, while Bank of America reported $1.21 adjusted EPS on $31.6 billion in revenue, both beating estimates.

Elsewhere in earnings, UnitedHealth Group delivered a meaningful positive surprise on July 16, reporting adjusted EPS of $6.38 versus a consensus estimate near $4.84, driven by an improved medical care ratio of 86.7% and strong Optum segment performance; the company raised its full-year adjusted EPS guidance to $19.50 – $20.00. TSMC posted record second-quarter revenues of $40.2 billion, up 33.7% year-over-year, with gross margins of 67.7%, as AI and high-performance computing demand continued to drive advanced-node utilization. GE Aerospace beat estimates with $2.02 in adjusted EPS and raised its full-year outlook on the strength of commercial engine services. Netflix was the notable disappointment: shares fell roughly 9% after the company’s third-quarter revenue guidance came in below expectations, raising questions about the pace of growth in its advertising-supported tier and prompting broader concern about consumer discretionary technology spending.

In commodities, WTI crude oil rose sharply to approximately $82.49 per barrel, up from $71.41 the prior week, as Middle East tensions re-escalated and risk premiums were rebuilt into energy markets. 

Looking ahead, Alphabet and Tesla both report after the close on Wednesday, July 22, providing investors’ first detailed look at AI monetization trends and electric vehicle demand in the second quarter.

All the best during the week ahead!

Disclaimer: Nothing in this discussion should be considered investment advice. The content of this discussion is strictly my personal opinion and subject to change at a moment’s notice. Investment advice can only be provided to you by your investment professional and not by a general market discussion such as this one. If you wish to speak with an investment advisor, contact us. We can probably help.