U.S. equities saw a pronounced decline in technology stocks last week, while Alphabet and Tesla earnings will be in focus this week. Slowing CPI growth and strength in financial stocks are cited as contributing factors.
U.S. equities saw widespread profit-taking centered on technology stocks last week, driven by inflation concerns, geopolitical risks and signs of overheating in AI-related stocks. The S&P 500 fell 1.55% and the Nasdaq 100 fell 4.13%. June CPI fell 0.4% month on month and rose 3.5% year on year, slowing, prompting a growing view that further interest-rate hikes were unlikely to be necessary.
As investor caution intensified ahead of earnings announcements, bank stocks including JPM, BAC, C, WFC and GS reported results above market expectations, while increases in equity trading revenue were also confirmed. By contrast, IT and AI-related stocks faced a tougher reaction, with IBM shares posting a sharp one-day decline after disappointment with its earnings outlook.
Under the surface, position adjustments progressed, weighing on momentum-strategy ETFs holding stocks that had led the market higher. Selling pressure was particularly strong in semiconductor stocks, with the SOX Index falling approximately 10% in the week of 13 July. Even when earnings indicated strong AI demand, the market moved to correct perceptions of undervaluation, while new competitors such as Moonshot AI's Kimi K3 are also drawing attention.
The main focus this week is Alphabet and Tesla earnings, with investors assessing the contribution to earnings from advertising and cloud growth and investment in AI data centers. In addition, economic data ahead of the FOMC and movements in oil prices and interest rates could affect the market's upside. Although price movements may become more volatile in the short term, some expect the medium- to long-term uptrend to continue as long as corporate earnings keep expanding.