Economic Strength Offsets AI Sector Weakness as Earnings Season Continues

Please note: The Morning Minutes will not be issued on Friday, July 17. They will return on Monday, July 20.

AI-related stocks, particularly semiconductor names, have come under pressure again overnight, with weakness most evident across Asia-Pacific markets and reflected in lower NASDAQ futures. At the same time, a series of US economic reports continues to point toward a resilient economy, with solid consumer spending, manufacturing activity and labour market data supporting a constructive backdrop for corporate earnings.

 Earnings season continues to produce mixed reactions. United Airlines exceeded earnings expectations, but its shares are down 3.3% premarket after management warned of approximately $6 billion in additional fuel costs this year. UnitedHealth, meanwhile, is trading 6.5% higher following stronger-than-expected results.

 Energy prices are also moving higher as markets continue to monitor escalating rhetoric between the US and Iran.

US retail sales rose 0.2% month-over-month, matching expectations. The Philadelphia Fed Manufacturing Survey came in well above expectations at 41.4 versus 13.0, while weekly jobless claims totaled 208,000, better than the consensus estimate of 217,000.

US index futures are mixed this morning, with NASDAQ futures down 1.0% while Dow futures are little changed.

Trading in Asia was mixed overnight. Japan’s Nikkei declined 2.8%, South Korea’s KOSPI fell 6.3%, while Hong Kong’s Hang Seng advanced 1.3%. European markets are weaker this morning, with Germany’s DAX down 0.9% and the UK’s FTSE 100 lower by 0.3%.

Commodity markets are generally firmer. Crude oil is up 1.3% and trading near $80.00 per barrel, while Brent crude has gained 1.2% to approximately $85.00 per barrel. Gasoline is up 1.5% near $3.35 per gallon and copper has added 0.5% to around $6.35 per pound. Precious metals are softer, with gold down 0.6% near $4,000 per ounce and silver lower by 1.4%.

Bond markets are little changed, with the US 10-year Treasury yield holding near 4.60% and the 30-year Treasury yield steady around 5.15%. The US dollar is broadly unchanged on the day, while the euro is down 0.1% and the Canadian dollar is up 0.2%.

Looking ahead, Netflix and Alcoa are scheduled to report earnings after today’s market close.

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