Morning in New York: Investors Are Banking on Diplomacy

A daily review and forecast of events in the U.S. stock market by Mikhail Denislamov, Deputy Director of Freedom Capital Markets Research.

The situation in the Middle East remains a source of uncertainty for the markets. The Houthis have announced a naval blockade of Saudi Arabia, and the U.S. has launched new strikes against Iranian targets. At the same time, mediators are continuing negotiations, including on the terms of a ten-day ceasefire. Despite the escalation, the market continues to hope for a diplomatic resolution to the U.S.-Iran conflict.

The White House’s new foreign trade initiatives are also causing concern among market participants. President Donald Trump’s administration announced the imposition of 50% tariffs on a range of Canadian goods totaling approximately $20 billion, effective August 19. However, numerous exemptions limit the economic impact of this measure. For its part, Canada has called the tariffs a violation of the USMCA and has not ruled out retaliatory measures. As rhetoric intensifies, this issue could return to the forefront of market attention.

This Tuesday will see the release of ADP’s weekly job openings data (previous reading: 19,750), as well as the Philadelphia Fed’s Non-Manufacturing Activity Index for July (June: -25.8 points). Both releases are of secondary importance and are unlikely to serve as standalone market triggers. Fed officials continue to observe a blackout period ahead of the July 28–29 meeting.

The U.S. is tightening requirements for supply chain localization in the defense sector. Starting in 2027, the use of foreign critical materials will be significantly restricted, and contractors will be required to demonstrate that they have sought out U.S. suppliers. The Department of Defense will require full traceability of supply chains. The new rules will have the most significant impact on the defense industry, manufacturers of critical materials, and suppliers of electronic components for the defense sector.

Before the start of the main trading session, Charles Schwab (SCHW), Danaher (DHR), General Motors (GM), 3M (MMM), and Northrop Grumman (NOC) will report their quarterly results. After the market closes, Capital One (COF), Chubb (CB), Interactive Brokers (IBKR), Webster Financial (WBS), and EQT (EQT) will report their earnings.

Futures on U.S. stock indices are showing positive momentum. We assess the risk balance for the upcoming session as neutral, with elevated volatility. In the absence of significant triggers, the session’s direction will be determined primarily by external factors, including the aforementioned situation in the Middle East, the announcement of import duties on Canadian goods, and oil price movements. We expect the S&P 500 to fluctuate within the 7,400–7,500 point range.

— Nebius Group (NBIS) shares rose by more than 5% following the disclosure that Nvidia (NVDA) holds a 9.3% stake in the company (~22.26 million shares). Of this total, 1.19 million shares are already owned by Nvidia, and an additional 21.07 million may be received upon exercise of a prepaid warrant acquired as part of the $2 billion investment announced in March. The buyer is not entitled to exercise the warrant or sell the corresponding shares until September 11.

— Steel Dynamics (STLD) shares are down about 2%, even though its EPS rose to $3.69 from $2.01 a year earlier, and revenue increased to $6.09 billion, thanks to record steel shipments of 3.7 million metric tons. The results include a $16 million asset write-down related to the planned relocation of an aluminum processing facility.

— W. R. Berkley (WRB) reported a second-quarter increase in operating earnings per share from $1.05 last year to $1.27, beating the consensus estimate of $1.08. At the same time, revenue came in at $3.72 billion, compared with a consensus estimate of $3.77 billion, as the company recorded an investment loss of $55.1 million, compared with a gain of $30.5 million a year earlier.

— Crown Holdings (CCK) shares are rising by about 3% following the release of its earnings report. The company’s adjusted earnings per share (EPS) rose 16% to $2.49, while global production of beverage cans increased by 5%. The company conducted a $305 million share buyback and raised its annual guidance for adjusted earnings to $8.3–8.5, with free cash flow of at least $900 million.

— Calix (CALX) shares are down about 13%. Despite record revenue of $293.3 million, the stock came under pressure due to a forecast of an adjusted gross margin for the third quarter in the range of 50.5%–53.5%. The midpoint of this range is 52%, which is 280 basis points lower than the second-quarter level. The company cited rising memory component costs as the main reason for the decline.

Trading on July 20 on U.S. stock exchanges closed near intraday lows. The S&P 500 fell 0.19%, the Nasdaq 100 lost 0.04%, the Dow Jones fell 0.59%, and the Russell 2000 dropped 0.67%. The session was calm, with no significant catalysts. The “Magnificent Seven” traded in mixed directions. Microsoft (MSFT: +2.15%) showed the strongest performance, while Tesla (TSLA: -2.96%) saw the steepest decline. The energy sector (XLE: +0.45%) emerged as a growth leader; against the backdrop of ongoing risks to oil supplies, it continues to serve as a kind of insurance for the market against disruptions in global logistics. The healthcare sector (XLV: -1.14%) lagged behind. Cyclical sectors were also under pressure.

Following last week’s accelerated sell-off in stocks driven by strong momentum, the market has begun to stabilize. The memory chip and semiconductor sectors showed a rebound, although the rally slowed in the afternoon. Market participants continue to attribute the recent correction primarily to positioning and market structure factors, rather than to a deterioration in fundamentals, while the debate continues to center on the return on capital investment in AI and competition from cheaper open-source models. At the same time, demand weakened for assets that had previously benefited from growth extending beyond the technology sector.

Investors kept a close eye on the geopolitical situation, though its impact on trading was limited. On Sunday night, amid escalating tensions in the Middle East and a slowdown in shipping through the Strait of Hormuz, Brent crude prices exceeded $90 per barrel, but by the close of the main trading session, this spike had subsided. Signals from the parties to the conflict indicating a willingness to negotiate contributed to the subdued reaction. Trends in related markets reflected cautious sentiment. Treasury bond yields rose by 3–5 basis points across the yield curve. The dollar index gained 0.2%, silver rose 1.3%, Bitcoin futures rose 1.4%, and gold fell 0.1%.

— Alphabet (GOOGL: +1.51%) is developing an AI chip codenamed Frozen v2, which boosts the efficiency of Gemini models by 6 to 10 times compared to current TPUs. The product is scheduled to launch in 2028.

— Advanced Micro Devices (AMD: +1.58%) announced the launch of its Helios AI lineup, which competes with Nvidia’s (NVDA) Grace Blackwell and Vera Rubin systems. Deliveries are expected to begin before the end of this year. Microsoft (MSFT) plans to use these solutions in its data centers.

— Oracle (ORCL: -3.98%) has faced multibillion-dollar cost overruns and delays in its AI data center projects.

— A federal court has suspended the merger between Warner Bros. Discovery (WBD: -3.76%) and Paramount Skydance (PSKY) for 14 days, noting that the states’ lawsuits raise serious questions about the deal.

— Alibaba (BABA: +4.67%) has launched a preview version of the Qwen 3.8 Max model, with 2.4 trillion parameters, which the company has described as the second most powerful model after Anthropic’s Fable 5. Developers have access to the model through Alibaba’s platforms, and the company plans to make the model open-source in the future.

— IREN (IREN: +19.57%) raised its annual guidance for normalized revenue in the cloud segment (AI Cloud) from $3.7 billion to more than $4 billion following the signing of multi-year contracts worth $2.8 billion. As a result, approximately 85% of the target has already been secured through contracts.

— Hut 8 (HUT: +10.37%) announced a second 15-year lease agreement worth $9.8 billion with an existing investment-grade client. The 1-GW Beacon Point campus in Texas is now fully operational.

This article was AI-translated and verified by a human editor