Morning in New York: Market News Will Exacerbate Volatility

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

Negotiations between the U.S. and Iran remain the focus of market participants. President Donald Trump reported ongoing contacts between the parties and suggested that shipping through the Strait of Hormuz could resume soon, but warned of new strikes if the agreements fall through. Hopes for a diplomatic resolution to the conflict have pushed Brent crude prices below $79 per barrel and WTI prices below $75. This eases inflationary risks and also provides support for stocks in the transportation and consumer sectors. At the same time, ongoing geopolitical uncertainty raises the possibility of a sharp rebound in oil prices.

The key macroeconomic releases this Wednesday will be the ADP private-sector employment report (consensus: 68,000; June: 98,000) and the ISM Services PMI for July. A moderate cooling of the labor market, which reduces the likelihood of a Fed rate hike, could provide support for bonds and growth stocks. In the ISM report, the most significant data points for the investment community will be the employment and prices paid components.

We anticipate a significant capital inflow into the technology sector. Strong results and confident outlooks from Arista Networks (ANET) and Astera Labs (ALAB) confirm sustained demand for networking infrastructure for AI data centers. The pullback in Advanced Micro Devices (AMD) shares following the company’s quarterly results, which beat consensus estimates, indicates that expectations for accelerator manufacturers are significantly overblown. At the same time, NVIDIA (NVDA) shares are reacting positively to Elon Musk’s comments that the Vera Rubin architecture is the best on the market, which is why SpaceX (SPCX) data centers will use only NVIDIA chips. Suppliers of components for network AI infrastructure may appear the most stable, while the broader semiconductor sector will continue to exhibit high volatility.

Before the main trading session begins, Eli Lilly (LLY), Uber Technologies (UBER), Disney (DIS), Shopify (SHOP), Circle Internet Group (CRCL), and CVS Health Corporation (CVS) will report their quarterly results. After the market closes, SanDisk (SNDK), Honeywell Aerospace (HONA), Western Digital (WDC), AppLovin (APP), McKesson (MCK), IonQ (IONQ), DoorDash (DASH), and MercadoLibre (MELI) will report their results.

S&P 500 futures are showing an upward trend. We assess the risk balance for the upcoming session as neutral-positive amid heightened volatility. Stabilizing oil prices and Treasury yields are supporting the bullish sentiment. Constraints include yesterday’s strong gains and the aforementioned negative investor reaction to AMD’s earnings report, which raises the likelihood of capital rotation within the semiconductor sector. Trading on the S&P 500 index will take place near all-time highs. Buyers are targeting 7,800 points.

— Despite a 50% year-over-year increase in quarterly revenue to $11.54 billion and earnings that exceeded expectations, Advanced Micro Devices (AMD) shares are down 8%. The company’s data center revenue more than doubled, reaching $6.72 billion. Its own revenue guidance for the third quarter, in the range of $13 billion, exceeded the consensus estimate. The negative reaction reflects high expectations following a strong rise in the stock price and the lack of a more significant upward revision to its AI-related guidance.

— SpaceX (SPCX) shares are down about 7% following its first-quarter earnings report, even though its revenue and profit exceeded average market expectations. Investors are focusing on the high capital intensity of the AI segment and the risk of needing to raise additional funding. Additionally, it was reported that SpaceX’s early shareholders will have the opportunity to sell a portion of their shares. This could also put pressure on the stock price.

— Astera Labs (ALAB) reported results and guidance that significantly exceeded consensus estimates. The company’s second-quarter revenue reached $392.4 million, compared with a consensus estimate of $360.8 million, and its guidance for July–September projects revenue in the range of $540–560 million, compared to the market’s average estimate of $417 million. The company expects its Scorpio switches to become its largest product line as early as this quarter. This will confirm the growing demand for AI data center solutions.

— Arista Networks (ANET) shares rose 10% in response to its quarterly results and guidance. The company’s revenue and adjusted earnings per share (EPS) for the second quarter reached $3.04 billion and $1.02, compared to consensus estimates of $2.82 billion and $0.88, respectively. For the third quarter, management forecasts sales of approximately $3.3 billion, which is significantly higher than expectations. The company expects to achieve this target thanks to sustained demand for networking equipment for AI data centers. The company also raised its revenue forecast for 2026 to $12.6 billion, confirming the acceleration of hyperscalers’ investments in AI-based networking technologies (AI-networking).

— Lucid Group (LCID) shares fell 7% following news that the launch of a more affordable electric vehicle model had been postponed from the second half of 2026 to the second half of 2027. The company also announced an “operational reset” aimed at generating $1.4 billion in cash savings. The company’s quarterly revenue rose 56% year-over-year to $405 million but fell short of consensus estimates, while its adjusted loss was higher than expected.

— Coupang (CPNG) shares fell 7% amid a significant decline in profitability. The company’s quarterly revenue increased by 4% year-over-year to $8.9 billion, or by 10% on a constant-currency basis. However, the gross margin contracted by 188 basis points, and adjusted EBITDA fell by 62%. Administrative fines totaling approximately $410 million, imposed on the company by South Korean regulators, put additional pressure on the stock price. Against this backdrop, the company’s operating loss reached $556 million.

Trading on August 4 on U.S. stock markets closed with strong gains. The S&P 500 rose 1.79%, hitting a new all-time high for the first time since June 2. The NASDAQ 100 soared 3.32%, the Dow Jones rose 1.71%, and the Russell 2000 climbed 1.85%.

A key positive driver was the rally in the semiconductor sector, fueled by strong earnings reports from companies benefiting from the AI boom, coupled with a sharp decline in Treasury yields. Most of the “Magnificent Seven” companies traded in positive territory, but Amazon (AMZN) shares came under pressure: Jeff Bezos filed a notice to sell a block of his shares worth approximately $4.1 billion.

The IT sector (XLK: +1.24%) emerged as the top performer, receiving additional support amid news that the U.S. is preparing a ban on the use of Chinese components in data centers. The defensive utilities sector (XLU: -0.56%) lagged behind as capital flowed into riskier assets.

The macroeconomic data released pointed to a continued cooling of the labor market, which market participants viewed positively. The number of JOLTS job openings in June fell to 7.359 million, below the revised May figure of 7.537 million. Meanwhile, layoff rates—both voluntary and employer-initiated—remained virtually unchanged. The U.S. trade deficit in June narrowed compared to the previous month, although it was slightly larger than forecast.

The situation in the Middle East remained the focus of attention. Statements by U.S. Treasury Secretary Scott Bessent that an agreement to resume shipping through the Strait of Hormuz could be reached in the coming days triggered a 5.7% plunge in WTI crude oil prices. Against this backdrop, Treasury yields fell by 5–7 basis points across the entire yield curve.

Anna Paulson, a voting member of the FOMC and president of the Federal Reserve Bank of Philadelphia, spoke in favor of a flexible approach to rate adjustments, noting that more evidence of a sustained decline in inflation is needed before monetary policy can be eased.

— Snap (SNAP: +14.3%) reported strong second-quarter financial results. Its non-advertising revenue increased by 85% year-over-year. In addition, daily active users (DAU) in North America and Europe showed signs of stabilization, and major advertisers increased their budgets.

— Caterpillar (CAT: +5.6%) reported second-quarter operating income and revenue that were significantly above consensus estimates. The world’s largest manufacturer of heavy equipment saw margins increase across all business segments, and its order backlog exceeded $70 billion. Company management noted growing demand from data center builders, which allowed it to raise its financial guidance for the full year 2026.

— Following a Reuters report that the White House is preparing a ban on imports of new Chinese optical transceivers, interest in U.S. manufacturers of these devices—including Coherent (COHR: +12.4%)—has surged. This protectionist measure, aimed at safeguarding against cyber threats and preventing data theft, is expected to significantly expand the domestic market for U.S. telecommunications equipment suppliers.

— Jeff Bezos plans to sell a block of Amazon (AMZN: -2.3%) shares worth approximately $4.1 billion. Despite the generally positive sentiment in the tech sector, insider sales on this scale traditionally exert downward pressure on the stock.

— A Bloomberg report on the recall of jalapeño peppers due to the detection of salmonella pathogens led to a sharp decline in Chipotle Mexican Grill (CMG: -9.7%) shares. Food safety incidents have historically triggered a negative reaction from investors due to the high risks of reputational damage and a decline in customer traffic.

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