Morning in New York: Oil Rally Versus Stabilization in the Chip Sector

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 surrounding the Strait of Hormuz will continue to put pressure on prices during the upcoming trading session. After the close of main trading yesterday, the U.S. and Iran exchanged blows once again. This calls into question whether the parties will return to negotiations and increases the risk of an uncontrolled escalation of tensions. The threat level for shipping has been raised to the highest level, and some tankers traveling through the Strait of Hormuz have changed their routes.

The market priced in a scenario of normalized oil supplies too early, whereas the physical restoration of supply flows cannot be expected to coincide exactly with the end of the military conflict. Current events are bringing oil back to the center of the macroeconomic chain, heightening inflationary risks and narrowing the scope for Fed policy easing.

The foreign trade agenda is another source of uncertainty. Following the NATO summit, U.S. President Donald Trump ordered a halt to trade with Spain, accusing it of insufficient defense spending. Relevant government agencies are compiling a list of Spanish goods that will be subject to the embargo. So far, the market has viewed these statements more as a negotiating tactic; however, amid seasonally low liquidity, such rhetoric from the U.S. leader could increase volatility in certain sectors.

As is customary on Thursdays, weekly data on the number of initial and continuing unemployment insurance claims will be released (consensus: 217,000 and 1,814,000, respectively, following 215,000 and 1,814,000 for the same period last year). Existing-home sales data for June will be released (consensus: 4.2 million; May: 4.17 million). Given the internal disagreements within the FOMC noted in the minutes of the June meeting, remarks by New York Fed President John Williams and Dallas Fed President Lori Logan will draw particular attention. Their remarks may provide greater insight into the sentiments of monetary policymakers and help adjust expectations regarding the interest rate path.

Before the main session opens, PepsiCo (PEP) and Byrna Technologies (BYRN) will report their quarterly results. After the market closes, WD-40 (WDFC) will report its results.

Futures on U.S. stock indices are showing a moderately positive trend. We assess the risk balance for the upcoming session as neutral, with elevated volatility. The market is under pressure from the aforementioned escalation of tensions in the Middle East. The semiconductor sector, which has stabilized after a recent pullback, is providing a positive backdrop. We expect the S&P 500 to trade within the 7,400–7,550 point range.

— AZZ (AZZ) shares are up nearly 8% following the release of its earnings report, which showed record sales, and amid an upward revision to its full-year guidance. The revenue guidance for fiscal year 2027 has been raised to $1.8–1.85 billion.

— Honeywell Technologies (HON) shares are reacting modestly to a technical update to its 2026 forecast following a 1-for-2 reverse stock split. The revision reflects a reduction in the number of shares and a mechanical doubling of the forecast EPS. Key operating guidance remains unchanged: revenue guidance for the second half of the year and the full year remains within the ranges of $10.1–10.3 billion and $19.9–20.2 billion, respectively.

— Pure Cycle (PCYO) shares are rising by about 5%, as its net income grew by 31% to $2.9 million during the most recent reporting period, and revenue increased by 60% thanks to land sales and water deliveries to customers in the oil and gas sector.

— Venture Global (VG) shares are rising by about 2% in response to the second-quarter report, in which the company exported 127 shipments of LNG and recognized 466.4 trillion BTE in revenue, with an average fixed liquefaction fee of $6.45 per million BTE.

— MDA Space (MDA) shares are down about 6% following the announcement of a placement of 20 million shares at $35.60 per share for a total of $712 million, which represents a discount to the market price. The proceeds will be used to acquire a 70% stake in Collecte Localisation Satellites.

— Levi Strauss (LEVI) shares are down about 6%, despite beating consensus estimates for revenue and earnings, raising its full-year guidance, and increasing its quarterly dividend. Investors are taking profits after the company’s market capitalization has risen by about 17% since the beginning of the year.

— Costco Wholesale (COST) shares are trading within a 1% range following the release of June data showing revenue growth of 10.6% year-over-year, to $29.24 billion, and an 8.8% increase in comparable sales (+7% excluding fuel and currency effects).

Trading on July 8 on U.S. stock markets ended mostly in the red, although the indices recovered from their intraday lows by the close. The S&P 500 fell 0.28%, the Nasdaq 100 rose 0.27%, the Dow Jones fell 1.09%, and the Russell 2000 fell 0.88%. The session was driven by the escalation of the Middle East conflict, which forced traders to reduce their positions in risky assets.

The “Magnificent Seven” stocks showed mixed performance. Nvidia (NVDA: +3.65%) posted the strongest gain amid reports that Chinese companies had been granted permission to make limited purchases of H200 chips. The energy sector (XLE: +1.76%) emerged as a growth leader, supported by oil prices. Commodity and materials producers (XLB: −2.62%) were the day’s underperformers. Chipmakers appeared more resilient than the broader market, rebounding after a pullback.

The geopolitical situation set the tone for trading. The U.S. launched a retaliatory strike against Iran following its attacks in the Strait of Hormuz. Donald Trump declared that the memorandum of understanding was no longer in effect and left open the possibility of further strikes. Tehran promised a harsh response and once again threatened to close the Strait of Hormuz.

WTI futures rose 4.4%, pulling back from intraday highs. At the same time, safe-haven assets fell in price: gold corrected by 1.8%, silver by 4.6%, and Bitcoin futures declined by 2.6%. It is worth noting that over the past few months, the escalation of the U.S.-Iran conflict has repeatedly been followed by de-escalation, so current events do not necessarily signal a resumption of full-scale hostilities.

The release of the minutes from the June FOMC meeting held no surprises. Several committee members pointed to reasons for raising rates as early as June, but ultimately supported keeping them at current levels. Opinions among meeting participants regarding the interest rate level by year-end were divided. Most noted the presence of both inflationary and disinflationary scenarios.

May wholesale inventory figures came in weaker than expected. Treasury bond yields rose by 1–4 basis points amid a slight flattening of the yield curve. The $39 billion offering of 10-year notes was priced at a 0.6-basis-point premium to the secondary market. The dealers’ share fell to its lowest level since January. The bid-to-cover ratio reached an annual high, and demand from foreign investors was very strong.

The stabilization of momentum in the semiconductor sector—which has lost about 14% on the SOX index since its record high on June 22—deserves special attention. Some analysts are reluctant to overreact to the sell-off, attributing it to investors’ desire to reduce the share of high-risk instruments in their portfolios rather than to panic. They also note that positive fundamental factors remain in place and that the correction is primarily technical in nature, driven by over-leveraged positions, consolidation following the quarterly rally, and the influence of seasonal factors.

— Dream Finders Homes’ (DFH: −5.55%) bid to acquire Beazer Homes (BZH: +13.09%) has been raised from $25.75 to $32 per share in cash. BZH management reported that other market participants are interested in acquiring the company and are considering various deal options, which is fueling expectations of a competitive bidding war for the asset.

— Alibaba Group (BABA: +11.05%) shares, like those of the entire Chinese technology sector, saw an inflow of capital withdrawn from South Korean companies. BABA’s share price received additional support from reports that Taobao Flash Sale’s losses are shrinking faster than expected, while e-commerce profits are growing overall.

— Enerpac Tool Group’s (EPAC: +6.27%) quarterly earnings came in above forecasts, and revenue also slightly exceeded expectations, driven by strong results from the Industrial Tool & Service segment. However, management lowered its full-year guidance to the midpoint of the range, warning of short-term pressure from geopolitical factors on the service segment.

— Apple (AAPL: +0.88%) and Broadcom (AVGO: +4.83%) have entered into a multi-year agreement worth more than $30 billion to develop and manufacture custom semiconductor components and wireless solutions in the United States.

— Fiserv (FISV: −4.00%) President Divya Suriadevara has stepped down from her position, invoking a contractual provision allowing her to resign for good cause. This is not the first resignation among the company’s top executives, which heightens uncertainty regarding the stability of its management team.

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