Morning in New York: Pressure on the Tech Sector Persists

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.

Pressure on investor sentiment persists following the continued sell-off of shares in semiconductor manufacturers and other companies related to artificial intelligence. Despite strong earnings reports and upward revisions to forecasts from Taiwan Semiconductor (TSMC), investors continue to take profits on the fastest-growing tech stocks. As a result, capital is being reallocated to defensive assets, including banking sector stocks, which have been supported by strong earnings reports from major U.S. financial corporations. Due to the high weighting of chipmakers in Asian indices, the sell-off in the sector has put pressure on stock markets across the Asia-Pacific region. This creates risks of increased volatility at the start of today’s session.

Tensions in the Middle East have escalated significantly following Iran’s strikes on U.S. targets in the Persian Gulf. This was in response to six consecutive nights of U.S. attacks on Iranian military infrastructure. The U.S., in turn, struck targets belonging to the Islamic Republic on the island of Qeshm and in the Bandar Abbas area. This breach of the ceasefire is limiting the transport of hydrocarbon resources through the Strait of Hormuz, and Tehran’s call for the Houthis to be prepared to block the route through the Red Sea heightens the risk of a simultaneous blockade of two export corridors that are crucial to the energy market.

Before the start of regular trading today, June data on housing starts (consensus: +11.2%, May: -15.4%) and building permits (consensus: 0.1%, May: -0.9%) will be released. Data on industrial production growth for June (consensus: +0.2%, May: +0.1%) and the preliminary University of Michigan Consumer Sentiment Index for July (consensus: 51 points, June: 49.5 points).

Before the market opens, Regions Financial (RF), Truist Financial (TFC), Fifth Third Bancorp (FITB), Autoliv (ALV), Sandvik (SDVKY), and Travelers (TRV) will report their financial results.

S&P 500 futures are trending lower. Japan’s Nikkei 225 is down more than 3%, while South Korea’s KOSPI is falling by more than 6%. We assess the risk balance for the upcoming trading session as negative, with elevated volatility.

— Netflix (NFLX) shares are down about 8% following the release of its second-quarter earnings report. Although the streaming service’s profit exceeded market expectations, its revenue came in slightly below the consensus estimate. For the current quarter, the company forecasts revenue of $12.86 billion and EPS of $0.82. The 2026 operating margin guidance remains at 31.5%, with advertising revenue expected to nearly double.

— Intuitive Surgical (ISRG) shares are down more than 9%, despite strong second-quarter results. The company exceeded average market expectations for earnings and revenue thanks to growth in the number of procedures using the da Vinci system and an increase in its installed base of equipment. At the same time, investors viewed the company’s decision to maintain its guidance for procedure growth this year in the range of 13.5%–15.5% as a lack of new positive drivers.

— Alcoa (AA) shares are down about 1% following the release of its earnings report and a downward revision of its 2026 production and supply guidance for alumina due to operational disruptions at its Pinjarra facility in Australia, which was affected by gas supply disruptions following Cyclone Narelle. At the same time, the forecast for aluminum output remained unchanged.

— STAAR Surgical (STAA) shares plummeted by about 11% following an update to its guidance. The revised second-quarter revenue guidance calls for a figure above $90 million, driven by a recovery in demand in China and strong results in the Asia-Pacific region and the Americas. However, investors are concerned about pressure on sales in the Middle East and certain EMEA countries, as well as the impact of geopolitical instability and challenges with the implementation of the ERP system.

— Shares of chipmakers Astera Labs (ALAB) and STMicroelectronics (STM) are down more than 4%, while Micron Technology (MU), Marvell Technology (MRVL), and Arm Holdings (ARM) have fallen more than 3%.

— PayPal (PYPL) considers the purchase offer from Stripe and Advent International to be too low, but has not yet sent an official response to those companies.

Trading on July 16 on U.S. stock markets ended in the red. The S&P 500 fell 0.51%, the NASDAQ 100 dropped 1.62%, the Dow Jones fell by 0.2%, and the Russell 2000 lost a nominal 0.06%. The aforementioned profit-taking in semiconductor stocks and other beneficiaries of the AI trend put pressure on the markets.

Most of the “Magnificent Seven” stocks closed in negative territory. Alphabet (GOOGL: -4.44%) saw the heaviest selling in the group amid reports of yet another delay in the launch of the Gemini model.

Suppliers of non-cyclical consumer goods (XLP: +2.8%) led the gains thanks to increased demand for safe-haven assets, while the IT sector (XLK: -2.24%) was the underperformer.

Macroeconomic data generally confirmed the resilience of the U.S. economy. In June, retail sales rose 0.2% month-over-month, in line with consensus estimates, while the index for the core group of goods increased by 0.5%. The Philadelphia Fed’s Manufacturing Activity Index unexpectedly rose to 41.4 points, compared with a forecast of 13. Initial jobless claims fell to 208,000, compared with a consensus estimate of 217,000. At the same time, pending home sales in June fell by 5.6% MoM, although a decline of only 0.5% had been expected, and the NAHB Homebuilder Confidence Index fell to 34 points from 36 a month earlier, underscoring the ongoing negative impact of high interest rates on the housing market.

Dallas Fed President Lori Logan spoke in favor of moderately higher interest rates, noting that one month of favorable inflation data is not enough to change the assessment of the situation. Jeffrey Schmid, president of the Federal Reserve Bank of Kansas City, believes that inflation has remained above the central bank’s target for too long.

— Eli Lilly (LLY: +1.08%) is acquiring AtaiBeckley (ATAI: +33.4%) for $6.75 per share in cash, representing a premium of about 26% over the previous session’s closing price. The base value of the deal, which is expected to close by the end of the current quarter, is $2.8 billion. Up to an additional $1 billion may be paid upon the achievement of specified milestones.

— Abbott Laboratories (ABT: +10.7%) beat expectations for second-quarter earnings and revenue thanks to strong sales of medical devices and better-than-expected results from its Nutrition segment. The company raised its own adjusted EPS forecast for 2026.

— UnitedHealth Group (UNH: +1.2%) reported better-than-expected results for April–June compared to average market estimates. The medical loss ratio (MLR) came in below forecasts, results from UnitedHealthcare and Optum exceeded expectations, and the EPS guidance for 2026 was raised.

— GE Aerospace (GE: -4.1%) reported operating and net income, as well as revenue, that exceeded consensus estimates, and raised its full-year guidance. Management comments regarding delays in parts deliveries, inflationary pressures, and general logistical challenges weighed on the stock.

— ManpowerGroup’s (MAN: +32.4%) quarterly earnings, revenue, and operating margin exceeded average market estimates. The company is maintaining strict cost discipline amid improving demand and increased productivity driven by the expanded use of AI tools.

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