Major Index Performance
Stock markets experienced declines on Friday after traders focused heavily on the latest developments in the semiconductor sector and recent corporate earnings reports. The three major U.S. indexes all finished lower for the week.
- The S&P 500 index lost 1.6% over the course of the week.
- The Nasdaq Composite dropped by 2.9%.
- The Dow Jones Industrial Average recorded a weekly decrease of 0.9%.
On the day’s close, the S&P 500 declined 1.01% to end at 7,457.69. The Nasdaq Composite fell 1.4%, finishing at 25,520.24, while the Dow Jones Industrial Average shed 406.55 points, or 0.77%, settling at 52,146.42.
Tech Sector and Semiconductor Pressure
Technology stocks faced particular scrutiny, with significant selling pressure observed in semiconductor names. The VanEck Semiconductor ETF (SMH) recorded its third weekly decline in four weeks, falling nearly 9% during the period.
This sell-off was intensified by a new artificial intelligence model unveiled by Chinese startup Moonshot AI. This model reportedly narrows the performance gap with leading U.S. offerings, prompting concerns about the pace of technology spending due to competition from open-source models in China.
The latest development is competition from open-source models in China, which are reportedly rivaling the performance of leading offerings from Anthropic and OpenAI, raising fresh concerns about the heavy pace of technology spending.
We are seeing signs of fatigue, with end-user demand for AI becoming more price sensitive and the market starting to penalize companies that are ramping spending too aggressively. We view this volatility as a signal that the AI theme is likely maturing rather than breaking, which is a healthy part of how transformative investment cycles evolve.
Angelo Kourkafas, senior investment strategist at Edward Jones, noted these industry trends. Separately, shares of Netflix were also significantly underperforming on Friday, dropping more than 7% after the company’s forecast failed to alleviate investor worries that its growth momentum was slowing.
Energy and Geopolitical Concerns
Escalating tensions in the U.S.-Iran conflict remained a central focus for investors, contributing to increases in oil prices. Crude futures reflected this instability:
- U.S. West Texas Intermediate crude futures rose 4.5% to close at $82.49 per barrel.
- The international benchmark Brent crude futures advanced 4.6%, concluding the day at $88.10.
These price movements were influenced by reports that Kuwait confirmed an attack on a power and water desalination plant by Iran, while U.S. Central Command announced it had completed its sixth consecutive evening of strikes against Iranian military targets, including logistics and maritime capabilities. Tehran also claimed targeting U.S. forces in Syria and Bahrain, escalating regional hostilities.
Economic Outlook and Consumer Sentiment
In terms of broader economic health, a survey conducted by CNBC showed that public pessimism regarding the economy remains high. The 1,000-adult nationwide poll revealed that 61% of the population expressed concern about the current state and future outlook for the economy—the highest percentage recorded since December 2023.
On a related note concerning inflation, the University of Michigan survey indicated improved consumer sentiment in July, attributed to falling energy costs and lower inflationary expectations. The survey’s sentiment gauge reached 54.4, which was nearly 10% higher than June’s reading.
Other Market Highlights
Company News and Sector Performance
Satellite Communications
Raymond James upgraded EchoStar to a “strong buy” rating and raised its price target to $115. Analyst Ric Prentiss suggested the satellite communications provider was trading at a substantial discount, noting that investors had begun shifting away from EchoStar shares since SpaceX became public.
Insurance Sector
Shares for Travelers Companies rose by over 8% following the release of its latest earnings report on Friday. The company reported $10.04 in earnings per share, surpassing Wall Street’s consensus estimate of $5.41. Furthermore, net income was approximately $2.2 billion compared to about $1.5 billion in the previous year’s quarter.
AI Infrastructure
The New York Times reported that hyperscaler Meta is reportedly negotiating a deal to lease computing power to artificial intelligence leader Anthropic. Sources indicated that the initial proposal came in June and could potentially be valued up to $10 billion, though talks are described as being in early stages.
International Markets
European and Asian Market Movements
In Europe, the pan-European Stoxx 600 closed Friday’s session with a negative return of 0.41%, with most major European bourses also declining. Tech names suffered significantly, dropping 2.7%. Only the U.K.’s FTSE 100 managed to record a positive gain of 0.27%.
In Asia, several markets opened lower on Friday morning as Asian stocks tracked losses in U.S. semiconductor shares. Hong Kong’s Hang Seng index was down 0.8%, and mainland China’s CSI 300 dropped 1.64%. Meanwhile, Sweden’s defense company Saab reported record orders for the second quarter, totaling a backlog of 317.7 billion Swedish crowns.
