On the surface, July appeared to be a relatively uneventful month for markets, with the S&P 500 finishing the month little changed.[1] Strong corporate earnings helped offset concerns from a renewed conflict with Iran, volatile oil prices, a hawkish Federal Reserve, and a sharp semiconductor sell-off. [2],[3]
However, investors rotated away from tech stocks, with the tech-heavy Nasdaq-100 falling approximately 7%, its steepest monthly decline since March 2025.[4] To give you an idea of the magnitude of the price swings, the VanEck Semiconductor ETF lost more than 19% at its late-July lows – on pace for its worst month since 2008 – after chip stocks had doubled in the first half of the year.[5],[6]
Source: https://www.reuters.com/business/wall-st-week-ahead-teetering-us-stock-market-faces-jobs-report-big-earnings-week-2026-07-31/
Money didn’t flee the market so much as move within it, out of semiconductors and into other parts of the market.[7] As a result, the S&P 500 is still up over 9% for 2026, with support from sectors that had previously lagged.[8] Solid corporate earnings helped the nearly four-year-old bull market remain on high ground.[9]
Blockbuster Earnings Meet the AI Spending Question
Here’s the paradox for July: corporate America delivered its strongest earnings season in five years, and the market seemed to barely reward it. With 88% of S&P 500 companies reporting, 86% beat earnings estimates, above the five-year average of 78%, and the index’s blended earnings growth rate reached 50.4%, its highest since Q2 2021.[10] Granted, that impressive number was inflated by an unusually large gain at Alphabet tied to unrealized gains on equity holdings. But excluding Alphabet and Amazon, growth was still a remarkable 32%.[11]
So why the selloff in tech? One of the key reasons was concern over AI spending. The largest cloud-computing companies are pouring hundreds of billions of dollars into AI infrastructure this year, and investors have begun asking pointed questions about when and whether those investments will pay for themselves.[12] Notably, these companies have shifted from funding the buildout almost entirely from their own cash flows to raising debt and equity from the capital markets.[13] If companies report record profits and their stock prices still fall, the market has probably been pricing these stocks to perfection and is now carefully dissecting them.
The Federal Reserve Holds and the Bond Market Talks Back
At its July 28–29 meeting, the Federal Reserve (the Fed) voted to leave the federal funds rate unchanged in a range of 3.5% to 3.75%, as largely expected.[14], [15] Three out of 12 policymakers dissented and voted for a hike. While new Fed Chairman Kevin Warsh repeated his intention to return inflation to 2%, it wasn’t immediately clear how that would be achieved.[16]
Source: https://www.reuters.com/business/wall-st-week-ahead-teetering-us-stock-market-faces-jobs-report-big-earnings-week-2026-07-31/
The bond market’s response was notable. The 30-year Treasury bond yield spiked to its highest levels since 2007, reaching about 5.25%, while the benchmark 10-year Treasury yield topped 4.7%, its highest level since January 2025.[17]
Bond yields rise when bond prices fall, and long-term yields, in particular, could reflect concern over sustained inflation and the ability of the U.S. government to pay for its spending.
One of the reasons the Fed could stay on hold was the relief in inflation numbers. The June Consumer Price Index (CPI), reported July 14, fell 0.4% for the month, the largest one-month decline since April 2020.[18],[19] Core inflation, which strips out volatile food and energy prices, was flat on the month.[20]
The improvement was driven overwhelmingly by energy. Gasoline prices tumbled 9.7% in June as a temporary ceasefire between the U.S. and Iran allowed oil prices to retreat.[21] That truce broke down in early July, hostilities resumed, and crude prices climbed more than 20% for the month, with Brent briefly topping $100 per barrel before easing on reports of renewed peace negotiations.[22], [23] The best inflation print in years reflected a one-month energy reversal that had already pulled back by the time the data was released. This could be another reason the bond market supported higher yields.
The silver lining is that yields at these levels mean bonds might pay more meaningful income for some investors.
What's Next
If July had a lesson, it was this: a calm surface can conceal strong currents. The upcoming August calendar is brief but consequential, with jobs and inflation numbers. Markets ended July pricing in roughly a two-in-three chance of a rate increase at the Fed’s September meeting.[24]
In late August, the Federal Reserve’s annual Jackson Hole symposium gives Fed Chairman Warsh his most prominent platform yet. Warsh has pledged to bring inflation down while deliberately communicating less about the Fed’s next moves than his predecessors.[25] While the Fed now says less, Chairman Walsh’s remarks may be the clearest signal markets receive about whether a rate increase in September is in play. As always, we’ll be watching the data – not the drama.
In this uncertain environment, we encourage you to reach out to us and inform us of any changes to your financial plans and goals. We want to make sure that the risk of your portfolio correctly matches your need and willingness to bear risk so that you can stay invested amidst the uncertainty inherent in financial markets.
We are motivated by your continued confidence and look forward to connecting with you. Please let us know if you need any tax information to finalize your 2025 tax returns. Also, deadlines are quickly approaching to finalize 2025 pension contributions. Reach out to us with any questions, concerns, or changes in your life or financial outlook. We are always here to help you navigate your evolving circumstances and stay on track toward meeting your diverse goals. Happy back-to-school season and wishing you a relaxing and fruitful end of summer!
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The Bloomberg Barclays U.S. Aggregate Bond Index measures the investment-grade U.S. dollar-denominated, fixed-rate taxable bond market and includes Treasury securities, government-related and corporate securities, mortgage-backed securities, asset-backed securities and commercial mortgage-backed securities.
The S&P 500 Index is an unmanaged, market value-weighted index of 500 stocks generally representative of the broad stock market.
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The CBOE Volatility Index (VIX) is a real-time index that represents the market’s expectations for the relative strength of near-term price changes of the S&P 500 Index (SPX). Because it is derived from the prices of SPX index options with near-term expiration dates, it generates a 30-day forward projection of volatility. Volatility, or how fast prices change, is often seen as a way to gauge market sentiment, and in particular the degree of fear among market participants.
The Nasdaq Composite is a market-capitalization-weighted index consisting of all Nasdaq Stock Exchange listed stocks that are not derivatives, preferred shares, funds, exchange-traded funds or debenture securities.
Treasury Bond- is a U.S. government debt security with a fixed interest rate and maturity between two and 10 years.
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[1] https://www.cnbc.com/2026/07/30/stock-market-today-live-updates.html
[2] https://www.cnbc.com/2026/07/30/stock-market-today-live-updates.html
[3] https://www.reuters.com/business/wall-st-week-ahead-teetering-us-stock-market-faces-jobs-report-big-earnings-week-2026-07-31/
[4] https://www.cnbc.com/2026/07/30/stock-market-today-live-updates.html
[5] https://www.cnbc.com/2026/07/27/stock-market-today-live-updates.html
[6] https://finance.yahoo.com/markets/stocks/articles/19-mostly-tech-stocks-fallen-214500420.html
[7] https://www.cnbc.com/2026/07/27/stock-market-today-live-updates.html
[8] https://www.reuters.com/business/wall-st-week-ahead-teetering-us-stock-market-faces-jobs-report-big-earnings-week-2026-07-31/
[9] https://www.reuters.com/business/wall-st-week-ahead-teetering-us-stock-market-faces-jobs-report-big-earnings-week-2026-07-31/
[10] https://www.factset.com/earningsinsight
[11] https://www.factset.com/earningsinsight
[12] https://www.cnbc.com/2026/07/30/stock-market-today-live-updates.html
[13] https://insight.factset.com/hyperscalers-tap-external-financing-as-ai-capex-outruns-cash-flow
[14] https://www.chase.com/personal/investments/learning-and-insights/article/kevin-warsh-july-2026-federal-reserve-will-deliver-price-stability
[15] https://www.cbsnews.com/news/fed-interest-rate-decision-july-meeting/
[16] https://www.reuters.com/business/wall-st-week-ahead-teetering-us-stock-market-faces-jobs-report-big-earnings-week-2026-07-31/
[17] https://www.cnbc.com/2026/07/30/stock-market-today-live-updates.html
[18] https://www.bls.gov/news.release/archives/cpi_07142026.htm
[19] https://www.cnbc.com/2026/07/14/consumer-price-index-inflation-report-june-2026.html
[20] https://www.cnbc.com/2026/07/14/consumer-price-index-inflation-report-june-2026.html
[21] https://www.cbsnews.com/news/june-2026-cpi-report/
[22] https://www.kiplinger.com/investing/live/fed-meeting-updates-and-commentary-july-2026
[23] https://finance.yahoo.com/markets/stocks/articles/stock-market-news-july-27-132000679.html
[24] https://www.reuters.com/business/wall-st-week-ahead-teetering-us-stock-market-faces-jobs-report-big-earnings-week-2026-07-31/
[25] https://www.chase.com/personal/investments/learning-and-insights/article/kevin-warsh-july-2026-federal-reserve-will-deliver-price-stability
