Geopolitics and oil
The week opens under pressure from renewed back-and-forth between the U.S. and Iran. Crude oil jumped more than 3%. Iran said the straits used for shipping are closed. President Trump said yesterday that commercial vehicles can still pass through. That rhetoric is adding uncertainty for both stocks and oil. Yields moved a bit higher, and the dollar firmed.
Last week told a different story. The S&P 500 finished up over 1%, and the NASDAQ rose 1.7%. The Dow and Russell were weaker. The VIX, the fear gauge, settled Friday at its lowest level in six months, showing no real worry. It popped 8% today on the new uncertainty.
The question: can markets push aside the geopolitical tension and focus on what really matters this week? That means earnings, inflation data (CPI and PPI), and retail sales. Plenty for investors to grab onto and push back against the fear, though the rising tension does not help as earnings season starts.
Memory chips under pressure
SK Hynix is set to open down about 8% this morning, weaker after Asian trading. That is dragging down SanDisk, STX, Western Digital, and Micron. Micron and Western Digital were both down more than 5% in the pre-market. Other chip names also rolled over as investors pause and take some profit.
No real news came from SK Hynix. After the stock started trading, the CEO said last Friday that 2027 will be the toughest year for the demand-supply gap, with demand far outstripping supply. That is a good outlook for the segment, yet investors appear to be taking profits after huge, parabolic runs in memory makers, chip equipment names, Intel, and AMD. Nvidia finally broke out of its recent range last week, up over 4% Friday.
The broader story for chips holds. Taiwan Semi reported June revenue growth of nearly 68% year over year. The key ahead: what earnings and outlooks look like over the next few weeks, and whether the hyperscalers pull back on capex. Many of them said they would ramp capex even more in 2027, and that is the number to watch for this group. Higher yields are adding some pressure too.
Apple versus OpenAI
Late Friday, Apple accused OpenAI of stealing secrets about products still in development, setting up a legal fight. Apple says an OpenAI employee downloaded internal documents from a laptop owned by the iPhone maker. This follows Apple's early-February accusation that OpenAI stole intellectual property, which OpenAI pushed back on.
Expect more of this as AI agents gather content and information. It becomes a push and pull between the tech companies and Apple. Apple is a hardware maker that spends less capital, while firms like Anthropic, OpenAI, and Perplexity fight to be top dog building these agents. That fight already shows up in employees getting pulled from one company to the next for big paydays. Whether those payouts pull back is an open question.
Citi turned more constructive on Apple, raising its price target to 365 from 315. The stock was near all-time highs just last week. A separate note covered the Mac chips Apple is developing to diversify its supply chain. If those new chips mean Apple relies less on outside chip makers, that is a positive.
The news comes ahead of the iPhone 18 release in September, which may include a foldable phone that might not have enough production in place. Price hikes are likely on the new iPhones, since components, especially memory, have been ramping up in cost.
Bank earnings kick off the week
Earnings season starts in earnest with the banks, most reporting tomorrow. The main focus is net interest income, the gap between what banks lend out and what they pay. Results were strong the past couple of quarters. The two-year/ten-year yield curve has contracted to about 35 basis points now, down from 70 basis points about four months ago, so that spread has tightened.
What to watch by bank:
- JP Morgan is the bellwether, swinging between consumer lending and investment banking and trading.
- Wells Fargo leans more on net interest income; watch its lending strength and how yields affect its take.
- Citigroup is a turnaround story under Jane Fraser, who has been a standout since taking the role about five or six years ago.
- Goldman Sachs relies less on the consumer and more on trading, M&A, and IPOs. M&A activity has picked up, a potential bonus for Goldman and other investment banks.
- Bank of America is more focused on the consumer. Brian Moynihan has said the consumer stayed resilient through this inflationary environment.
A key theme this season is how inflation and fuel prices hit the consumer. People have pulled from savings to keep spending and lean more on buy now, pay later, yet they stayed resilient.
The bar is high. Most of these banks trade just below all-time highs, so guidance on the economy matters. After passing last month's stress test, banks were hiking dividends and buybacks, which looks healthy, but the high bar makes this a tough setup for the sector.
