Equity Markets: Strong First Half, Early-Month Regrouping
The equity markets are showing signs of regrouping at the start of the month, following a strong opening to the year that a single snapshot doesn't fully capture. Seasonally, June has historically been a down month, creating headwinds for the broader equity market, while July has historically been a fairly solid month. Despite June's reputation, last month's results were notable: the Dow rose 2.5% and settled at a record high, while the Russell 2000 small-cap index surged 3.6% in June — its best quarter since 1991.
There was some recalibration and rotation within the equity markets. The S&P 500 and NASDAQ were relatively weaker last month, but both had enjoyed very strong runs earlier in the quarter and across the first half of 2026. The NASDAQ 100 finished down only 2% last month, and that decline came after a volatile first three weeks of June.
Anyone arguing the equity markets are overbought should look at the earnings that many companies have posted — the rally has been earnings-driven, not sentiment-driven. Looking at the past three years of gains — 26%, 25%, and 18% for the S&P 500 — such multi-year runs are unusual. Supporting the durability of the move are strong earnings, the pushing aside of geopolitical risks and tensions, and a slight decline in crude oil prices, which together have fueled a reacceleration.
Importantly, the rally is no longer confined to the major technology names. It has begun to broaden out. The S&P 500 equal-weight index finished just below record highs, and this broadening is lending the market meaningful support.
Why the Pullback to Start the Month?
Several factors explain the early-month softness. Part of it is simply a reprieve after a push into month-end, and part may be rebalancing heading into quarter-end. Bonds are down, pushing yields higher. The dollar is sitting just below its 13-month highs and ticking up, which is creating additional headwinds. Iran added to the caution overnight, saying it has not restarted talks with the United States, even though Steve Witkoff traveled to Qatar the day before — a headline situation that continues to warrant close watching.
The key catalyst for the day is expected to be commentary from the new Fed chair, Warsh, speaking in Sintra, Portugal, at the ECB economic forum, which could inject volatility into the morning session. The market is expected to hang on every word from the new Fed chair. Additional data on the docket includes ADP employment figures and manufacturing numbers. Looking slightly further ahead, earnings season kicks off in a couple of weeks and could serve as a catalyst either to the upside or the downside.
Memory Chip Stocks: Profit-Taking After a Parabolic Run
Memory stocks are taking a step back in the pre-market, with SanDisk and Micron both lower — notable because these names have been at the top of the performance leaderboard this year. The pullback looks like profit-taking after a parabolic move over the past four to six months. The space is getting choppy at the top, which may well be warranted given how far and fast it has climbed.
Fundamentals have supported the sector: strong growth rates, extended sales guidance, robust earnings, strong pricing power, and demand outstripping supply. As a result, even though these stocks have run up sharply, their forward-looking price-to-earnings ratios have not expanded — they have essentially stabilized, because earnings have been so strong. Valuation, therefore, has not been a real concern. The memory strength has taken the limelight away from the "MAG Seven" names, which have been severely underperforming. The Philadelphia semiconductor index rose over 85% last quarter, near record highs, and the SMH ETF has performed very well; the chip space as a whole is doing extremely well. Analysts continue to pile into the trade, with price-target hikes on Seagate (STX), SanDisk, and Western Digital issued that morning.
Is a peak in demand approaching? That remains to be seen and is not yet known. On the positive side, longer-term supply deals that memory chip makers have begun signing add to the optimism for the sector going forward. On the cautionary side, additional capacity is coming online in 2027 and 2028 for some of these makers — and that incoming capacity could itself be a signal that the space is approaching a peak.
Nike: Better-Than-Expected Quarter, Still a Murky Outlook
Nike shares continue to decelerate. The company beat expectations in its most recent quarter, but the outlook remains murky. This was another choppy quarter. On the bottom line, adjusted EPS was 72 cents — but 52 cents of that came from tariff relief, after the tariffs were struck down and Nike began getting money back, so that figure needs to be viewed in context. Revenue slightly beat expectations, and North America and the U.S. showed good metrics, which is a positive.
The problem area is China, where sales fell 12%, worsening from a 10% decline the prior quarter. That is moving in the wrong direction, and there is no sign yet of a bottoming cycle in China — a major growth region Nike simply cannot seem to turn around. CEO Elliot Hill offered commentary that the company is "based on winning."
One notable item ties into the ongoing World Cup, which expanded from 32 to 48 teams. Nike sponsors only 12 of the 48 teams — and actually went down from 13 teams to 12. The competitive impact is real: Puma and Adidas are eating Nike's lunch. The hoped-for bottom in Nike shares does not appear to be materializing, because the company continues to lose market share amid intensifying competition. It was noted that data showed Nike had higher sell-through rates, but the China headwind and inability to move the needle there remain the central obstacle to a turnaround under Elliot Hill.
Meta's Push into Prediction Markets
Reports indicated that Meta was originally trying to tie up with Kalshi, but that deal is not happening now. According to NPR, Meta had initial talks with Kalshi, though the source of that information is uncertain. It is unsurprising that Mark Zuckerberg is looking for new revenue streams. The prediction-market sector has been expanding across multiple platforms, with exchanges such as CME and CBOE trying to get into the space. Meta now appears to be moving to internalize its own prediction markets and build a standalone app for the product.
Growth in this space has been strong, though regulation is still not confirmed across the board. The broader context is Meta's heavy capital expenditure, which has capped the shares lately. With such large spending — and management indicating capex will increase again in 2027 — investors have to scrutinize how Meta will monetize that outlay, making a new revenue stream like prediction markets a logical move.
Constellation Brands: Beer Carries the Quarter
Constellation Brands beat expectations, and the World Cup provided a tailwind, with heavy beer consumption at matches. When Scotland's "Tartan Army" fans invaded Boston, they drank bars dry of beer, and pictures showed a lot of Modelo being consumed.
On the numbers: adjusted earnings came in at $3.43 per share, surpassing the $3.25 estimate. Revenue was $2.43 billion, slightly above the roughly $2.41 billion expected. However, overall sales declined 3% compared with a year earlier. The beer segment offset that weakness and remains the company's primary growth engine, with net sales up 2% to $2.28 billion and beer shipment volumes growing 1.8%. Constellation's beer brands include Modelo — the leader in the space — along with Corona, Pacifico, and others.
The spirits and wine business dragged, but beer more than offset it, which is a positive. With roughly another month of World Cup still to come, that could lend further support to the shares. That said, the stock's recent price action has not been pretty; it has been a choppy ride, as one segment typically offsets the other, with beer currently the strong performer.
