- The US stock market is entering a super week as the Federal Reserve (Fed) is set to hold its policy meeting on July 28-29. The market is intensely debating whether interest rates will remain unchanged or if there will be an unexpected 25 basis point hike. A strong labor market and persistent inflation are prompting a repricing of the monetary policy path.
- The earnings season for tech giants is reaching its peak, with Microsoft (MSFT:US), Meta (META:US), Apple (AAPL:US), and Amazon (AMZN:US) set to release their results. Amid rising upstream costs and cash flow pressures, the market is focused on whether AI capital expenditures can translate into substantial profits.
- Macroeconomic and geopolitical factors are intertwining to influence trading sentiment. The easing of tensions in the Middle East has led to a decline in oil prices from their highs. Meanwhile, a major storage collaboration between South Korean chip giants and US tech companies, along with the release of US Q2 GDP and PCE data, is raising cross-asset rebalancing risks.
Fed Decision Sparks Hawkish Debate and Rate Hike Pricing
The Federal Reserve is about to hold its July policy meeting, with federal funds futures showing a divided market pricing. The probability of a 25 basis point rate hike in July has risen to 36.3%, and the expectation for a September hike has increased to about 80%. Persistent inflation and a strong labor market give policymakers a hawkish stance, with some officials warning of the need for early rate hikes to counter the risk of a second inflation rebound. Policy uncertainty is prompting financial institutions to adjust their allocations, with market risk appetite under pressure and showing clear two-way hedging characteristics.
Tech Giants' Earnings and AI Capital Expenditure Scrutiny
Microsoft (MSFT:US) and Meta (META:US) will release their earnings on Wednesday, followed by Apple (AAPL:US) and Amazon (AMZN:US) on Thursday. After peers faced valuation adjustments due to massive AI capital expenditures eroding free cash flow, investors are now focusing on the ability to commercialize these investments. If substantial spending fails to drive simultaneous growth in free cash flow and profits, the tech sector's valuations will face re-evaluation pressure, leading to more cautious capital flows.
Chip Giants Sign Major Deals and Upstream Supply Chain Impact
The semiconductor supply chain is witnessing significant collaboration, with Samsung Electronics and SK Hynix planning to enter a $950 billion storage chip supply agreement with US tech giants, while Nvidia is also expanding its infrastructure investments. Long-term orders have secured the supply of core upstream components, highlighting the strong demand trend for AI computing infrastructure. However, rising component prices are increasing end-deployment costs, thereby squeezing profit margins for midstream computing platforms.
Macroeconomic Data and Geopolitical Dynamics Drive Market Restructuring
The US is set to release its Q2 GDP and June PCE price index, with the market expecting an economic growth rate of 2.1%. Inflation indicators may temporarily slow due to the pullback in oil prices. Meanwhile, the easing of Middle East tensions is driving international oil prices down, effectively alleviating cost pressures on commodities. The interplay of multiple macro factors is accelerating cross-asset fund rebalancing, widening treasury yields and exchange rate fluctuations, and prompting the market to reassess risk premiums.
