By Logan Gilland, CFP®
What Happened:
Bank Earnings Kick Off a Blockbuster Season
What Does It Mean?
The five largest banks in the country, JPMorgan Chase, Goldman Sachs, Bank of America, Wells Fargo, and Citigroup, all reported second quarter results on the same morning last Tuesday, and every single one beat analyst consensus expectations. JPMorgan posted the highest quarterly profit in the history of American banking, with net income of $21.2 billion. Goldman Sachs nearly doubled its earnings per share, fueled by record equities trading and a jump in investment banking fees tied in part to the SpaceX public offering.
Why Do We Care?
Big bank earnings are often the opening act for the broader corporate earnings season, and this was about as strong an opening as you can script. Analysts now expect S&P 500 companies as a group to post earnings growth north of 20% for the quarter, a pretty significant pace that would continue the great earnings run we have seen this year. Strong corporate numbers like these are one of the biggest reasons we have seen the resilience of this market, and it is a good reminder that when earnings are this strong, technology does not necessarily have to do all the heavy lifting.
What Happened:
Chip Stocks Stumble Even as Earnings Come In Strong
What Does It Mean?
While the banks were celebrating, semiconductor stocks were having a rough week. Taiwan Semiconductor beat earnings expectations but raised its spending forecast, and instead of cheering the growth, investors focused on the higher costs. ASML, which makes the machines that produce chips for a company like Taiwan Semiconductor, turned in an even stronger quarter and raised its own outlook for the year, yet that was not enough to steady the broader group. Micron fell 8%, Lam Research and Advanced Micro Devices each dropped several percent, and the semiconductor sector as a whole, as tracked by the SMH fund, was down close to 9% for the week. By Friday, the Nasdaq had dropped 2.9% for the week, the S&P 500 fell 1.6%, and the Dow slipped 0.9%.
Why Do We Care?
The AI trade feels like a Christopher Nolan film. The ones of the past have been so good that the bar they set can hurt how we view the new. The Odyssey could be the best movie of the year, but we’ll only judge it against Nolan’s other great hits. That’s the bind semiconductor earnings are in right now. Given how expensive these stocks already are, sky high expectations are fair. But it means the market is looking for anything it can nitpick rather than celebrating genuinely strong results. We saw that with Taiwan Semiconductor’s overspending on AI buildout, and ASML putting up strong demand numbers but still ending the week in the red. If these reactions continue through the rest of the earnings season, it could be a rough one for semiconductors.
What Happened:
Inflation Cools, but Geopolitics Complicate the Picture
What Does It Mean?
June’s inflation report, released the same day as the bank earnings, showed consumer prices fell 0.4% for the month, the largest one month drop since April of 2020, pulling the annual inflation rate down to 3.5% from 4.2% in May. The move was driven almost entirely by a sharp drop in gas prices during a brief window when tensions with Iran had eased. Jobless claims and retail sales both came in a little better than expected too, suggesting the consumer is still holding up.
Why Do We Care?
Here’s the catch. That inflation data looks backward at June, and tensions with Iran have flared again this month, pushing gas prices back up toward the four dollar mark and adding a fresh layer of uncertainty heading into the Federal Reserve’s meeting later this month. Markets generally like to price in a clean, predictable story and the constant back and forth is shaping up as anything but.
Bottom Line
Strong earnings and cooling inflation are genuinely good news, but they don’t erase what this week felt like, especially if you were watching your portfolio closely. The broad markets did not have massive moves, but some individual names and sectors took painful declines. There’s real concern right now about the mix of an on again, off again war and an AI trade that seems to be losing some steam, and it’s the kind of combination that can keep markets choppy for a while. My perspective right now is simple: buckle up and expect some turbulence. I do not think this storm is fully past us yet.
Talk again soon,
Logan
Logan Gilland, CFP®, is Director of Wealth Management at Bluespring Wealth’s Lexington office, where he helps clients turn financial goals into practical plans. He also shares straightforward financial guidance through the DIY Money podcast, Savings & Sense radio show, and his weekly newsletter, Logan’s Lens. Outside the office, Logan and his wife, Hannah, enjoy hosting friends and planning their next national park trip.
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