Global Market News

Global Equities Decline

Global equities declined in a volatile week of trading as tech stocks fell further following weaker-than-expected earnings. The S&P 500 and Nasdaq lost 0.83% and 2.08%, respectively, while the Dow Jones was able to recover and gain 0.75%. The US 10-year Treasury note dropped a few basis points to 4.19%. The price of a barrel of West Texas Intermediate crude oil fell more than 4%, lowering below the $80 mark to $76.83 on Friday. Volatility, as measured by the CBOE Volatility Index, closed the week at 16.39 after hitting a high of 18.42 on Thursday.

US Growth Data and China’s Slowdown

The US economy grew at an annual pace of 2.8% in the second quarter after growing at only a 1.4% rate in Q1. The growth data came in stronger than expected and was boosted by solid consumer demand accompanied by further indications that inflation is moderating. Meanwhile, China’s central bank made surprising cuts to policy rates amid weak growth. China’s economy grew 4.7% in Q2, missing the forecast of 5.1%. Despite much anticipation, Chinese markets were also disappointed by the lack of major reforms announced at the Third Plenum of the Communist Party last week. China’s failing property sector and indebtedness continue to weigh heavily on growth.  

International Developments

Germany and UK Increase Military Cooperation to Hedge Against Uncertainty in the US

Britain’s new Labour government, under Prime Minister Keir Starmer, has moved to deepen military ties with Germany due to fears that a potential Trump administration might reduce US support for Ukraine. British Defense Minister John Healey signed a defense cooperation deal with German counterpart Boris Pistorius, committing to increased industrial coordination and joint operations. This agreement reflects the UK’s and Germany’s status as the top two European military aid donors to Ukraine, spending €74.9 billion and €66.8 billion respectively in 2023. The deal also aims to standardize weapons systems and reinforce Trans-Atlantic security.

Houthi Strikes, Netanyahu in Washington, and Chinese Mediation

On Saturday, Israel launched airstrikes near Yemen’s port of Hodeidah that resulted in the deaths of nine people and wounded 87 in response to a Houthi drone attack on the Israeli city of Tel Aviv the day prior. In a televised speech on Thursday, the Houthi’s leader vowed that the group’s response would come. Meanwhile, Prime Minister Benjamin Netanyahu traveled to the US to address Congress for a record 4time. In his speech, he vowed that nothing less than total victory in Gaza was acceptable and heavily criticized Americans who have been critical of Israeli actions in Gaza. Concurrently, thousands of protestors gathered outside of the Capitol along with dozens of Democrat lawmakers to protest the speech. On the Palestinian front, China announced on Tuesday that it had fostered an agreement between the Fatah and Hamas factions to end their division and strengthen Palestinian unity.

Brazil Cancels its Venezuelan Election Observation Mission, Free Elections Unlikely 

Brazil has canceled its mission to observe Venezuela’s presidential election following Venezuelan President Nicolas Maduro’s criticism of Brazil’s electoral system. Brazil’s top electoral court condemned Maduro’s false statements about Brazilian electronic voting machines, asserting the integrity of Brazil’s elections. Maduro had praised Venezuela’s electoral auditing system while disparaging other countries, including Brazil, during a rally. This cancellation reduces the number of credible international observers for the Venezuelan election set for July 28th, raising concerns about potential irregularities. Maduro and the primary opposition candidate Edmundo Gonzalez are the only serious contenders for the presidency; however, it is unlikely that Maduro will allow free and fair elections on Sunday that would almost certainly result in the end of his rule of 11 years.

US Social & Political Developments

Biden Passes the Torch to Harris, Democrats Coalesce around Her Candidacy

In his Oval Office address on Wednesday night, President Joe Biden explained his decision not to seek re-election, endorsing Vice President Kamala Harris as his successor. Despite feeling he could have won, Biden emphasized the importance of stepping aside for the sake of democracy and praised Harris for her capability and leadership. He highlighted his administration’s accomplishments, including handling the pandemic, strengthening NATO, and domestic economic achievements. Harris now stands as the presumptive democratic candidate for the presidency with numerous key figures endorsing her candidacy prior to the Democratic National Convention including Gov. Andy Beshear (D-KY), Gov. Josh Shapiro (D-PA), Rep. Hakeem Jefferies (D-NY), Sen. Chuck Schumer (D-NY), and Rep. Nancy Pelosi (D-CA).

Secret Service Director Resigns over Failure to Prevent Trump Assassination Attempt

Secret Service Director Kimberly A. Cheatle resigned on Tuesday following security failures that led to the assassination attempt on former President Donald Trump at a rally. Cheatle acknowledged the agency’s shortcomings in protecting Trump, stating that the Secret Service “fell short” of its mission. President Biden praised Cheatle’s integrity and announced Ronald Rowe as the acting director. The resignation comes after intense criticism from lawmakers and a congressional investigation into the security lapses surrounding the July 13th shooting.

Corporate/Sector News

Alphabet and Tesla Lead Disappointing Drop in Tech Stocks

Disappointing earnings reports from Google’s parent company Alphabet and electric car manufacturer Tesla triggered a significant drop in tech stocks, leading to the largest daily decline for Wall Street’s major benchmarks since 2022. The S&P 500 fell 2.3%, while the Nasdaq composite plunged 3.6%. Tesla’s shares plummeted over 12% following a 45% profit drop in the June quarter. Alphabet’s shares fell more than 5% despite beating earnings expectations, amid concerns over missed targets in YouTube’s ad revenue. Also, Tesla CEO Elon Musk announced that he was pausing any further investments into Tesla’s planned Giga Factory in Mexico until after the US presidential elections, fearing Trump’s proposed tariffs. Meanwhile, Israeli cyber firm Wiz rejected Google’s $23 billion dollar bid, planning for an initial public offering instead.

Fears of Increased Restrictions on Semiconductor Exports to China Fuel Tough Day on Wall Street

Wall Street’s semiconductor index lost over $500 billion in market value on July 17th, after reports that the US might impose tighter curbs on semiconductor exports to China. Remarks from Republican presidential nominee Donald Trump about Taiwan paying the US for its defense intensified the sell-off. Major chip stocks like Nvidia, AMD, and ASML Holding saw significant declines, while companies with US chip manufacturing operations like GlobalFoundries and Intel gained. The Philadelphia Semiconductor Index experienced its worst one-day decline since the COVID-19 pandemic, declining by 6.8%.

NBA Signs $77B TV and Streaming Deal with Disney, Comcast, and Amazon

The NBA has signed new 11-year media rights deals with Disney, Comcast, and Amazon worth a combined $77 billion, starting with the 2025-26 season and lasting until the 2035-2036 season. This marks a significant increase over the current deal and introduces Amazon as the league’s first streaming-only partner. Disney’s ABC will continue to broadcast the NBA Finals, while Comcast’s NBC will air games on both NBC and Peacock. TNT will no longer broadcast NBA games after the upcoming season.

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