Weekly Market Update for July 17, 2026

by Gavyn Jensen-Schneider, Research Associate

Market indices fell as the Middle East conflict reheated and worries about AI spending continued to build. The S&P 500 finished the week down -1.55%, while the Nasdaq fell 2.90%. The 10-Year Treasury yield, an interest rate indicator, closed at 4.55%, down -1 basis point (bp) from last week. The 6-Month US Treasury, a favorite of our US Treasury strategy, fell -3 bps to 3.92%.

The US reinstituted a naval blockade of the Strait of Hormuz earlier this week, grinding commercial traffic to a standstill. Attacks from both sides have widened, with Iran targeting US allies Qatar, Kuwait and Jordan, and the US responding in kind with targeted strikes on critical Iranian infrastructure. Since the memorandum of understanding was cast aside nearly 10 days ago, Brent Crude oil prices have climbed around 20%. Markets have been generally unresponsive to the reheating conflict, as businesses have adjusted to the adverse geopolitical environment.

This week’s index declines were instead motivated by the AI investment cycle, as investors are antsy to see positive returns on investment. The PHLX Semiconductor sector index (SOX) has fallen nearly 25% from its May highs, even as semiconductor manufacturers, such as Micron Technology (MU), have posted record-breaking revenue and operating profit growth. If the immense capital expenditures from hyperscalers like Meta, Alphabet, and Microsoft result in higher earnings growth rates, it would suggest AI demand—and thereby semiconductor revenue growth—is sustainable going forward, rather than a feared case of “irrational exuberance.”

Earnings season kicked off this week, as the big banks including JPMorgan Chase, Goldman Sachs, and others reported strong revenue growth in the second quarter. JPMorgan saw record revenue across the company’s major business segments and 23.7% growth in earnings per share (EPS), with CEO Jamie Dimon stating, “It’s getting close to as good as it gets” for the banking industry. In healthcare, insurer UnitedHealth Group saw a return to form, with EPS growing 30% year-over-year. According to FactSet, blended second-quarter EPS growth for the S&P 500 is estimated at 18.8% year-over-year.

Inflation cooled in June according to the latest print of the Consumer Price Index (CPI). Headline CPI fell 70 bps from last month to 3.5%. Core CPI fell 40 bps to 2.6%, marking the lowest core inflation since February. While inflation is trending in the right direction, it’s still nowhere near the 2% target maintained by the Federal Reserve. Chairman Warsh, in a public hearing before Congress earlier this week, reiterated that fact: Fed policymakers “have no tolerance for persistently elevated inflation,” and while “there might be some that look at this morning’s data and say, ‘mission accomplished,’” that is not his view.

Earnings season will be in full swing next week, as a smorgasbord of companies including Alphabet (Google’s parent company) and Tesla report their earnings. Economic data are sparse, with initial jobless claims on Thursday and new housing orders Friday, the most notable publications.