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The S&P 500 Index ($SPX) (SPY) on Friday closed down -1.01%, the Dow Jones Industrial Average ($DOWI) (DIA) closed down -0.77%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -1.49%. September E-mini S&P futures (ESU26) fell -1.02%, and September E-mini Nasdaq futures (NQU26) fell -1.51%.
Stock indexes settled sharply lower on Friday, with the S&P 500 posting a 1-week low, the Dow Jones Industrials sliding to a 2.5-week low, and the Nasdaq 100 falling to a 5-week low. The global selloff in chipmakers continued on Friday amid concerns that massive gains fueled by the buildout of artificial intelligence have run too far to justify their elevated valuations. The rout began in Asia, with China’s Shanghai Composite falling -3% and Japan’s Nikkei Stock Index falling -4% after China’s AI startup Moonshot launched its new Kimi K3 AI model, which the company says rivals the strongest offerings from OpenAI and Anthropic PBC, sparking concerns about the industry’s spending spree. Losses in the Magnificent Seven technology stocks also weighed on the overall market.
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On the positive side for stocks, the University of Michigan US Jul consumer sentiment index rose more than expected to a 5-month high, and 1-year inflation expectations eased more than expected. Also, energy stocks rallied amid the surge in crude oil prices to a 5-week high.
Friday’s US housing news was mixed. Jun housing starts rose +19.0% m/m to 1.427 million, stronger than expectations of 1.310 million. However, Jun building permits, a proxy for future construction, fell -3.0% to 1.367 million, below expectations of 1.403 million.
US Jun manufacturing production was unchanged m/m, weaker than expectations of +0.1% m/m.
The US Jun import price index ex-petroleum rose +0.5% m/m, stronger than expectations of +0.4% m/m.
The University of Michigan US Jul consumer sentiment index rose by +4.9 to a 5-month high of 54.4, stronger than expectations of 51.0.
The University of Michigan US Jul 1-year inflation expectations eased to 4.2% from 4.6% in Jun, weaker than expectations of 4.4%. The Jul 5-10-year inflation expectations were unchanged at 3.3% from Jun, right on expectations.
Hawkish comments on Friday from Cleveland Fed President Beth Hammack were negative for stocks and bonds, as she said persistently high inflation is her bigger concern right now, even as consumer spending holds up and unemployment remains low.
Geopolitical risks continue, as WTI crude oil (CLQ26) soared more than +4% as the US launched fresh strikes against Iran for the sixth consecutive day on Friday, hitting coastal surveillance and air defense sites, military logistics infrastructure, and maritime assets. Iran responded by attacking US bases in Kuwait, Jordan, and Bahrain, with Kuwait saying a desalination and electricity plant were hit, with many power-generation units sustaining damage. The Kuwaiti armed forces said it intercepted 32 Iranian drones targeting “vital” institutions. Crude prices raced to their highs Friday afternoon after Axios reported that the Trump administration notified Israel it is sending more refueling planes to the country, a possible sign that US military operations could expand in the coming days.
President Trump pledged to intensify the bombardment until Iran stops attacking ships in the Strait of Hormuz and agrees to open the waterway. The Wall Street Journal reported that US forces struck multiple bridges to cut supply routes to an Iranian port city and naval base used to support attacks on ships in the Strait of Hormuz. According to RBC Capital Markets LLC, a seven-day moving average of oil flows through the Strait of Hormuz has slumped to 3.9 million bpd from 8.5 million bpd before the collapse of the ceasefire.
Selling by corporate insiders is another negative for stocks. According to EPFR Global Market Intelligence, executives sold $77.6 billion of stock during the first half of this year, the second-highest amount in more than 20 years.
The outlook for strong Q2 earnings, which began this week, is a bullish factor for stocks. Forecasts compiled by Bloomberg Intelligence suggest Q2 earnings may increase by +23%, close to Q1’s blowout earnings of +30%, which was more than double the +12% analysts had expected. AI spending is expected to account for most of earnings, with AI infrastructure stocks set to contribute nearly 60% of the S&P 500’s earnings-per-share growth in Q2.
The markets are discounting a 14% chance of a +25 bp rate hike at the next FOMC meeting on July 28-29.
Overseas stock markets settled sharply lower on Friday. The Euro Stoxx 50 slid to a 1-week low and closed down -0.84%. China’s Shanghai Composite sank to a 10.5-month low and closed down -3.05%. Japan’s Nikkei-225 Stock Average fell to a 5-week low and closed down -4.03%.
Interest Rates
September 10-year T-notes (ZNU6) on Friday closed up +4 ticks, and the 10-year T-note yield fell -0.8 bp to 4.545%. Sep T-notes climbed to a 1.5-week high on Friday, and the 10-year T-note yield fell to a 1.5-week low of 4.509%. Friday’s slump in global equity markets sparked safe-haven demand for T-notes. Gains in T-notes were limited after US Jun housing starts and consumer sentiment rose more than expected, and after WTI crude oil surged by more than +4% to a 5-week high, which lifted inflation expectations.
European government bond yields moved lower on Friday. The 10-year German bund yield fell -0.8 bp to 3.126%. The 10-year UK gilt yield fell -1.5 bp to 4.951%.
Swaps are discounting an 8% chance of a +25 bp ECB rate hike at its next policy meeting on July 23.
US Stock Movers
Chipmakers and AI-infrastructure stocks sold off for a second day on Friday, dragging the broader market lower. The iShares Semiconductor ETF (SOXX) fell to a 1.75-month low and closed down more than -1%. Applied Materials (AMAT) closed down more than -5%, and KLA Corp (KLAC) and Sandisk (SNDK) closed down more than -3%. Also, Intel (INTC), Lam Research (LRCX), ASML Holding NV (ASML), and Texas Instruments (TXN) closed down more than -2%.
The Magnificent Seven technology stocks mostly fell on Friday, weighing on the overall market. Meta Platforms (META), Alphabet (GOOGL), Nvidia (NVDA), and Tesla (TSLA) closed down more than -2%, and Microsoft (MSFT) and Amazon.com (AMZN) closed down more than -1%. Bucking the trend, Apple (AAPL) closed up +0.09%.
Energy stocks and service providers climbed on Friday amid the surge in crude oil prices. Valero Energy (VLO) closed up more than +3%, and APA Corp (APA), Diamondback Energy (FANG), Marathon Petroleum (MPC), Occidental Petroleum (OXY), and Phillips 66 (PSX) closed up more than +2%. Also, Chevron (CVX), ConocoPhillips (COP), and Devon Energy (DVN) closed up more than +1%.
Intuitive Surgical (ISRG) closed down more than -14% to lead losers in the S&P 500 and Nasdaq 100 after maintaining its full-year forecast despite reporting better-than-expected Q2 earnings results.
STAAR Surgical (STAA) closed down more than -9% after reporting preliminary Q2 net sales of $90.0 million, below the consensus of $90.2 million.
Netflix (NFLX) closed down more than -7% after forecasting full-year revenue of $51 billion to $51.4 billion, the midpoint below the consensus of $51.38 billion.
Autoliv (ALV) closed down more than -4% after reporting Q2 adjusted EPS of $2.43, below the consensus of $2.45.
Coca-Cola (KO) closed down more than -3% to lead losers in the Dow Jones Industrials after it said it has temporarily suspended production operations at its Fairlife milk in the US after an unauthorized third party gained access to some of its systems.
International Business Machines (IBM) closed down more than -2% after Citigroup cut its price target on the stock to $255 from $375.
Travelers Cos (TRV) closed up more than +9% to lead gainers in the S&P 500 and Dow Jones Industrials after reporting Q2 net premiums written of $11.53 billion, above the consensus of $11.409 billion.
Jazz Pharmaceuticals Plc (JAZZ) closed up more than +2% after Canaccord Genuity initiated coverage of the stock with a buy recommendation and a price target of $290.
Construction Partners (ROAD) closed up more than +1% after S&P Dow Jones Indices announced that the company will replace Molina Healthcare in the S&P SmallCap 600 before the opening of trading on Wednesday, July 22.
Earnings Reports(7/20/2026)
AGNC Investment Corp (AGNC), BOK Financial Corp (BOKF), Crown Holdings Inc (CCK), Domino’s Pizza Inc (DPZ), Steel Dynamics Inc (STLD), W R Berkley Corp (WRB), Wintrust Financial Corp (WTFC), Zions Bancorp NA (ZION).
On the date of publication,
Rich Asplund
did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes.
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