US Stock Market Preview | All Three Major Index Futures Fall, Oil Prices Surge, Google and Tesla Decline After Earnings, Intel to Announce Earnings After Market Close

Pre-market Market Trends

1. On July 23 (Thursday) before the US market, all three major US stock index futures fell. As of press time, Dow Jones futures fell 0.60%, S&P 500 index futures fell 0.59%, and Nasdaq futures fell 0.83%.

2. As of press time, Germany's DAX index was down 0.87%, the UK's FTSE 100 index was down 0.27%, France's CAC40 index was down 1.27%, and the Euro Stoxx 50 index was down 1.05%.

3. As of press time, WTI crude oil rose 4.57% to $90.80/barrel. Brent crude oil was up 4.96%, at $98.74/barrel.

Market News

Red Sea oil tankers hit by missile strike for the first time! Alternative routes blocked as oil prices jump. After the Iran-backed Houthi militants claimed to have attacked two Saudi Arabian oil tankers in the Red Sea, crude oil prices soared sharply. This has further escalated Middle Eastern tensions and poses a deeper threat of supply disruptions. Earlier this week, the Houthi group issued threats to blockade Saudi shipping in the Red Sea. This waterway has become an increasingly important alternative export route for Saudi Arabia to circumvent the Strait of Hormuz. The worsening situation threatens millions of barrels of crude oil supplied to global clients every day. On the 22nd, international market service provider Kpler posted on social media that shipping volumes through the Strait of Hormuz and the Bab-el-Mandeb Strait, two major international energy transport channels, both declined on the 21st. With both straits under pressure, along with decreasing inventory buffers and rising refining pressure, the energy shock may further drag on the recovery of the global economy.

“Fed’s favorite inflation indicator” is set for a revamp—will it reinforce the case for pausing rate hikes? The US Bureau of Economic Analysis (BEA) plans to adjust the calculation of the Personal Consumption Expenditures (PCE) price index, involving three categories: portfolio management fees, computer software, and legal services. The BEA announced on June 24 that the new methodology will be formally implemented on September 30. It is expected that the revised core PCE inflation rate may fall by 0.2 to 0.3 percentage points compared to previous data. Currently, for the 12 months ending in May, the core PCE price index was up 3.4% year-on-year; after the adjustment, it could fall to 3.2% or even 3.1%. This change might provide additional rationale for Federal Reserve officials favoring a pause in rate hikes, but it is insufficient to change the reality that inflation remains above target. The Fed's goal is to bring annual inflation down to 2%, while the core PCE—by either calculation method—remains significantly above this level.

Semiconductor rally under scrutiny: Is high volatility a bottom-fishing opportunity? After a month-long correction, semiconductor stocks have recently rebounded. However, investors are clearly divided on the sustainability of this rally. On one hand, options markets are signaling extremely high short-term volatility; on the other, investment banks are optimistic about rebuilding positions, citing historical drawdowns and seasonal factors. LPL Financial's Chief Market Strategist Adam Turnquist expressed that the semiconductor volatility index remains at an “extremely high level,” especially compared to the VIX, a common measure for S&P 500 volatility. Investors in the VanEck Semiconductor ETF (SMH) may continue facing substantial volatility in the short term. Meanwhile, Bank of America’s trading department believes that after some profit-taking in US momentum stocks, the current price levels are attractive, advising clients to refocus on the sector. UBS’s trading desk also remarked earlier this week that the sell-off in momentum stocks could be coming to an end, and investors may begin to rebuild positions in AI and semiconductor stocks.

“Wall Street’s Big Short” Paulson: Gold’s long-term bull market is just beginning—gold mining stocks are the real profit king. John Paulson, the billionaire hedge fund manager who rose to fame shorting the US subprime crisis and later correctly betting on gold, recently said that gold is in the early stages of a long-term bull market. Paulson noted: “I really believe we’re at the beginning or in the early stages of a long-term bull market in gold. As people lose confidence in fiat currencies, gold as an alternative asset will keep appreciating.” He further explained that gold is becoming the world's most important reserve currency, gradually replacing fiat money, and both global central banks and the private sector continue to increase physical gold holdings. In terms of investment strategy, Paulson believes returns from gold mining stocks will be more rewarding for investors than physical gold, especially those large companies with substantial undeveloped reserves.

Barclays declares a “golden age” for tech IPOs: Rare overlap of multiple AI innovation cycles and greater market capacity than the 2021 boom. The global technology IPO market is at a historic turning point. Jamie Turturici, Barclays' Head of Technology, Media & Telecom (TMT) Equity Capital Markets, dubbed the current tech IPO climate the “golden age,” saying he’s “never seen so many innovation cycles happening at once” in his career. Turturici pointed out that the influx of tech companies going public now covers not only core AI sectors but also six major segments: power infrastructure, data centers, robotics, automation, defense technology, and space. He described the current cycle as roughly year three of a typical five-to-six year IPO cycle. Additionally, Turturici believes concerns about the market’s capacity to absorb the supply surge are exaggerated.

Individual Stock News

Google (GOOGL.US) Q2 cloud revenue surges 82%, but capex set to soar to $205 billion—historic negative cash flow rattles market. The earnings report shows Google's Q2 revenue grew 24% year-on-year to $119.8 billion, topping market expectations of $117.02 billion. Google Cloud revenue hit $24.77 billion, up 82% year-on-year and above expectations of $22.46 billion; services revenue was $94.54 billion, compared with an expected $94.32 billion. Operating profit for Q2 was $40.77 billion, up 30% year-on-year and higher than the expected $40.55 billion; adjusted EPS was $9.11 (including a $6.26 per share gain from the fair value of equity investments), far surpassing the expected $2.88. Meanwhile, Google’s Q2 capital expenditure reached $44.92 billion, outpacing the market's $44.15 billion expectation and significantly higher than last year’s $22.446 billion, reflecting the company's continued large-scale investment in data centers, AI servers, and computing infrastructure. With such spending rapidly rising, Google’s free cash flow for Q2 turned negative by $5.9 billion—the company's first negative figure in decades and below market expectations. Google raised its full-year 2026 capital expenditure guidance from $180-190 billion to $195-205 billion and expects a continued significant increase in 2027. As of press time, Google shares fell over 4% in pre-market trading Thursday.

Tesla (TSLA.US) Q2 net profit misses expectations as margins shrink further—free cash flow turns negative. The earnings report shows Tesla Q2 revenue reached $28.24 billion, exceeding expectations and up 26% year-on-year, marking the first time in three years revenue growth surpassed 20%. However, operating profit for Q2 was just $398 million, far below the expected $1.39 billion; adjusted EPS was $0.33, down 18% year-on-year and well below expectations; the gross margin was 16.8%, lower than the 19.4% anticipated. Notably, Tesla’s free cash flow for Q2 was negative $1.09 billion, marking the first negative quarterly figure since Q1 2024. Tesla executives indicated that negative free cash flow is due to capex more than doubling quarter-on-quarter in Q2 and expect capex to continue rising over the next two to three years, reaffirming that this year's capex will exceed $25 billion. In the earnings announcement, Tesla clearly stated the company is in its largest and most exciting investment phase, with much more effort required ahead; it is committed to using AI technology to transform transportation, energy, and productivity, and the scaling of its business will be nonlinear; Tesla remains focused on long-term value creation. These comments suggest that investment will not slow down, and profit pressure may intensify. As of press time, Tesla shares were down over 6% in pre-market trading Thursday.

Texas Instruments (TXN.US) Q2 revenue and earnings beat expectations, Q3 guidance optimistic—but the 70% YTD gain leaves market “scared of heights.” The world’s largest analog chip and embedded processor manufacturer, Texas Instruments, issued Q3 revenue guidance above expectations but failed to excite investors—its stock has already surged this year, raising the bar for market expectations. Q2 revenue rose 23% year-on-year to $5.46 billion, ahead of the expected $5.24 billion; EPS was $2.14, also above expectations. The company projects Q3 revenue of $5.65–6.15 billion, with the analyst consensus at $5.62 billion. This outlook shows the company is becoming one of the main beneficiaries of the AI spending boom; meanwhile, a recovery in traditional automotive and industrial sectors is also boosting its performance. As of press time, Texas Instruments was down over 3% in pre-market Thursday trading.

“Big Blue” IBM (IBM.US) hits setback in its transformation: mainframe sales plummet 42%! Full-year revenue outlook lowered to 4-5% growth. IBM has cut its full-year revenue guidance and lowered its annual software sales growth forecast, mainly due to a significant decline in demand for its mainframe business. The Q2 report shows IBM revenue was about $17.2 billion, up about 1% year-on-year; mainframe sales fell 42% quarter-on-quarter. Adjusted EPS was $2.93. The company expects full-year 2026 revenue to increase by 4-5%, lower than the previously provided “over 5%” guidance; CFO Jim Kavanaugh revealed software revenue is now expected to grow 6-8% per year. CEO Arvind Krishna admitted that in the final weeks of June, customers suddenly diverted quarterly capex to servers, storage, and memory ahead of anticipated AI infrastructure price hikes; the company “did not anticipate the magnitude” of this reallocation, and several major deals were not completed on schedule. As of press time, IBM shares were down over 1% in Thursday’s pre-market.

AI data center business becomes new growth driver, Nokia (NOK.US) Q2 profit far surpasses expectations. Nokia’s Q2 profit greatly exceeded expectations, as the Finnish telecom equipment company ramped up its data center hardware business, boosting sales. Nokia announced Thursday that Q2 net sales rose 8% year-on-year to €4.8 billion, in line with analyst estimates; adjusted operating profit jumped 18% to €434 million ($496 million), well above the €372.3 million analyst consensus. At constant exchange rates, Q2 sales for the network infrastructure division—inclusive of AI data center connection business—rose 12% year-on-year to €2.037 billion. Of these, optical network sales rose 20% and IP network sales grew 16%. Net sales to AI and cloud clients grew by 105%.

Middle East conflict ignites oil prices! Refining and trading powers Total (TTE.US) Q2 net profit up 68%. French energy giant Total noted that Middle East war-driven surges in crude oil and finished product prices offset the decline in gas profits, leading to a significant Q2 profit boost. In a statement Thursday, Total reported Q2 adjusted net profit rose 68% year-on-year to $6.03 billion. This result was roughly in line with analyst expectations. Total will pay shareholders a Q2 interim dividend of €0.90 (about $1.03) per share, up 5.9% from a year ago, and plans to repurchase up to $1.5 billion in shares in Q3, matching the buyback volumes of the previous three quarters. As of press time, Total shares were up nearly 3% in pre-market Thursday trading.

Southwest Airlines (LUV.US) Q2 results mixed, full-year EPS guidance surpasses expectations. The earnings report shows Southwest Airlines’ Q2 revenue rose 16.4% year-on-year to $8.43 billion, below the market expectation of $8.58 billion; adjusted EPS was $0.94, far beyond the anticipated $0.51. Looking to Q3, Southwest expects adjusted EPS of $0.50–0.75, compared to the market’s $0.80 forecast. For full year 2026, the company sees adjusted EPS of $3.25–4.25, above the market’s $3.13 consensus. As of press time, Southwest shares were down over 3% in pre-market Thursday trading.

American Airlines (AAL.US) Q2 beats expectations, Q3 earnings outlook disappoints. The financial report shows American Airlines’ Q2 revenue was $16.735 billion, above the expected $16.707 billion; adjusted EPS was $0.15, higher than the forecast $0.03. The company’s Q2 fuel costs exceeded $2.2 billion, up 83% year-on-year. American expects Q3 adjusted EPS of -$0.70 to -$0.10, whereas the market anticipated $0.28. As of press time, American Airlines shares were down nearly 4% in Thursday's pre-market trading.

Countdown to Starship’s 13th test flight! This critical launch weighs heavily on SpaceX (SPCX.US)’s space ambitions and trillion-dollar valuation. After aborting last week’s launch attempt, SpaceX will try again on Thursday for the pivotal test of its massive Starship rocket. This event exposes investors to the risks of the company’s turbulent R&D cycle and further amplifies attention on this key milestone. This Starship test will be the rocket’s 13th flight and SpaceX’s first test since completing the largest IPO in history this June. Regarding the 13th Starship test, capital markets care less about the flight being labeled as “successful” or “partially successful” and more about whether known issues have been addressed and if Starship is, after multiple tests, approaching practical usability.

Significant Economic Data and Event Preview

At 20:30 Beijing time: US Initial Jobless Claims for the week ending July 18

Earnings Preview

Friday morning: Intel (INTC.US), Newmont Mining (NEM.US), SAP (SAP.US)

Friday pre-market: American Express (AXP.US), NextEra Energy (NEE.US), Verizon (VZ.US)