Stocks finished the week lower rattled by mounting investor jitters over artificial intelligence spending and a ramp up in Middle East tensions. The trading week appeared to initially be moving in investors’ favor on a strong start to the earnings season, cooling inflation, and healthy consumer spending. While the economic data continues to support a resilient economy, the market remains highly sensitive to the capital intensity of the AI trade and the geopolitical pressures on energy markets.
Key Highlights:
- June consumer prices came in cooler than expected, bringing some much needed price relief to consumers. The CPI Index fell 0.40% on the month, its first decline since 2020. YOY, the inflation rate eased to 3.50%, down from May’s 4.20%. Core CPI which excludes volatile food and energy, was unchanged for the month, bringing the 12-month rate to 2.60%. A big decline in energy and an easing in services costs, particularly housing drove prices lower.
- Wholesale prices followed consumer prices lower in June. The PPI Index fell 0.30% month-to-month for its biggest decline in 14 months. That helped push the YOY rate down to 5.50% from 6.00% in May. Excluding food and energy, the Core PPI Index rose a modest 0.20% to bring the annual rate to 4.70%. A drop in energy prices once again fueled the headline decline. However, the PPI report also showed the artificial intelligence buildout driving up wholesale prices, a top concern of late for Fed officials.
Price relief at the pump helped consumers brush off elevated prices. Retail sales rose 0.20% in June, down sharply from an upwardly revised 1.00% in May. The headline figure was driven by a sharp drop in gas station receipts as energy prices eased amid a slight easing in Middle East tensions. Excluding gas stations, retail sales were up a solid 0.70%. The sales gains were broad-based, led by higher sales for autos, online sales, and sporting goods and hobby stores.
Markets Slip as AI Trade Cools
Blockbuster earnings, cooling inflation, and a resilient consumer failed to offset a cautious tone on AI spending and a resurgence in Middle East tensions. Chip stocks continued their rollercoaster ride this week, coming under selling pressure once again. Taiwan Semiconductor (TSMC) was the fuse that lit the chip stock rout as it raised its spending forecast to a range of $60 billion and $64 billion for the year, up from a prior range of $52 billion to $56 billion. The spending increase overshadowed an otherwise strong earnings beat as investors remain wary that meeting AI chip demand will require enormous ongoing investment, potentially pressuring near-term margins and shareholder returns. Elsewhere, the earnings season was off to a strong start. Of the 40 S&P companies that have already reported, more than 87% have exceeded expectations. The major banks including Goldman Sachs and JPMorgan set a positive tone for the Q2 earnings season reporting record results. On the economic front, consumers got a much needed win in the fight against inflation as both consumer and business prices eased in June, allowing consumers to plow those savings into retail sales which rose solidly for the month.
This week’s downturn came as a surprise with investors brushing aside a strong start to the earnings season, early signs of easing inflation, and a resilient consumer – instead choosing to focus on chip sector risks. Valuation concerns are very much real for the sector as investors have unrelentingly pushed prices to eyepopping gains this year. TSMC’s earnings report served as a check that it will require massive capital investment to sustain the AI boom which could easily cut into investor profits. On a positive note, early Q2 earnings results show it’s not just an AI world as the banks posted strong gains and pointed to resilient consumers keeping economic momentum strong. Easing inflationary pressures should serve to not only support spending but also keep the Federal Reserve on hold. A potential rate hike had been the perceived Fed bias but even with the positive inflation report this week, the flare up in Middle East tensions could remain a headwind for prices looking forward. The recent exchange between the US and Iran has pushed West Texas Intermediate Crude to around $82 a barrel, up about 15% from a week ago. The trading in the market this week serves as a reminder that while the U.S. economy remains resilient and inflation shows the potential to cool; the market is still highly sensitive to the AI trade and the persistent threat of geopolitical instability in energy markets.
The Week Ahead
The earnings season continues with the first crop of MAG-7 members, Google, Amazon, and Meta set to report. On the economic front, it’s a light week with Flash PMI and new home sales being the highlights of the week.
Trump Accounts for Children Are Here: Eligibility, Contributions, and Considerations
Trump Accounts officially launched on July 4, 2026. Also known as 530A accounts, they are individual accounts for children created under President Trump’s One Big Beautiful Bill Act in 2025 to encourage long-term savings and help build wealth for the next generation. Tyler Ozanne, Partner and Senior Financial Advisor at Probity Advisors, Inc., shares that there are a range of investment vehicles to consider when saving and investing for children, such as 529 plans, UGMA (Uniform Gifts to Minors Act) and UTMA (Uniform Transfers to Minors Act) accounts, and Roth IRAs. “While Trump Accounts may be a useful new tool for some families, the best choice will depend on each child’s age, the family’s goals, tax considerations, and how much flexibility parents want in accessing the funds,” Ozanne explained.
Below is a brief Q&A on how these accounts work and some of the advantages and benefits.
What are the eligibility rules?
Trump Accounts are open to children under 18 years of age who are U.S citizens and have a valid Social Security number. The federal government will make a one-time $1,000 contribution for each eligible child’s account. To qualify for the one-time federal pilot contribution, the child must be born between January 1, 2025 and December 31, 2028 (during Trump’s second term).
How do Trump Accounts work?
These new accounts operate in a custodial-style structure where the assets are owned by the child, while an adult — typically a parent or guardian — is authorized to act on the child’s behalf until the beneficiary (the child) reaches age 18. The U.S. Department of Treasury will set up and administer the accounts, and the money will initially be managed by Bank of New York Mellon. All accounts must be opened through the federal framework, and the IRS is expected to issue more guidance for families to be able to roll over the accounts to their preferred brokerage firm.
How are the funds invested?
Contributions to Trump Accounts are invested in a low-cost exchange-traded fund that tracks the performance of the S&P 500 index.
How are Trump Accounts opened?
Opening a Trump Account starts with an election process through the IRS—either by filing Form 4547 or using the online tool at trumpaccounts.gov.
Who can contribute to a Trump Account?
Trump Accounts may be funded by contributions from family members, employers, governments, and charitable organizations. Authorized contributions from individuals and employers are allowed up to $5,000 per year. Employers can contribute up to $2,500 per year toward an employee’s or dependent’s Trump Account without it counting as taxable income for the employee. The annual contribution limits are indexed to inflation and will adjust starting after 2027. A $6.25 billion gift from the Michael & Susan Dell Foundation will fund $250 charitable deposits for qualifying children in certain ZIP codes.
How are the funds withdrawn or used?
The funds are generally inaccessible before age 18. At age 18, the account converts into a traditional IRA with similar tax rules. From that point forward, the account holder can make penalty-free withdrawals for certain life expenses, such as college tuition, first-time home purchases, or medical costs. However, because it functions as a traditional IRA, ordinary income taxes still apply to all withdrawn funds. Early withdrawals for nonqualifying expenses before age 59½ may incur a 10% penalty. Additionally, Required Minimum Distributions (RMDs) rules apply once the account holder reaches the applicable age. Trump Accounts may be converted from a traditional IRA to a Roth IRA after age 18. The converted amount is added to taxable income for that year, but if the account holder has low income (such as a student with minimal earnings), the conversion may incur little or no federal income tax. Once in a Roth IRA, future growth and qualified withdrawals are tax-free, providing a long-term tax advantage.
One nuance worth understanding: contributions made by parents, grandparents, and other family members create basis in the account since they’re after-tax dollars, and that basis comes back out tax-free at distribution — similar to a nondeductible IRA. The catch is twofold. First, 530A accounts follow pro-rata distribution rules, so a withdrawal can’t isolate basis and pull it out first — every distribution is a blended mix of basis and taxable growth. Second, that basis has to be tracked on IRS Form 8606, filed annually with the child’s tax return, and unlike a 529 plan, the custodian isn’t required to track it for you. Over an 18-plus-year holding period — often spanning multiple preparers, custodians, or a family member who simply forgets to file the form — that basis history can get lost, and an untracked contribution effectively becomes fully taxable on distribution. By contrast, the $1,000 federal pilot contribution and any employer contributions carry no basis at all; that money, and its growth, are fully taxable as ordinary income regardless. Families should weigh the recordkeeping burden when comparing a 530A account to a UTMA or to a Roth IRA for a child with earned income (generally age 14 and up).
Given some of the disadvantages of Trump Accounts, including not only those addressed above but also the limited investment choices, restrictions on withdrawals, and the cap on annual contributions, parents and guardians should discuss their family’s priorities with an advisor when making decisions about investing and saving for their children and grandchildren to make the best choice.