The S&P 500 and Nasdaq Composite Index began the second half of 2026 on firm footing, led by renewed strength in semiconductor stocks and resilient demand across goods and services despite elevated prices. The Dow 30 broke above the 53,000 level for the first time ever but renewed Middle East tensions handed the index a weekly loss. All eyes now turn to Q2 earnings with earnings expected to rise 24%+ with growth forecasted across ten of the eleven sectors.
Economic Highlights:
- The services sector continued to expand in June, although at a slower rate. The ISM Services PMI slipped to 54, down from May’s 54.5 reading. Numbers above 50 indicate expansion while those below signal contraction. Declines in business activity and new orders offset an increase in employment. On a more positive note, the services industry did see some price relief. The prices paid subcomponent within the index decreased to 67.7 from 71.3, the first sub-70 reading since February.
- The rush by businesses to secure goods to avoid shortages and higher prices amid the Middle East war sent the U.S. trade deficit higher in May. Imports rose to a 14-month high, more than outstripping strong oil exports as shipments of petroleum hit a record high. Despite the deficit widening, which will be a drag on Q2 GDP growth, the persistent strength in imports suggest resilient domestic demand despite global economic uncertainty.
- June Fed minutes showed a house divided on the future path of interest rates. Fed officials offered competing cases for Fed policy. Hikes could be on the table if inflation remains elevated but cuts could also be an option if inflation eases. The minutes were also notable in that the Fed dropped all forward guidance and cut descriptions of current economic conditions, a shift in Fed communication strategy under new Fed Chair Kevin Warsh that he believes will make markets less Fed dependent.
It’s a Chip Stock World and We’re All Just Living In It
The second half of 2026 trading is off to a healthy start with the chip sector leading the way higher, pushing the tech heavy S&P 500 and Nasdaq Composite to weekly gains. After faltering in recent weeks amid valuation concerns, the chips are back in investors’ favor amid a number of positive headlines this week. Micron Technology rose on Thursday after it announced plans to invest up to $3 billion in the US semiconductor supply chain. Meanwhile, Applied Materials rallied after its CEO cited strong long-term visibility into chip equipment demand. Friday brought the U.S. market debut of the tech sector’s newest AI darling, South Korean chipmaker SK Hynix. The U.S. listed shares opened at $170, above their $149 offer price. The offering raised $26.5 billion, second only to SpaceX’s record $75 billion IPO haul last month. SK Hynix plans to use the proceeds to build up its manufacturing capacity to keep up with the demand for memory and storage chips driven by the global AI build-out. As the S&P 500 and Nasdaq moved higher on bullish tech sentiment, the Dow Jones Industrial Average finished lower. The index was poised for a winning week after surging above the 53,000 level for the first time ever on Tuesday as the rotation out of tech and into value gathered steam. Unfortunately, the index ran into the brick wall of Middle East uncertainty. On Wednesday, President Trump announced the U.S.-Iran ceasefire was over after Iran shot at a Qatari tanker, prompting the U.S. to resume strikes. The news sent the Dow Jones Industrial Average down 576 points during the session and West Texas Intermediate Crude up 5.20% to $78.02 a barrel. Mediators from Qatar and Pakistan however were quick to jump into the fray, working to bring the two sides to the negotiating table once more. That allowed markets on Thursday to shake off the latest Middle East developments and focus on renewed tech bullish sentiment as well as economic reports showing resilient demand for goods and services.
Although it is still early in the quarter, investors have chosen to buy the dip in tech stocks, which had fallen recently due to concerns over high capex spending. However, words of encouragement from tech companies this week bolstered sentiment. The renewed bullishness for tech and renewed Middle East tensions have served to slow the move into value stocks which dominate the Dow. The Dow, however, is well positioned to catch up to its tech heavy peers as the consumer remains resilient and AI-related infrastructure spending remains robust. All eyes now turn to the Q2 earnings season kicking off in earnest next week. Earnings are expected to rise 24.40%, following Q1’s 29.40% increase. And Q2 is not just a tech story. Ten of the eleven sectors in the index are expected to see an improvement in earnings compared to Q2 2025. A better than expected earnings season with earnings beats across sectors could give the rally legs into the second half of the year.
The Week Ahead
It’s a big week for markets as the Q2 earnings season kicks off with financial giants Goldman Sachs and JPMorgan looking to set a positive tone. Traders will also pour over the latest CPI, PPI, and retail sales figures.
What a Long Strange Trip: Eccentric Summer Festivals
Underwater Music Festival
The Underwater Music Festival takes place this weekend near Key West, FL to promote Coral Reef Conservation. The event started in 1984 in Looe Key Reef, an area of the National Marine Sanctuary where thousands of years of coral growth have created the largest living coral reef in the United States and in the Northern Hemisphere. The festival brings divers 20 feet below the surface to listen to a playlist of water-inspired songs that is piped underwater via speakers suspended from boats, including songs from Key West’s own Jimmy Buffett, as well as “Yellow Submarine” by the Beatles, and songs from the Titanic and The Little Mermaid movies during the four-hour concert. Many divers bring hand-crafted musical instruments using non-corrosive tin and copper such as a “bass-oon,” a “trombonefish,” and a “manta-lin.” We hear it’s a real lure.
Bigfoot Festival
The WNC (Western North Carolina) Bigfoot Festival in Marion, NC, in late August started in 2018 after several purported sightings of Bigfoot in the area. The festival attracts an estimated 40,000 visitors each year. Sasquatch enthusiasts and hunters participate in a Bigfoot calling contest and a street festival where vendors sell Bigfoot-themed art, crafts, t-shirts and souvenirs. There are other Bigfoot festivals across the country, with several in the Pacific Northwest area and one in the Smoky Mountains of Tennessee.
Pierogi Fest
The Pierogi Fest in Whiting, IN in late July each summer is an opportunity for participants to celebrate a type of dumpling made from unleavened dough that is typically boiled and filled with a variety of ingredients, such as mashed potatoes, cheese, sauerkraut, meat, or fruit. Pierogis are particularly popular in Polish cuisine. In addition to food, there is a parade featuring women dressed in housecoats and babushkas and a choreographed lawnmower brigade of men wearing sandals and socks. There is also a pierogi toss and a pierogi eating contest.
UFO Festival
Every summer in Roswell, NM, the UFO Festival commemorates the Roswell Incident of 1947 where some residents are said to have seen a UFO and aliens that were later recovered by the military. The U.S. Air Force released a report in 1994 saying the UFO, or UAP (unidentified aerial phenomena) as they are now called by the U.S. military, was a high-altitude research balloon, not a spaceship, and the “aliens” were just test dummies. While some people accept this explanation, others continue to believe extraterrestrials visited New Mexico. The festival includes live music, fire dancers, aerialists, and drone light shows. The convention center hosts Galicticon, a vendor hall featuring everything sci-fi, the Robert H. Goddard Planetarium features laser shows set to music, and the International UFO Museum Research Center hosts lectures from UFO researchers.
Humongous Fungus Festival
The Humongous Fungus Festival in Crystal Falls, Michigan, has been taking place every summer since 1991. This quirky and beloved festival celebrates the town’s local armillaria gallica fungus, a type of mushroom. Discovered in the 1980s, the mushroom spans 91 acres and weighs 440 tons. Researchers took 245 samples of the fungus to confirm through DNA analysis that the sprawling mushroom consists of the same individual organism. They found that it had been growing for about 2,500 years, making it one of the oldest living organisms as well. The humongous fungus is visible above ground as clumps of honey mushrooms, while the bulk of its 400-ton body is located underground. It’s made up mostly of black subterranean tendrils called rhizomorphs which can extend miles beneath the earth in search of sustenance. Armillaria gallica is notable for its bioluminescent properties — it can glow in the dark. The festival’s 2026 theme, “Spore-tacular,” includes a fungus-themed cook-off, a soapbox derby, live entertainment, and the “Humongous Pizza” — a 10 foot by 10 foot pizza made with mushrooms from the colony.
Wherever your summer adventures may take you, we wish you safe travels and unforgettable memories.