Written by: Tide Research

Last week, U.S. stocks ended trading with a rebound in tech stocks and adjustments in interest rate expectations, with the three major indices recording their largest single-week gains since mid-April. New variables over the weekend focused on negotiations in the Strait of Hormuz, Berkshire's capital allocation, and U.S. government funding. This week's core issue has shifted to whether inflation data can support the current interest rate pricing.

Tech Stocks Drive Index Rebound, Sector Performance Still Divergent

The S&P 500 rose 0.62% last Friday, closing at 7757.64 points, with a weekly increase of 3.58%; the Dow Jones increased by 0.28% to 54036.93 points, up 2.96% for the week; the NASDAQ rose 1.30% to 26690.62 points, with a weekly gain of 5.19%. The S&P 500 and Dow Jones set closing records.

In market capitalization weighted statistics of S&P 500 constituent stocks, consumer discretionary rose by 1.50%, materials gained 1.46%, information technology increased by 1.33%, while healthcare, utilities, and real estate saw slight gains; industrials remained roughly flat, while consumer staples, financials, communication services, and energy declined, with energy down 1.15%, the weakest performer.

Individual stocks continued to diverge around performance and guidance. SpaceX rose 15.8%, with an increase of over 20% in the two days after unlocking restricted shares; Coherent gained over 40% in a week, supported by optical communication orders and data center revenue; Trade Desk fell 21.9% due to revenue guidance below expectations.

The VIX fell 1.65% to 14.90. The yield on U.S. 10-year Treasury bonds is 4.645%, while the two-year yield is 4.195%. WTI crude oil is at $78.18, down 7.66% for the week; Brent crude oil is at $83.55, down 4.98%; spot gold is $4339.75, up 7.27% for the week. As of Sunday, Bitcoin is $64856, Ethereum is $1908.94.

Strait Agreement Still Lacks Execution Conditions, Oil Prices Return to Pricing Center

Discussions between Iran and Oman regarding the arrangement of shipping lanes in the Strait of Hormuz are nearing completion, but the formal restoration of navigation is still linked to demands for sanctions relief, unfreezing of assets, cessation of military threats, and compensation for damages. The U.S. and Iran continue to communicate through intermediaries, and the order of execution for the agreement has not yet been determined.

The Houthi armed group once again attacked the Saudi Aramco Jazan refinery over the weekend, continuing to pressure the safety of energy facilities and shipping in the Gulf region. On Monday during the Asian session, Brent crude rose above $84, and WTI crude approached $79.

Last week's decline in oil prices was mainly due to expectations of a restoration of navigation, and weekend news did not confirm that commercial shipping could resume quickly. Arrangements for Strait management, U.S. lifting of restrictions, and ship insurance recovery still need to advance independently. If oil prices rebound continuously, it will once again impact inflation expectations, U.S. Treasury yields, and tech stock valuations.

Berkshire Starts Using Cash, Stalemate Pressure Temporarily Delayed

Berkshire's operating profit in the second quarter increased by 16% year-on-year to $12.98 billion, with net profit rising to $25.67 billion. In the second quarter, the company repurchased $4.5 billion of its own stock, continuing with approximately $3.3 billion in buybacks in July, ending a streak of 14 consecutive quarters of net stock sales, with net purchases in a single quarter nearing $20 billion.

Berkshire also invested about $10 billion to increase its stake in Alphabet, placing it among the top five largest holdings. Cash reserves decreased from $380.2 billion in the previous quarter to $364.7 billion. After Greg Abel took over as CEO, stock buybacks, company repurchases, and physical acquisitions have all increased, shifting Berkshire's valuation discussions more towards capital efficiency.

The U.S. Senate passed a temporary funding bill, planning to maintain funding for most federal agencies until December 11. The Senate version still needs to align with the House proposal, and the likelihood of a government shutdown has decreased recently, with fiscal negotiations pushed to after the midterm elections.

Over the weekend, Apple’s Chinese official website briefly displayed the user guide for Apple’s smart access to Alibaba Qianwen, but the related page was subsequently deleted, and Apple did not disclose the reason for the adjustment. The official confirmation of the landing time for Apple in the Chinese market is still awaited.

Inflation, Retail Sales, and AI Earnings Dominate This Week's Calendar

There are no significant U.S. economic data releases on Monday, and the market will digest the rebound in oil prices and Berkshire's performance. Rocket Lab will release its earnings after the market closes, with commercial launch progress, order backlog, and new-generation rocket investments being the main focus.

On Tuesday, CoreWeave and Lumentum will announce their earnings. CoreWeave will update on AI cloud computing demand, capital expenditures, and financing costs; Lumentum's revenue guidance will test whether optical communication demand can be sustained. The optical interconnection sector performed significantly last week, and earnings need to keep pace with valuation changes.

On Wednesday, the U.S. will release the July CPI, with the market expecting a year-on-year increase of 3.4% in overall CPI and 2.5% in core CPI. Cisco will announce its earnings after the market closes, focusing on demand for enterprise network equipment, AI orders, and profit margins.

On Thursday, the U.S. will announce the July PPI and initial jobless claims, with Applied Materials reporting earnings after the market closes. Semiconductor equipment orders, HBM-related investments, advanced logic process spending, and next quarter's guidance will impact the equipment and memory supply chains.

On Friday, the U.S. will announce July retail sales and preliminarily consumer sentiment from the University of Michigan. The market expects retail sales to grow by 0.2% month-on-month. Consumer data will help assess whether any weakening in employment has affected household spending.

Employment Data Lowers Rate Hike Probability, CPI Determines Interest Rate Direction

The U.S. non-farm payroll employment in July decreased by 23,000, lower than the market expectation of an increase of 80,000, with May and June data revised down by a total of 103,000. The probability of a September rate hike subsequently dropped to around 44%, with two-year U.S. Treasury yields and the dollar retreating in tandem, easing the valuation pressure on tech stocks.

If the CPI does not exceed expectations, and the 10-year U.S. Treasury yield remains around 4.65% or continues to decline, while the AI supply chain earnings maintain growth, the index still has upward space. If inflation resurges, oil prices continue to rise, interest rate trading may quickly reverse. The S&P 500 is already at a record high, and this week requires inflation and corporate earnings to jointly provide new support.