The semiconductor rebound reignites Wall Street, on the eve of the busiest earnings week of the year
A decisive rebound for Wall Street on Tuesday: the S&P 500 closed up 0.85% and the Nasdaq 1.3%, led by semiconductors, with the sector index gaining more than five points. The spark was a shortage of memory chips for artificial-intelligence data centres, and it spread to the whole speculative complex — cryptocurrencies, quantum computing, space. Even gold, which had stopped acting as a safe haven last week, climbed back above 4,000 in step with the calmer mood.
It is a genuine change of air, but the verdict is only hours away: Tesla and Alphabet report tonight, and it is their numbers — not the chart — that will decide whether the rebound has legs. On our own system, meanwhile, almost every name that rallied yesterday is still a daily bounce inside a weekly sell signal: the price rose, the underlying money flow has not yet signed off.
Tesla (+3.46%) and Alphabet (+1.9%) closed higher on the eve of their respective quarterly reports, both due tonight after the U.S. close. Tesla rose after announcing an expansion of its robotaxi service and a price-target increase from UBS, with record second-quarter deliveries confirmed at 480,126 units (+25% year on year); the options market is pricing a post-earnings move of 5.8-7.6%, the widest in a year. Alphabet climbed on reports of a new proprietary artificial-intelligence chip.
The board of PayPal formally rejected the joint offer from Stripe and Advent International worth 53 billion dollars — 60.50 dollars per share, a 28% premium over the undisturbed price — deeming it inadequate and targeting a valuation closer to 70 dollars; the consortium, which already has committed financing of about 50 billion, is said to aim to reopen talks by month-end. Coinbase (+11%) benefited instead from a deal between the White House and Republican senators on the ethics package of the CLARITY Act, which removes a procedural obstacle to the U.S. framework law on cryptocurrencies, with bitcoin at two-week highs.
Baidu fell 3.93% despite confirming its artificial-intelligence partnership with Apple and announcing a dual listing in Hong Kong: price-target cuts from Barclays and Bank of America weighed. Netflix rose 1.6% despite a downgrade to "sell" from Goldman Sachs, yet remains the worst of the big tech names this year, down 26% year to date after the disappointing 16 July guidance. Alibaba had the most nervous session of the group: up 4% pre-market on the launch of a new artificial-intelligence model, then closing at -2% as the market digested a record European Union fine of 550 million euros on AliExpress.
A filing dated 13 July but made public only on the 20th revealed that Nvidia holds a passive 9.3% stake in Nebius Group, worth almost 5 billion dollars. Nvidia closed at +2.10%, but it was Nebius that benefited most, rising between 7% and 17% depending on the moment of the day — the widest move on our list.
UniCredit (+0.95%) rose after Moody's placed the bank's rating under review for a possible upgrade, in the wake of its move on Commerzbank, with Germany appearing to soften its opposition. Eni (+1.0%) announced that its Norwegian subsidiary Var Energi will merge with BlueNord in a deal worth about 1.1 billion euros, creating the largest independent oil and gas producer in Europe. On the Poste Italiane (-0.90%)–Telecom Italia (-2.36%) front it was the second day of the full takeover bid: the terms offer 1.67 euros in cash plus 0.218 new Poste shares for each TIM share, but acceptances remain marginal for now.
Two cross-cutting stories moved much of the rest of our list. The first is the double-digit rally in memory makers — Micron, Sandisk and Western Digital — on a forecast of memory prices rising 25% in the third quarter on the data-centre shortage. The second is a wide reshuffle of software coverage by Morgan Stanley: it cut Adobe (to "underweight", target 240 dollars against a street of 365) and Salesforce, while promoting Microsoft among its highest-conviction names.
The session answered the question we had been carrying since last week — rotation, or the start of something worse — with a rebound, but a rebound to be read with a cool head. In favour of the calmer reading, the evidence firmed up: market breadth is still growing, equity volatility has turned lower, and the artificial-intelligence chain that had been eroding our long-term signal count bounced back, lifting prices above their guard levels.
Against it stands the nature of the rebound: it was led by the most speculative part of the market — memory, cryptocurrencies, quantum — and our weekly flow gauge promotes none of it. On the rates side, meanwhile, stress is not easing: bond volatility and the spread between Italian and German government bonds keep rising, indifferent to the equity party.
Our ideal book sits in the comfortable part of the story, outside the speculative chain that ran, and it does not need to chase. The sensible thing, hours away from Tesla's and Alphabet's numbers and two days from UniCredit's and Intel's, is to avoid moves those results could make wrong by tonight. This week the chart matters less than the earnings sheet.