Mid-Morning Look

Friday, July 17, 2026

U.S. stocks are under pressure to start the day and on track for weekly declines as the tech driven sell off in semis/AI/data centers do more damage to momentum stocks/trades as investors rotate into more defensive sectors with consumer staples, healthcare, REITs leading the last few days. Financials had been strong until some profit taking yesterday while Energy climbs again behind another rise in oil prices after the US, for the sixth consecutive night, launched a wave of strikes in Iran. But the story this morning is the renewed pressure in semis (SOX) as investors questioned whether elevated AI-related valuations remain justified.  Competition fears rose driven by Chinese startup Moonshot’s Kimi K3 Ai model rivaling OpenAI and Anthropic. Investors fear the breakthrough echoes of the DeepSeek shock, questioning the justification for massive Ai capital spending. A disappointing market reaction to TSM‘s results the day prior and higher capex guidance fueled concerns over the eventual returns on the sector’s heavy investment cycle. Weakness was particularly acute across Asia, where Taiwan, Japan and Hong Kong all posted sizeable declines given their heavy exposure to chipmakers/AI supply chains. Japan’s Nikkei 225 tumbled -4.6% to 64,141.12, marking its worst weekly loss since April 2025, with memory maker Kioxia (KXIAY) plummeting nearly 15%, Tokyo Electron (TOELY) tumbling about 3.3%. @MikeZaccardi noted on X, “Tech $XLK having its worst month of the bull market… -8.7%… worst since Sept 2022.” Stocks trying to pare losses with QQQ -1.2% after falling as much as -2.7%.

In his highly awaited national address, President Trump focused mainly on US election security. Trump repeated claims that the 2020 election was stolen and cast doubt on the security of the upcoming midterms. He used the speech to press Congress to pass a strict voter identification bill, saying it is imperative that Americans feel elections are free of misconduct and interference. He said he was detailing findings from newly declassified intelligence reports, alleging vulnerabilities in voting systems and noncitizens on state voter rolls. In geopolitical news, for the sixth consecutive night, the US launched a wave of strikes on Qeshm Island, Bandar Abbas, Bushehr, and other areas across Iran. Iran responded with multiple waves against Kuwait, Iraq and Bahrain targeting US assets. Oil prices rose again this morning and are higher on the week.

• June Industrial output rose a modest +0.1% vs. consensus +0.2% and in-line with May +0.1%; June mining output +0.4% (May +1.1%), Utilities output +0.4% (May -0.7%); June capacity use rate 76.1% vs. consensus 76.2% and vs May 76.1% (previous 76.2%).
• U.S. housing starts jumped +19.0% m/m to a seasonally adjusted annual rate of 1.427M in June from 1.199M (revised from 1.177M) in May, well above the 1.320M consensus. The rate of housing starts in June increased 3.5% y/y. May building permits issued for privately owned housing slipped -3.0% m/m to a seasonally adjusted annual rate of 1.367M vs. 1.400M consensus and 1.410M prior.
• University of Michigan surveys of consumers sentiment prelim July 54.4 (consensus 51.0) vs final June 49.5 as current conditions index prelim July 54.9 (consensus 48.7) vs final June 47.7 and expectations index prelim July 54.0 (consensus 51.7) vs final June 50.7.
• University of Michigan surveys of consumers 1-year inflation outlook prelim July 4.2% vs final June 4.6% while 5-year inflation outlook prelim July 3.3% vs final June 3.3%.

• Media & Communication sector: NFLX shares tumbled after reporting quarterly results that were in-line but gave Q3 guidance that fell short of consensus for earnings and revenue (guides Q3 revs $12.86B vs est $13B and EPS $0.82 vs est $0.84) while tightened its 2026 rev view to +12% FXN (+13-14% reported). In other news, President Trump threatened to revoke the broadcast licenses of DIS owned ABC and CMCSA-owned NBC, accusing both networks of spreading misinformation and failing to air his remarks in prime time last night. META is in talks to hire a senior AMZN cloud computing executive as the social media giant expands its data center and cloud infrastructure ambitions, the WSJ reported.
• Restaurant sector: YUM shares fell initially after investigators identified shredded iceberg lettuce supplied by Taylor Farms to Taco Bell as a potential source of a multistate Cyclospora outbreak that has sickened thousands. In earnings previews, Benchmark raised its tgt on BJRI to $68 from $50 and raised Q2 comp sales assumptions based on the traffic strength that have seen broadly across the full-service dining industry during Q22; BJRI was also upgraded to Outperform at William Blair. RBC Capital previews some quarters saying they continue to lean constructive on WING despite top-line pressures and constructive on shares of CMG heading into the print where RBC anticipate a SSS growth beat and raise.

• FANG +2%; amid bounce in oil/energy related names (APA, COP, EOG, XOM) after the U.S. and Iran stepped up attacks across the Gulf, with shipping threatened by a potential Red Sea closure on top of the restricted traffic through the Strait of Hormuz.
• PSNL +3%; added to prior day gains following a report (by Street insider) indicating that the company is exploring a potential sale after receiving takeover interest from MRK and two other bidders. Merck already owns more than 10% of the company and is a key customer https://tinyurl.com/42c5a3wj
• TRV +8%; reported Q2 core profit jumps on lower catastrophe losses and strong investment income while quarterly core income per share rises 44% to $10.04; Q2 catastrophe losses were $518M on a pre-tax basis, compared with $927M y/y and net investment income rose 13.6% y/y to $1.07B.
• UNH +2%; adds to prior day gains after beat and raise quarter and as investors rotate further out of tech and into other sectors such as Healthcare (XLV).

• GSK -2%; said it decided to halt the development of an experimental drug as a treatment for chronic cough after the medicine missed the key goal in a late-stage clinical study; said the drug, camlipixant, its primary endpoint in a 12-week trial but fell short in a 24-week study.
• ISRG -11%; shares fell as Q2 revenue of $2.89B was up 18% Y/y ex-fx, topping ests $2.82B, including as systems up 19%, I&A up 18% and service up 21% on better margins but procedure growth decelerated ~200bps q/q amid headwinds from ACA subsidy cuts and only reiterated 2026 da Vinci procedure growth guidance of 13.5%-15.5%, below consensus’s 14.9%
• NFLX -10%; shares tumbled after reporting quarterly results that were in-line but gave Q3 guidance that fell short of consensus for earnings and revenue (guides Q3 revs $12.86B vs est $13B and EPS $0.82 vs est $0.84) while tightened its 2026 rev view to +12% FXN (+13-14% reported).
• RGNX -13%; as prices public offering of 10M shares at $9 and 1.11M pre-funded warrants at $9.
• SPCX -3%; shares fell further below its IPO pricing of $135 after Starship rocket triggered a last-second abort before liftoff for its 13th flight test from Texas on Thursday as some of its 33 engines failed to start. CEO Elon Musk says SPCX will likely try to launch again early next week.
• STAA -19; shares tumbled after guides Q2 prelim revs $90M vs. est. $90.25M saying growth was driven by China, broader Asia-Pacific, and double-digit gains in the Americas while EMEA sales declined due to Middle East turmoil; company warns of ongoing macroeconomic headwinds.
• YUM -2%; after investigators identified shredded iceberg lettuce supplied by Taylor Farms to Taco Bell as a potential source of a multistate Cyclospora outbreak that has sickened thousands