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Market Update | July 27th, 2026

Financial Markets

Stocks moved lower last week as escalating tensions with Iran and renewed concerns over the future return on investment from artificial intelligence capital spending pressured technology stocks. The Nasdaq Composite led the decline, falling 2.13%, while the S&P 500 slipped 0.61% and the Dow Jones Industrial Average declined 0.38%.

Source: Y-Charts

Market News

Earnings Season

Second-quarter earnings season is off to a strong start, with more than one-quarter of S&P 500 companies having reported results. While investor sentiment has been tempered by concerns surrounding AI-related capital expenditures and ongoing geopolitical developments, corporate results have broadly exceeded expectations. Based on reported results and analyst estimates for the companies yet to report, S&P 500 earnings are currently projected to grow 37.9% year over year for the quarter.

Source: FactSet, Fundstrat, as of 7/24/26

Financials, one of the first sectors to report, have delivered particularly strong results. As of Friday, approximately 50% of the sector had reported, generating 30.6% YoY earnings growth. JPMorgan Chase, Bank of America, Wells Fargo, and Goldman Sachs all posted strong results, benefiting from a favorable combination of robust capital markets activity, improving business lending, and resilient consumer credit.

Accordingly, four of the five major banks have also outperformed the S&P 500 on a month-to-date basis. Citigroup was the exception. While recent cost-cutting initiatives have improved profitability, investors remained cautious over the company’s expense outlook, including restructuring costs, severance related to workforce reductions, and continued investments in technology. On the whole, earnings season has begun on a positive note, led by exceptionally strong results from the financial sector.

Source: Y-Charts

Expectations for July Fed Meeting

The Federal Reserve will hold its first meeting of the second half of the year this week, marking Kevin Warsh’s second meeting as Chair. Markets continue to expect policymakers to leave the federal funds rate unchanged at the meeting, though rising oil prices over the past several weeks have materially increased expectations for a rate hike.

According to federal funds rate futures, the probability of a July rate hike has risen from 12.8% one week ago to 35.8%, highlighting how quickly markets have adjusted to changing inflation and geopolitical conditions. While a rate hike would still come as a surprise, investors will be closely watching for any shift in the central bank’s tone.

In addition to the policy decision, investors will also be monitoring changes to the FOMC statement. At the June meeting, Chair Warsh significantly shortened the statement to just over 100 words, making any changes in this week’s language especially important for understanding the FOMC’s outlook.

Source: CME Group FedWatch, as of 7/24/26

Leading Economic Indicators Stabilize

The Conference Board’s Leading Economic Index (LEI) declined 0.2% in June, following a 0.1% increase in May. Despite the monthly decline, the LEI has fallen just 0.3% during the first half of 2026, an improvement from its 1.1% decline during the second half of 2025, suggesting leading indicators have stabilized considerably over the past year.

Weakness during the month was driven primarily by softer consumer expectations for business conditions, lower building permits, and higher initial unemployment claims. These declines were partially offset by a more positively sloped yield curve as long-term Treasury yields increased, along with minor improvements in the Leading Credit Index, stock prices, and the ISM New Orders Index.

Although the LEI remains slightly negative on both a six- and twelve-month basis, the trend has become considerably more stable as the pace of deterioration has slowed. Consumer spending has softened, but continued business investment related to artificial intelligence is expected to support economic activity.

Reflecting this backdrop, the Conference Board recently raised its 2026 U.S. GDP growth forecast from 1.8% to 1.9%, suggesting that while the LEI remains modestly negative, its components are consistent with continued economic expansion rather than signaling an impending recession.

Source: The Conference Board

New Home Sales

Sales of new single-family homes increased modestly in June to a seasonally adjusted annual rate of 628,000, up 1.6% from May but 5.6% below June 2025, reflecting continued softness in the new home market. Inventory of new homes available for sale totaled 485,000, down 3.2% from a year ago, representing 9.3 months of supply at the current sales pace.

At the same time, the median sales price declined to $398,300, down 2.7% from a year ago, as homebuilders continued adjusting prices to attract buyers in a high mortgage rate environment.

Source: U.S. Census Bureau

Summary

Markets traded lower last week as investors balanced escalating geopolitical risks and renewed scrutiny of AI investment spending. Strong corporate earnings continued to reinforce a resilient fundamental backdrop, with attention now shifting to this week’s Federal Reserve meeting and any signals regarding the outlook for interest rates.

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