Infosys, Wipro decline despite upbeat Q2 earnings; margin concerns weigh
Stocks have almost recovered all of the Friday pullback, another example of an overreaction to tariff threats, rewarding the dip buyers once again. It’s encouraging that the even-weighted S&P is keeping pace with the market-weighted, indicating broad participation. The move is being led, as usual, by tech. Also encouraging is that the NASDAQ is up almost twice as much as the Magnificent 7 at the open.
We did get another tariff scare yesterday afternoon when Trump complained that China wasn’t buying American soybeans, and he may punish China by not buying their cooking oils. That stopped yesterday’s recovery late in the day. Today’s continued rally has likely further emboldened dip buyers and should result in less of a pullback on the next tariff threat.
Earnings continue to support the rally. Bank of America (BAC) had beats top and bottom, and the shares are up 4.8% (+19.3% YTD). Morgan Stanley (MS) had major beats both top and bottom and is up 6.9% (+32% YTD). ASML (ASML), Europe’s largest company, which makes equipment used to manufacture AI chips, had a miss on the top and a beat on the bottom. The company warned that China sales could slow but that total sales in ’26 should rise 15%. The shares are up 1.8% (+44.5% YTD). Tomorrow, we get Taiwan Semiconductor (TSM) and several more brokerage firms.
Interest rates with the US 2-year flat at 3.48% and the 10-year yield down 1 bp to 4.01%. We’re seeing international yields following the US lower with Canada’s 10-year down 4 bps to 3.11%, the UK down 5 bps to 4.53%, and Germany down 3 bps to 2.57%. The US dollar index is down slightly to 98.6.
On the commodity front, gold has hit yet another new all-time high, hitting $4,235/oz, and silver is back over $51/oz. Copper is holding firm at $5/oz. Crude oil is trying to get back to $59/bbl and natural gas has fallen below $3/mcf. Energy stocks are up today but down for the week, the month, and LTM.
The strength of gold is a bit disconcerting in that it is seen as a safe haven, a defensive strategy, while stock markets are surging to new highs. Pundits suggest that it reflects concerns about fiat currencies, which have grown dramatically through debt issuance, leading to devaluation. This is also the base argument of crypto, which has a finite number of coins. Today, crypto is flat, with Bitcoin at $111.0K, down 2.5% for the trailing month, while gold is up 13.2%.
Earnings season is off to a great start, the AI theme is still working well, the government shutdown isn’t concerning the market, Fed cuts are coming, and soft energy prices are positive for inflation. The trend is positive, and we are likely to see new highs by the end of the month.