Renewed geopolitical risk, rising oil prices, and disappointing reactions to mega-cap earnings gave investors plenty to digest this week.
The two biggest market headlines this week were GOOGL’s capex spending and renewed escalation in the Middle East. More on the GOOGL spending below.
Brent crude traded above $100 per barrel, while the U.S. benchmark, West Texas Intermediate (WTI) crude, moved above $90 as markets priced in growing risk to oil flows through the Strait of Hormuz and the Red Sea. Houthi attacks near the Bab al-Mandeb Strait raised concern that the Red Sea, a critical export route for Saudi oil redirected through the East-West pipeline to the port of Yanbu, could become another chokepoint. That matters because the Red Sea has served as an important bypass route for Gulf oil stranded by Hormuz disruptions.
The spike in oil fed directly into macro concerns. Higher crude supports the dollar by increasing global demand for dollar liquidity. This lifts inflation expectations and pushes Treasury yields higher as investors reconsider the Fed’s policy path. That dynamic is especially important ahead of next Wednesday’s FOMC decision.
The July 28-29 meeting is now likely to carry even more cautious language around energy-driven inflatoin risk, even if the Fed does not move rates immediately.
Overall, the week showed a market that is still resilient, but less forgiving. AI remains a powerful theme, yet investors are increasingly separating companies that benefit from infrastructure demand from those spending aggressively to chase it. With oil above key psychological levels, the VIX elevated, and the Fed meeting approaching, next week’s policy language may determine whether recent weakness in the equity complex becomes a deeper correction or another rotation inside a still-resilient bull market.
Roughly a third of S&P 500 companies report earnings this week, which will be the busiest week of second-quarter earnings season.
For the week, the DOW lost -0.4% to 51,947, the S&P 500 declined -0.6% to 7,412, the Nasdaq slumped by -2.1% to 24,976 and the Russell 2000 declined by -1.1% to 2,930. The CBOE VIX actually dipped by -1% to 18.58.
Oh Alphabet, or Google, or whatever you want to call it. The market is not taking kindly to a big bump higher in spending plans from Google parent Alphabet.
Though Alphabet smashed Wall Street’s heady earnings forecasts, with revenue rising firmly to just under $120 billion and cloud revenue jumping 82% from last year, they said its 2026 capex would rise to $205 billion, more than double last year’s amount.
That was enough to ignite new concerns about the pace of AI spending, and the lack of visibility in how it will be returned in the form of profits. This has become the most expensive tech-led arms race in history. The rise comes as the costs for components—the hardware needed to power AI—become increasingly expensive as demand far outpaces supply. Alphabet also proved its willingness to keep spending when it announced plans in June to raise $80 billion through equity sales to fund its 2026 and 2027 capex.
Shares got pummelled right down to the 200 day moving average near $320, the first time it hit that mark since June 2025. Big spending from tech firms has been making investors nervous for several quarters but those worries seem exacerbated this earnings season, as evidenced by the market’s reaction to Alphabet and Intel results. Will the likes of Meta, Microsoft and Amazon follow suit? We will have to wait and see this week.
An hour before its earnings release, I was on a live interview from the CBOE trading floor with Liz Claman from Fox Business. We talked specifically about this exact issue. You can watch it here:
30-Year Yield Alarms
The US 30-year bond yield has held above 5% for the longest stretch since the dawn of the financial crisis, echoing investor concerns about a growing debt pile and sticky inflation.
As of Wednesday, the 30-year has traded beyond 5% for 27 days in 2026 — including the last 12 days in a row — or about 19% of all sessions, according to data compiled by Bloomberg. That’s the most number of days and longest consecutive run since 2007 when it traded above that level for 50 days.
Unlike 2007, however, the Federal Reserve’s benchmark is 150 basis points lower currently, suggesting investors are demanding even more compensation for holding the longest maturity sold by Treasury than at the start of the subprime debt woes.
Behind the sustained rise in long-dated yields is growing concern about a deteriorating fiscal picture, just as a deluge of issuance to fund artificial intelligence infrastructure is flooding the corporate debt market. That’s stirring comparisons to the era of “bond vigilantes,” popularized in the 1980s when investors dumped government debt, driving yields higher to enforce fiscal discipline.
Since 2007, the Treasury market has ballooned to $31 trillion from $4.5 trillion while debt as a percentage of US gross domestic product has doubled to exceed 100%. All told, years of excessive spending have propelled annual interest cost above $1 trillion.
The US isn’t alone among global governments having to finance large debt piles that soared since the 2020 pandemic. Still, with the exception of the UK, US 30-year yields are trading higher than other big debtors like Japan and France. Fitch Ratings recently warned the US debt burden sits “far above” other nations that share its AA score.
Competing for debt buyers is also the over $500 billion financing linked to AI. For fund managers, that’s a reason 5% plus yields are here to stay unlike similar spikes in the past.
“In every one of the instances that we saw 5% in the last few years, it was quickly bought,” said Alex Payne, senior portfolio manager at Vanguard Capital Management. Traditional buyers of 30-year bonds, such as pensions and insurers now have “a wider menu of options than they’ve had in years past,” said Payne, adding that he isn’t sure yields have reached the highs yet.
The pressure on the US long end is sustained even as Treasury has gravitated toward hefty sales of short-dated bills, while keeping long bond sales steady in recent years. That could change as Wall Street dealers expect Treasury will start boosting two- to 30-year coupon auction sizes by May 2027.
In contrast, shorter-dated benchmarks from two to 10-year notes have only risen back toward levels last seen in early 2025, even as the bond market switched gears from expecting Fed rate cuts to hikes later this year.
Over one-quarter of the way through the Q2 earnings season, the S&P 500 is reporting impressive results, even if one excludes the unusually large EPS surprise reported by Alphabet. Overall, both the percentage of S&P 500 companies reporting positive earnings surprises and the magnitude of earnings surprises are above recent averages. As a result, the index is reporting higher earnings for the second quarter today relative to the end of last week and relative to the end of the quarter. In addition, the index is also reporting its highest (year-over-year) earnings growth rate since Q3 2021.
Overall, 27% of the companies in the S&P 500 have reported actual results for Q2 2026 to date. Of these companies, 86% have reported actual EPS above estimates, which is above the 5-year average of 78% and above the 10-year average of 76%. In aggregate, companies are reporting earnings that are 39.3% above estimates, which is above the 5-year average of 7.0% and above the 10-year average of 7.4%. Historical averages reflect actual results from all 500 companies, not the actual results from the percentage of companies that have reported through this point in time.
Economic Reports of Note (All Times EST):
Monday
8:30 am – US: Durable Goods
10:00 am – US: Atlanta Fed GDPNow
10:30 am – US: Dallas Fed Manufacturing Business Index
11:30 am – US: 3 & 6-month Bill Auctions
1:00 pm – US: 2 & 5-year Note Auctions
Tuesday
6:00 am – US: OPEC Meeting
8:15 am – US: ADP Employment Change
8:30 am – US: Retail & Wholesale Inventories
8:55 am – US: Redbook
9:00 am – US: House Price Index
10:00 am – US: Conference Board Consumer Confidence
10:00 am – US: Atlanta Fed GDPNow
10:00 am – US: Richmond Manufacturing & Services Index
10:30 am – US: Dallas Fed Services Revenues
1:00 pm – US: 7-year Note Auction
Wednesday
7:00 am – US: Mortgage Data
10:30 am – US: Crude Oil Inventories
1:00 pm – US: Fed Interest Rate Decision
1:30 pm – US: FOMC Press Conference
Thursday
5:00 am – EU: GDP
7:00 am – UK: Bank of England Interest Rate Decision
8:30 am – US: PCE
8:30 am – US: GDP
8:30 am – US: Personal Income & Spending
8:30 am – US: Weekly Jobless Claims10:00 am – US: Atlanta Fed GDPNow10:00 am – US: Dallas Fed PCE
11:30 am – US: 4 & 8-Week Bill Auctions
10:30 pm – JAP: Bank of Japan Interest Rate Decision
Friday
8:30 am – CAN: GDP
9:45 am – US: Chciago PMI
10:00 am – US: Michigan Consumer Sentiment & Inflation Expectations
