Alphabet lifts S&P 500 and Nasdaq to new highs

General market commentary

Equity markets had a quiet start to the week on Monday, with mixed results across major indexes. The S&P 500 and Nasdaq ended modestly higher, both notching fresh record closes, while the Dow Jones slipped slightly. Early gains faded as investors turned cautious ahead of a busy week of corporate earnings. Alphabet shares rose more than 2.5% ahead of its results due Wednesday, helping lift the broader technology sector. Tesla also reports that day, marking the beginning of earnings season for the so-called "Magnificent Seven." European equities posted mixed performances as ongoing tariff uncertainty continues to weigh. In the bond market, yields moved lower following softer-than-expected inflation data in June, with the 10-year Treasury yield falling to around 4.38 percent. With inflation in check and the Federal Reserve still in wait and see mode, markets continue to price in a potential rate cut by year end. Investors are now focused on Fed Chair Jerome Powell’s upcoming speech on Tuesday for further clues.

Second quarter earnings season is off to a strong start, with 86 percent of S&P 500 companies that have reported so far beating expectations. Financials have led the upside, benefiting from strong trading revenues and improved capital markets activity. While earnings growth forecasts had been revised lower in recent months, early results suggest full year growth could reach the mid to high single digits. Tariff concerns remain, but so far have not had a material impact on inflation or consumer demand. Cost absorption, stockpiling, and lower energy prices have helped offset pressures, while recent signs of progress in trade policy may support longer term stability and earnings momentum.

Latest market and economic update

Asian equities traded in a narrow range on Tuesday amid caution over impending US trade tariffs and key earnings. Japanese shares swung after PM Ishiba's coalition lost its upper house majority. Broader markets, including China, Hong Kong, and South Korea, edged lower, while Australia and India were flat. Investor focus remained on trade risks and corporate results.

US equity futures were steady overnight after a choppy start to the week. The S&P 500 and Nasdaq hit record highs on Monday, boosted by tech gains, before easing. Focus now shifts to earnings from Philip Morris, Coca-Cola, and Lockheed Martin, alongside a key speech from Fed Chair Jerome Powell for rate policy signals.

European equities opened the week cautiously, with the STOXX 50 and STOXX 600 little changed as trade tensions with the US persisted. Stellantis slumped 1.7% on a projected €2.3 billion H1 loss, dragging the auto sector lower. In contrast, BP gained 0.6% on leadership news, while Ryanair jumped over 5% on strong quarterly earnings.

The US dollar index held below 98 on Tuesday after two days of declines, as traders awaited clarity on trade talks ahead of the 1 August deadline. Comments from Treasury Secretary Bessent suggested possible deadline flexibility. Meanwhile, EUR/USD hovered around 1.1690, supported by dollar softness and investor caution ahead of Jerome Powell’s rate policy remarks.

Oil prices dipped in Asian trade as European sanctions on Russia showed little impact on global supply, while rising US-EU trade tensions weighed on sentiment. Brent and WTI fell 0.5%, despite a weaker dollar. Analysts warn high tariffs could hurt economic activity and crude demand, with EU-Russia sanctions unlikely to significantly curb Moscow’s oil exports.

Equities on the move

The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news:

Ryanair’s net profit more than doubled to €820 million in Q1, boosted by higher last-minute fares and Easter timing. Bookings remain strong, unlike rivals reporting later trends. The airline expects to recover most fare declines in Q2 and foresees reasonable net profit growth for the year, while hoping for a Boeing tariff exemption.

Verizon raised its annual profit forecast after strong demand for premium plans and benefits from U.S. tax reforms. Shares rose 4% following better-than-expected Q2 sales and profit, despite a surprise loss of 9,000 wireless subscribers. Growth was supported by broadband additions and fibre-optic investments, including a $20 billion Frontier acquisition approval.

Domino’s Pizza beat Q2 U.S. same-store sales expectations with a 3.4% rise, boosted by new menu items and promotions amid economic uncertainty. Online and third-party delivery sales grew, aided by DoorDash. International sales also surpassed estimates. However, ingredient price hikes cut gross margins by 2% for U.S. company-owned stores.

Stellantis reported a €2.3 billion net loss in H1 2025, impacted by US tariffs costing €300 million so far, expected to double in H2. The automaker faces challenges from tariff-related production cuts and restructuring costs, including cancelled projects. CEO Antonio Filosa promised gradual improvement despite a tough first half and rising external pressures.

OpenAI and SoftBank’s ambitious $500 billion AI infrastructure plan, Project Stargate, has stalled, with no data centre deals finalised, according to the Wall Street Journal. Disagreements over key terms have led to a scaled-back goal of one small facility in Ohio by end-2025. SoftBank had earlier pledged $30 billion, becoming OpenAI’s biggest backer alongside Microsoft.

US Treasury Secretary Scott Bessent called for major reforms to the financial regulatory system, criticising Biden-era dual capital requirements as flawed and burdensome. He urged regulators to reduce capital demands hindering lending and growth, proposing relief for smaller banks. Bessent pledged stronger Treasury leadership to drive consensus and modernise rules safely.

Activist investor Elliott Investment Management has increased its stake in data centre operator Equinix following a sharp equity sell-off after a surprise capital expenditure announcement. Equinix shares rose 1.5% to $789.19. Elliott, known for profitable tech bets, is in talks with the company amid growing demand for data centres driven by AI adoption.

Elliott Investment Management, a major BP shareholder, urged the company’s new chairman Albert Manifold to urgently address BP’s ongoing operational issues. The activist investor highlighted the need for decisive leadership amid BP’s recent cuts to renewables spending and a falling share price, which have sparked takeover and break-up speculation.

Truist Securities downgraded Royal Caribbean to Hold from Buy, citing softening cruise bookings and record-high equity valuation. Despite raising its price target to $337, Truist noted bookings remain only modestly improved and valuations peak. Shares have doubled recently, but limited upside in 2026 earnings means the Buy rating is no longer justified.

Benchmark initiated coverage on General Motors with a Buy rating and $65 target, citing strong free cash flow, disciplined capital allocation, and measured EV growth. GM’s $24 billion cash and focus on US projects bolster financial strength. Despite tariff risks, Benchmark highlights GM’s strategic positioning and operational efficiency as undervalued with significant upside potential.

Morgan Stanley upgraded Pinterest to Overweight, citing improved macro conditions and lower China tariffs. Amazon remains the top pick, driven by AWS growth, with a $300 price target. Alphabet is preferred over Meta due to valuation and AI monetisation, while overall data centre spending among major tech firms is forecast to rise sharply.

Upcoming data and events

Today’s agenda includes earnings reports from Coca-Cola, Philip Morris, and Raytheon Technologies, providing some insight into consumer and defence sectors. Investors will also watch Federal Reserve Chair Jerome Powell’s speech for any hints on monetary policy, making it an important day for market developments.

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