Wall Street Morning News: Both the Strait of Hormuz and the Red Sea heat up; the shadow of the long-end “bond vigilantes” returns; AI giants post impressive earnings, but “burning cash” scares the market away

Every Monday to Friday morning, focusing on macro, U.S. stocks, AI, precious metals, and crude oil—using data to review the market and using trends to seize opportunities, produced by PANews.

Overnight, the three major U.S. stock indexes all fell collectively, as risk assets shifted into defense amid “oil price shocks + a rebound in rate-hike expectations + disagreements in megacap tech earnings.” As of the close, the Dow Jones inched down 0.01%, the S&P 500 slipped 0.14%, and the Nasdaq Composite led the decline at 0.57%.

At first glance, the declines look mild, but traders’ sentiment has already changed. The market is currently most worried about two things: first, the Middle East situation is pushing up oil prices, which could cause inflation to rise again; second, although AI giants’ revenue performance is solid, their spending is moving too fast, and cash flow has started to come under pressure.

Holzhormuz and the Red Sea heat up at the same time—crude oil breaks a six-week high

Hardline rhetoric exchanged between the U.S. and Iran overnight became the direct trigger for the oil price jump. Trump said that if Iran fires at ships in the Strait of Hormuz, the U.S. would bomb Iran’s bridges or power plants, including facilities near or inside Tehran. Iran also responded forcefully, saying it would firmly safeguard Iran’s sovereignty in the Strait of Hormuz. If the U.S. carries out its threats, Iran could cut off oil flows in the Gulf region and hit critical infrastructure such as oil, natural gas, and power facilities.

Risk is not only in the Persian Gulf. Yemen’s Houthi forces announced that they used ballistic missiles, cruise missiles, and drones to attack two Saudi oil tankers, claiming they forced about 10 ships to turn back and head in reverse, pushing the Red Sea route back to the center of traders’ screens.

In intraday trading, Brent crude broke through $96 per barrel, and WTI crude rose to about $88, with both surpassing six-week highs. The rise in oil prices is not just a single geopolitical premium; it’s also driven by Hormuz, the Red Sea, and the approaching operational lower bounds for Cushing inventories, moving in sync with falling U.S. crude production. DOE data showed that U.S. Cushing inventories fell another 674k barrels last week, nearing the operational lower bound; U.S. crude production has pulled back from record highs, strategic petroleum reserve releases accelerated, further weakening the supply buffer.

Standard Chartered analysts pointed out that Middle East risk has evolved into a “dual choke points” problem, and during the period of sustained risk, transportation costs for crude oil are likely to rise. For macro traders, an oil price breakout is not only an energy story—it’s also a signal that inflation expectations are being repriced. The market once again raised the $4 per gallon gasoline threshold; once U.S. retail gasoline prices continue climbing, discretionary spending, dining out, convenience stores, and retail foot traffic among lower-income consumers will face pressure.

Rate-hike expectations flare back up—the shadow of “Bond Vigilantes” returns in the long end

The U.S. dollar is largely range-bound and failed to sustain one-way strength. Driven by inflation concerns sparked by the oil price rally, the U.S. Treasury market faced notably higher pressure. The yield on 2-year U.S. Treasuries rose to the highest level since February 2025, and the yield on 30-year U.S. Treasuries rose to about 5.14%, with both already staying above 5% for 13 straight trading days—marking the most eye-catching long-end pressure range in nearly two decades.

Higher long-term rates mean mortgage rates, corporate financing costs, and government borrowing costs will all increase. The market once again brought up “Bond Vigilantes”—investors express dissatisfaction by selling Treasuries, demanding higher interest to buy bonds.

Tony Rodriguez at Nuveen said that the U.S.’s debt and excessive fiscal deficit are an important reason long-term rates are hard to fall. Haverford Trust also warned that if Bond Vigilantes truly returns, both the bond market and the stock market will face tests.

Institutional forecasts show that uncertainty in the era of Fed Chair-elect Waush will become the new normal. With the absence of forward guidance, the probability of a 25bp rate hike at the July 29 meeting is about 30%. Economists broadly expect no action, but oil-price-driven inflation pressure is making the September rate-hike path almost fully priced in. Trump also warned that on September 30 the federal government could “shut down.” Fiscal risk and an energy shock are creating a reinforcing effect.

The House has already passed a short-term appropriations bill to extend government funding to December 4, but it still needs Senate review. If Congress cannot pass the bill in time, funding for most federal government agencies will expire at midnight on September 30.

Alphabet and Tesla cash flow turns negative—market worries about AI’s “burning money” mode

The tech giant earnings season is in full swing, and capital expenditure plus cash flow pressure has become the key narrative tension for the market. Alphabet and Tesla both beat revenue expectations but turned cash flow negative. After raising large capital expenditure guidance, their after-hours share prices plunged, and investors’ tolerance for an “AI accelerating cash burn” model is being consumed rapidly.

Overnight, U.S. stocks showed notable divergence: demand for AI infrastructure remains strong, but the market is becoming increasingly stringent about the profitability and cash-flow requirements of AI-related companies. Funds are clearly concentrating along hardware chains such as computing power, networking, storage, and power equipment. The Philadelphia Semiconductor Index edged up 0.44%, Nvidia rose 2.30%, and Broadcom gained 2.67%; meanwhile, application software weakened—iShares Expanded Tech-Software ETF fell 3.05%, and Palantir dropped 6.10%.

As AI giants keep ramping up capex, OpenAI raised its forecast for compute spending before 2030 to $750 billion and plans to invest $20 billion to build the “Camellia Project” data center. In addition, Microsoft and Mistral have reached multi-billion-dollar collaborations. Moreover, AI infrastructure financing is evolving into a “supercycle” spanning credit markets and private credit. Anthropic is pushing forward with a $35 billion infrastructure financing package tied to Broadcom. However, market liquidity pressure is rising as well: total stock sales in the U.S. stock market this year have already exceeded $300 billion, far above expectations.

Specific project moves and share price fluctuations:

• Google down 1.46%, down nearly 3% after hours: Alphabet’s Q2 revenue and earnings both beat expectations, and Google Cloud is strong—cloud orders backlog exceeds $514 billion. Still, the stock fell because the company raised full-year capital expenditure guidance to $195 billion to $205 billion, and for the first time reported negative free cash flow. Google isn’t failing to make money, but AI data centers are burning too much. Investors worry whether revenue growth can cover the increasingly large AI spending.

• Tesla down 1.30%, down 5% after hours: Despite a 26% surge in Q2 revenue, profit fell 18% far below expectations due to price cuts and promotions. Free cash flow turned negative for the first time in more than two years. Musk said the company is in a massive investment year for robots, autonomous driving, and AI infrastructure, and acknowledged that Optimus may be the product hardest to scale for mass production. In related sectors, Chinese EV names also faced pressure: Xpeng fell 3.60% and NIO fell 2.51%. Among large-cap tech, Apple fell 0.56%, Amazon dropped 1.09%, Meta slid 2.58%, and Microsoft fell 1.86%.

• AMD up 1.45%: AMD and Anthropic reached a strategic collaboration, planning to invest up to $5 billion and locking in orders for hundreds of billions of dollars of AI servers. Beginning in the first half of 2027, Anthropic will procure up to 2 gigawatts of AI servers equipped with AMD Instinct MI450 chips.

• Broadcom up 2.67%: Wall Street banks have started trading the initial portion of the $35 billion financing package for Broadcom and Anthropic’s AI infrastructure expansion, with private credit participation at one of the largest levels in recent years. As a core supplier of AI chips and network equipment, Broadcom continues to benefit from large-model companies expanding their data centers.

• Super Micro Computer SMCI jumps 19.84%: Super Micro Computer was one of last night’s strongest AI hardware stocks. The company expects gross margin in the fourth fiscal quarter at 15% to 17%, nearly double its prior guidance of 8.2% to 8.4%. New orders in the quarter exceeded $60 billion, a record high. Boosted by this, hardware and equipment stocks strengthened against the tide: Dell Technologies surged more than 9%, posting its biggest single-day gain in nearly two months.

• Micron Technology down 1.17%: While the stock closed lower, Bank of America is bullish on the long-term space for the HBM market, forecasting that by 2030 the HBM market will expand from the current roughly $35 billion to $246 billion—about a 7x increase—and it raised Micron’s price target to $1550. Related memory stocks diverged: Seagate rose 1.82%, Western Digital rose 1.51%, SanDisk rose 0.62%, and SK hynix fell 3.88%.

• IBM down 2.25%, briefly up about 5% after hours: IBM’s Q2 revenue came in below expectations and the company lowered its full-year revenue growth outlook. However, because it had issued a profit warning a week earlier (which had previously plunged more than 25%), the stock rebounded after hours as bad news had been priced in.

• ServiceNow down 6.47%: Q2 results showed revenue up 24% year over year and subscription revenue up 24.5% year over year, while the after-hours stock rose 5%. In addition, Texas Instruments’ Q2 results showed revenue above market expectations, and the CEO said growth was driven by industrial, data center, and automotive sectors.

• Palantir down 6.10%: Palantir was impacted by U.K. regulatory news. The U.K. statistics regulator asked NHS England to add qualifying language when describing the effectiveness of Palantir software, acknowledging that existing data cannot prove the software is effective.

• SpaceX down 6.70%: SpaceX set another record low since listing. The company will release its Q2 earnings after the close on August 4, and then will trigger the release/vesting of the first batch of insider and employee share holdings, involving up to 911.5 million shares. The market worries about selling pressure from the unlock. S3 Partners estimates that currently about 206 million shares of SpaceX are being shorted, representing about 32% of publicly tradable shares, and the short position is about $25 billion. The company is also preparing to launch Starship as early as July 23 local time, but weather remains a key uncertainty.

• Intel down 2.68%: Intel will carry out another round of layoffs for its data center business. The company said this is to simplify operations and improve efficiency. Over the past four years, Intel’s headcount has been reduced by nearly 40%. The market is watching whether its after-hours earnings can prove the transformation is on track.

Next to watch:

July 23 20:15: ECB interest rate decision and Lagarde press conference

• Market expects the ECB to hold steady, but if Lagarde’s remarks on inflation, liquidity withdrawal, or growth risks for the euro zone are more hawkish, the euro and global bond markets may see volatility, indirectly affecting the U.S. dollar index and U.S. stock valuations.

July 23 20:30: U.S. initial jobless claims for the week

• Market expects about 214k. If the data comes in clearly below expectations, it would indicate the labor market remains tight and the Fed would find it harder to shift toward easing—bearish for Treasuries and overvalued tech; if initial claims rise, it would reinforce a growth-slowdown trade—bullish for Treasuries and weighing on banks, energy, and cyclicals.

July 24 00:30: AMD Advancing AI conference, with CEO Lisa Su delivering a keynote

• The market will focus on details of MI450, Helios rack-level solutions, the timing of Anthropic orders, and the AI server ecosystem. If AMD can strengthen order visibility around before 2027, the second-tier AI chip makers could receive a reassessment.

July 24 05:00: Intel Q2 earnings call

• Investors will watch the scale of layoffs, the data center business, gross margin repair, and discipline around capital expenditures. Any updates on AI accelerators, advanced process technologies, or foundry customers could affect rotation within the semiconductor sector.