Stocks Set to Open Higher as Chipmakers Rebound, Corporate Earnings in Focus

September S&P 500 E-Mini futures (ESU26) are up +0.30%, and September Nasdaq 100 E-Mini futures (NQU26) are up +0.59% this morning, buoyed by a mild rebound in chip stocks at the start of an earnings-packed week.

Chip stocks advanced in pre-market trading as investors stepped in to buy the dip following a rout that pushed the high-profile group into a bear market. Micron Technology (MU) was up over +4%, Advanced Micro Devices (AMD) was up more than +2%, and Marvell Technology (MRVL) was up about +2%.

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Also aiding sentiment, the price of WTI crude erased earlier gains and fell on Monday after Iran said it was still pursuing a diplomatic solution and that it had received proposals from mediators. Oil prices initially jumped after the U.S. and Iran intensified hostilities, including attacks on vessels attempting to transit the Strait of Hormuz and a strike on an oil facility in Kuwait over the weekend.

Treasuries fell across the curve on Monday, with the benchmark 10-year yield rising two basis points to 4.57%. The risk of inflationary pressures stemming from the conflict nonetheless came into focus as U.S. gasoline prices climbed back above the $4-a-gallon mark.

In Friday's trading session, Wall Street's major equity averages closed lower. Most members of the Magnificent Seven slid, with Meta Platforms (META) and Alphabet (GOOGL) falling over -2%. Also, chip stocks sank after Chinese startup Moonshot unveiled its Kimi K3 AI model, with Applied Materials (AMAT) sliding over -5% and KLA Corp. (KLAC) dropping more than -3%. In addition, Intuitive Surgical (ISRG) tumbled over -14% and was the top percentage loser on the S&P 500 and Nasdaq 100 after the company left its full-year da Vinci procedure growth guidance unchanged, disappointing investors. On the bullish side, Travelers Cos. (TRV) climbed more than +9% and was the top percentage gainer on the S&P 500 and Dow after the property and casualty insurer posted better-than-expected Q2 net premiums written.

"As we enter earnings season, a market defined by modest selloffs and rapid recoveries suggests bulls remain in control, but they're waiting for an all-clear signal from earnings before pushing stocks to new highs," said Mark Hackett at Nationwide.

Economic data released on Friday were mixed for equities. The University of Michigan's preliminary U.S. consumer sentiment index rose to a 5-month high of 54.4 in July, stronger than expectations of 51.0. Also, U.S. industrial production rose +0.1% m/m in June, weaker than expectations of +0.2% m/m, while manufacturing production was unchanged m/m, weaker than expectations of +0.1% m/m. In addition, the U.S. import price index unexpectedly rose +0.3% m/m in June, stronger than expectations of -0.7% m/m. Finally, U.S. June housing starts jumped +19.0% m/m to 1.427 million, stronger than expectations of 1.310 million, while building permits, a proxy for future construction, fell -3.0% m/m to 1.367 million, weaker than expectations of 1.400 million.

Cleveland Fed President Beth Hammack said on Friday that persistently high inflation remains her bigger concern as consumer spending stays resilient and unemployment remains low. "There is no conflict in our mandate. Inflation is too high. The labor market is right around my level of maximum employment," Hammack said.

Meanwhile, U.S. rate futures have priced in an 85.6% chance of no rate change and a 14.4% chance of a 25 basis point rate hike at the July FOMC meeting.

Second-quarter corporate earnings season heats up this week, with Big Tech in the spotlight. Investors will closely watch earnings reports from Magnificent Seven stalwarts Alphabet (GOOGL) and Tesla (TSLA). Besides the Mag Seven heavyweights, major companies such as Intel (INTC), Texas Instruments (TXN), International Business Machines (IBM), GE Vernova (GEV), ServiceNow (NOW), Philip Morris International (PM), AT&T Inc. (T), T-Mobile US (TMUS), RTX Corporation (RTX), Lockheed Martin (LMT), Charles Schwab (SCHW), 3M Company (MMM), and American Express Company (AXP) are set to report quarterly results this week. According to Bloomberg Intelligence, companies in the S&P 500 are expected to post an average +24% jump in quarterly earnings for Q2 compared to the previous year.

The busy earnings calendar is balanced out by a relatively light economic data slate. Preliminary U.S. July purchasing managers' surveys for manufacturing and services will be the main highlight this week, offering a snapshot of how the economy has performed this month just as oil prices have surged again amid escalating tensions in the Middle East. Other noteworthy data releases include U.S. Initial Jobless Claims and New Home Sales.

U.S. central bankers are in a media blackout period before the July 28-29 policy meeting. During that period, policymakers do not speak publicly about the economic outlook or monetary policy.

Elsewhere, Advanced Micro Devices (AMD) will host a conference in San Francisco this week, where it is expected to unveil its latest AI chips. Some analysts believe new partnerships or customer wins could also be announced.

Today, investors will focus on the Conference Board's Leading Economic Index for the U.S., which is set to be released in a couple of hours. Economists project the June figure to drop -0.1% m/m, following a +0.1% m/m gain in May.