Stocks Slip Before the Open as Chipmakers Extend Slide, U.S. Retail Sales Data and Earnings on Tap

September S&P 500 E-Mini futures (ESU26) are down -0.17%, and September Nasdaq 100 E-Mini futures (NQU26) are down -0.59% this morning as chipmakers remained under pressure, with investors weighing whether earnings justify further gains in the AI trade.

Taiwan Semiconductor Manufacturing Co. (TSM), the world's largest contract chipmaker, reported its fifth consecutive quarter of record earnings and raised its full-year revenue growth forecast. However, that was not enough to spark fresh gains in chipmakers that have driven most of this year's stock market rally. Chip and AI infrastructure stocks were broadly lower in pre-market trading. U.S.-listed shares of TSMC fell nearly -4%.

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Meanwhile, the price of WTI crude was little changed on Thursday, steadying after three days of gains. The U.S. carried out a fifth consecutive day of strikes on Iran and targeted a sanctioned oil tanker near the country's main export terminal. The Wall Street Journal reported that U.S. President Trump is weighing an expansion of U.S. military operations in Iran, with options including intensified airstrikes and the deployment of ground forces to seize Iranian islands near the Strait of Hormuz.

Market participants are now awaiting a fresh batch of U.S. economic data, with particular attention on retail sales figures, remarks from Federal Reserve officials, and a new wave of corporate earnings reports.

In yesterday's trading session, Wall Street's three main equity benchmarks closed mixed. Most members of the Magnificent Seven stocks advanced, with Apple (AAPL) gaining over +4% and Alphabet (GOOGL) rising more than +3%. Also, PayPal Holdings (PYPL) jumped more than +17% and was the top percentage gainer on the S&P 500 and Nasdaq 100 following reports that payments startup Stripe and private equity firm Advent International jointly offered to buy the company for more than $53 billion. In addition, BlackRock (BLK) climbed over +6% after the company reported strong Q2 results and assets under management exceeding $15 trillion for the first time. On the bearish side, chip and AI infrastructure stocks sank, with Western Digital (WDC) slumping over -8% to lead losers in the Nasdaq 100 and Micron Technology (MU) sliding about -8%.

Economic data released on Wednesday showed that the U.S. producer price index for final demand fell -0.3% m/m and rose +5.5% y/y in June, weaker than expectations of no change m/m and +6.2% y/y. Also, the core PPI, which excludes volatile food and energy costs, rose +0.2% m/m and +4.7% y/y in June, weaker than expectations of +0.3% m/m and +5.2% y/y. In addition, the U.S. July Empire State manufacturing index rose to 15.6, stronger than expectations of 9.3.

"There's no near-term pressure on the Fed, but oil is in the driver's seat over the longer term. Energy saved the day in June, but that might become ancient history if the Strait of Hormuz doesn't open soon," said David Russell at TradeStation.

In Senate testimony on Wednesday, Fed Chairman Kevin Warsh reaffirmed his commitment to deliver price stability but also rejected the view that the AI boom would spur persistent inflation. "I don't view a one-time change in prices as necessarily being inflationary because I think there's a supply response. In that way, this is different from a foreign conflict and what it might do, which tends to reduce the supply side of the economy," he said.

New York Fed President John Williams said on Wednesday that "the current stance of monetary policy is well positioned" to bring inflation back to the central bank's 2% target. "Inflation is unquestionably too high. But there are encouraging reasons to expect that inflation has peaked and should edge down in coming quarters," Williams added. At the same time, Fed Governor Lisa Cook said the risk of persistent inflation now exceeds that of a weakening labor market, as the AI build-out and recent supply shocks fuel price pressures. "If we do not see signs of disinflation soon, I am prepared to act," Cook said.

Meanwhile, the Fed said on Wednesday in its Beige Book survey of regional business contacts that U.S. economic activity expanded at a slight to moderate pace in recent weeks as most regions reported little to no change in employment levels. The report noted that prices rose at a moderate pace overall. "Some contacts tied these cost increases to the conflict in the Middle East; others mentioned tariffs. Consumer prices continued to rise, and a few districts said contacts saw greater price sensitivity among their customers," according to the Beige Book.

U.S. rate futures have priced in an 89.8% chance of no rate change and a 10.2% chance of a 25 basis point rate hike at the conclusion of the Fed's July meeting.

In tariff news, U.S. Trade Representative Jamieson Greer said late on Wednesday that the U.S. intends to impose a 25% tariff on certain imports from Brazil under Section 301 of the Trade Act.

Second-quarter corporate earnings season is gathering pace, and investors look ahead to new reports today from high-profile companies such as UnitedHealth Group (UNH), GE Aerospace (GE), Netflix (NFLX), Abbott Laboratories (ABT), and Intuitive Surgical (ISRG). 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.

On the economic data front, investors will focus on U.S. Retail Sales data, set to be released in a couple of hours. Economists, on average, forecast that Retail Sales will show a +0.2% m/m increase in June. That compares with a +0.9% m/m jump a month earlier.