The hot summer weather has started to melt the bull thesis on stocks. Three moves in global markets have come to our attention that warrant monitoring:
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Chip stock slide: The Philadelphia Semiconductor Index (^SOX) has reached its lowest level in nearly a month. The index is now 15.95% below its mid-June highs, after just posting its best quarter ever in Q2.
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Bond market watch: The 30-year Treasury yield (^TNX) closed above 5% for the first time in nearly a month on Tuesday, at 5.06%.
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Overseas rout: South Korea’s Kospi (^KS11) index, the world’s best-performing market of this year, entered a bear market on Wednesday. That amounts to a 20% plunge from its peak of 9,386 as the tech-heavy index deals with valuation worries.
What’s behind the move: The stock market has come under renewed selling pressure at the start of July, driven by a volatile mix of sudden geopolitical escalation and growing skepticism about the tech sector’s massive artificial intelligence spending.
It really amounts to a one-two punch.
US–Iran tensions have intensified following new missile attacks on cargo vessels in the critical Strait of Hormuz shipping lane, which have caused crude oil prices to spike while reigniting fears of a fresh inflationary shock.
This geopolitical anxiety hit a market that was already highly sensitive to valuation risks. Despite Samsung Electronics (005930.KS) forecasting a historic 19-fold jump in operating profits this week, its blockbuster results actually triggered a wave of profit-taking across global semiconductor stocks, including Micron (MU) and SK Hynix (000660.KS).
Read more: How to protect your money during turmoil, stock market volatility
Rather than reassuring Wall Street, the stellar chip earnings have sparked worries that the AI data center build-out cycle may be peaking just as component supply bottlenecks ease, causing investors to aggressively derisk ahead of the broader second quarter earnings season.
“The lesson isn’t that Samsung is broken,” Slatestone Wealth chief strategist Kenny Polcari said. “It’s that expectations have become extraordinarily high. In a market priced to perfection, beating estimates is no longer enough — you have to continue to raise the bar and WOW them!”
The bottom line: Bigger moves in markets often start with smaller moves in key areas. Right now, the evidence is mounting that the broader market could contend with a short-term pullback, and it may only be saved by the expected strong earnings season set to begin soon.
Brian Sozzi is Yahoo Finance’s Executive Editor, host of the ‘Power Players With Brian Sozzi’ podcast and a member of Yahoo Finance’s editorial leadership team. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.
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