This was a week where a few storylines finally caught up with each other. June’s inflation data confirmed what we already suspected — prices are cooling, but largely because oil got cheaper last month, not because underlying pressures have gone away. Fed Chair Kevin Warsh used his first congressional testimony to make clear he’s in no rush to telegraph his next steps – the Treasury curve shuffled modestly in response. And just as the disinflation narrative was taking a bow, oil prices turned sharply higher on renewed Middle East tension — a reminder that the same commodity doing the market’s disinflation work can just as easily reverse it. Layer in a chip-led stock market wobble and a stacked earnings calendar next week, and there’s plenty to watch heading into the back half of July.
Inflation: Old News, But Watch the Driver
June CPI and PPI both came in on the softer side, extending the moderation trend we’ve been tracking for months — at this point, not exactly a headline-grabber. What’s worth noting is where the relief is coming from. WTI crude fell roughly 20% during June, and that decline flowed straight through to gasoline and energy prices, doing most of the heavy lifting on the headline number. Core inflation, stripped of energy, was stickier, with services costs still creeping higher. In short: this isn’t broad-based disinflation so much as an energy-price effect — which matters given what oil did later in the week (more below).
The Stock Market: Chips Wobble, Mega-Caps Up Next
The S&P 500 Index slipped to about 7,494 on Friday, down roughly 0.6% on the day, as a semiconductor selloff gathered steam. Chipmakers had their worst week since the April 2025 tariff-driven selloff, with investors growing skeptical that AI infrastructure spending can keep growing at its current pace.
That said, the broader earnings tape still looks healthy — of the S&P 500 companies that have reported so far, about 95% have beaten on earnings, and blended Q2 growth is tracking near 24.7%, up from last week’s pace. However, we are just getting started on the Q2 earnings reports. In the chart below, you can see that over the last several weeks we have been trading in a choppy range which continued this week. Will earnings reports create a breakout to the upside?
Next week raises the stakes considerably. Tesla and Alphabet both report Tuesday, July 22, after the close, followed by Intel on Wednesday, July 23. These reports — particularly Alphabet’s cloud numbers and any commentary on AI capital spending — will go a long way toward settling the debate the chip sector opened this week: is AI spending still accelerating, or are we due for a pause?
The Fed and the Yield Curve
Fed Chair Kevin Warsh delivered his first semiannual Monetary Policy Report testimony to Congress this week, and the tone was firmly hawkish — he was direct in saying prices remain too high for comfort and laid out plans for a set of task forces to review the factors shaping policy. Markets took it in stride rather than panicking, but it reinforces that a summer rate cut isn’t the base case.
The Treasury curve was fairly quiet on the week. The 10-year finished near 4.55%, essentially flat, while the 2-year eased a few basis points to about 4.18%, leaving the 2s/10s spread a touch wider than last week. Nothing dramatic — a curve digesting a hawkish Fed message rather than reacting to it.
Oil: This Week’s Wildcard
Brent crude jumped roughly 2% on Friday to near $86 per barrel, while WTI traded around $78, as U.S. strikes on Iran-linked targets raised the risk of a broader Middle East disruption. Brent, the global benchmark, is the one most exposed to this geopolitical premium, while WTI reflects a domestic market still digesting last month’s steep decline. The same commodity that drove June’s inflation relief is now moving the other direction.
Putting It Together
The thread connecting this week is oil, cutting both ways. June’s decline in crude did the market’s disinflation work for it, but that data is already a bit stale given oil’s sharp reversal on Middle East risk. Combine that with Chair Warsh’s hawkish debut, and there’s little reason for the Fed to move quickly regardless of how the next couple of inflation prints land. Meanwhile, equities are being asked to prove the AI-spending story still holds after a rough week for chips — and next week’s Tesla, Alphabet, and Intel reports will be an important test. I’ll be watching all three threads — oil, the Fed, and mega-cap earnings — closely into next week.
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President, Kisco Capital
This commentary is provided by Kisco Capital LLC for informational purposes only and does not constitute investment advice or a recommendation to buy or sell any security. Opinions are subject to change without notice. Past performance is not indicative of future results. All investments involve risk, including possible loss of principal. Kisco Capital and its clients may hold positions in securities discussed herein.
