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U.S. forces on Monday conducted a ninth consecutive day of offensive and retaliatory airstrikes inside Iran. Military sites and communications networks as well as infrastructure that supports military operations were targeted. Iranian forces continue, despite these operations, to attack civilian vessels in the Strait of Hormuz as well as U.S. military bases in Kuwait, Jordan, Bahrain and Iraq. The Iranian military is now also issuing direct threats to resume its attacks against civilian infrastructure areas such as airports and seaports in the U.A.E. Ports in the U.A.E. to include Fujairah and Jebel Ali are critical to the global trade of crude oil.

Energy prices have unfortunately moved sharply higher in response to the intensification of hostilities in the region. Front month WTI crude oil futures rose to above $85 a barrel late last week. I now see those futures trading with an $82 handle. Oil prices eased after Iran leadership announced that mediators, probably Qatari and Pakistani, had reached out. Tehran has announced that the nation’s interior minister, Eskandar Momeni, will travel to Pakistan later today. Over the weekend, US gasoline prices, on average, climbed back above the $4 per gallon level, which is potentially as psychologically damaging as it actually is on the economy itself.

Rial Falls

The Iranian currency, the rial, has dropped into a record low of around 1.95M to the U.S. dollar on Sunday, which is a 10% drop just since mid-July. This is a direct result of the U.S. naval blockade and puts further pressure on an already crippled Iranian economy. While Iranian officials claim that grocery stores remain well-stocked despite the run-away inflation, we know that at least two million Iranians (what the government admitted) lost their jobs in April, which is the most recent month we have any data for.

Iranians have also been asked by the government to curb their use of air conditioners. That inflation compounded with the deterioration of the standard of living inside Iran could be why that side is so willing to meet with mediators in Pakistan on Monday. We can only hope that they are desperate enough to put an end to their aggression. The problem has been, though, that even when there does seem to be some kind of effort, on behalf of the civilian government in Iran to reach a diplomatic settlement, the Iranian military appears to disagree.

Sonnet 16

But wherefore do not you a mightier way
Make war upon this bloody tyrant Time?
And fortify your self in your decay
With means more blessed than my barren rhyme?
Now stand you on the top of happy hours,
And many maiden gardens yet unset,
With virtuous wish would bear you living flowers,
Much liker than your painted counterfeit:
So should the lines of life that life repair
Which this (Time’s pencil) or my pupil pen
Neither in inward worth nor outward fair
Can make you live your self in eyes of men.
To give away your self, keeps your self still,
And you must live drawn by your own sweet skill.

– William Shakespeare (1609)

The Week That Was…

The S&P 500 posted a second losing week in four last week and has posted three losing weeks in the past seven. Ahead of that, the S&P 500 had out together a nine-week winning streak. The Nasdaq Composite has posted three losing weeks in seven and four losing weeks in ten. This is how the past week went…

• The S&P 500 lost 1.01% on Friday and 1.55% for the week.
• The Nasdaq Composite gave up 1.4% on Friday and 2.9% for the week.
• The Nasdaq 100 surrendered 1.49% on Friday and 4.13% for the week.
• The Russell 2000 lost 0.42% on Friday and 0.52% on the week.
• The S&P Small Cap 600 gave back 0.71% on Friday but gained 0.38% for the week.
• The S&P Midcap 400 lost 0.56% on Friday and just 0.13% for the week.
• The Dow Transports gave up 0.45% on Friday but added 2.46% for the week.
• The Philly Semis closed down 1.53% on Friday and a horrific 9.97% for the week.
• The KBW Bank Index surrendered 1.49% on Friday but gained 0.89% for the week. On Friday, ten of the eleven S&P sector SPDR ETFs closed out the session in the red. Overall, the defensive sectors outperformed for the day, but energy (XLE) was the lone winner. Growth stocks lagged badly

For the week, just five of the 11 S&P sector SPDR ETFs finished in the green. Again, defensive sectors did best overall, while energy led outright. Technology (XLK) suffered a severe beat-down with the semiconductors leading the sector lower. Within that group, SanDisk (SNDK) gave up a stunning 29.3% for the period while Marvell Technology (MRVL) and Arm Holdings (ARM) lost 20% and 17.4% respectively.

Week Ahead

After an extremely volatile five-day period last week that saw the war in the Middle East intensify and crude oil prices rise sharply, traders and investors approach the coming five-day period with their heads on a swivel.

The Geopolitical: The situation in and around Iran has only deteriorated over the weekend with the combat loss of U.S. troops in both Jordan and Iraq. U.S. forces have now pounded specific targets inside of Iran for nine consecutive days. The intent has been to degrade Iran’s ability to attack civilian merchant vessels traversing the Strait of Hormuz and to degrade Iran’s ability to attack U.S. forces stationed in neighboring countries. More U.S. forces are headed to the region as to this point, the Iranian military has stubbornly retained more offensive capability than might have been expected.

Macro: This will be a very light week for our domestic macroeconomic calendar. Later this morning, the Conference Board will release its June edition of the Leading Indicators Index. Then there will be very little released until Friday outside the weekly data that we regularly see. On Friday, S&P Global will post their July Flash manufacturing and service sector PMIs for the US. The Census Bureau will also publish its report on New Home Sales for the month of June.

The Federal Reserve: The Fed has gone into its media blackout period ahead of the July 29th FOMC policy decision, so we will not hear from that crew this week. However, market participants should be cognizant of the fact that the European Central Bank will hold a policy meeting and subsequent press conference this Thursday morning.

Earnings: Second-quarter earnings season will start to heat up this week. This morning, we’ll hear from Domino’s Pizza (DPZ). On Tuesday morning, General Motors (GM) and Northrop Grumman (NOC) will go to the tape with their results. Attention will then turn to Wednesday afternoon when Alphabet (GOOGL), IBM (IBM), ServiceNow (NOW) and Tesla (TSLA) all lineup to tell their tales. Thursday brings results from Honeywell (HON), Lockheed Martin (LMT), RTX (RTX), Union Pacific (UNP) and United Rentals (URI). Friday will close out the earnings week with American Express (AXP) and SLB (SLB).

Events: There are a few non-earnings corporate events to keep an eye out for this week. The biennial Farnborough Air Show will be held in the U.K. this week. This aerospace and defense show often produces large orders for the industry. This could be a big week for Boeing (BA), Embraer (EMBJ) and Airbus (EADSF) as well as a number of defense contractors.

This Wednesday and Thursday, Advanced Micro Devices (AMD) will hold its “Advancing AI” event in San Francisco, California. CEO Lisa Su will deliver her keynote address on Thursday. In addition, Constellation Brands (STZ) will hold that firm’s annual meeting on Wednesday.

Finally, on Thursday, the San Diego Comic-Con will kick off a four-day event. Apple (AAPL), Disney (DIS) and Warner Bros Discovery (WBD) will be among the publicly traded companies showcasing the content and upcoming shows or products.

The Chart

Readers will see that last week, the Nasdaq Composite lost the moving averages that it had regained the week prior. The sell-off on Friday, allowed the index to break below the lower trendline of the Pennant formation that I drew up for you last week. Does the loss of that line and the loss of those averages mean increased pain for the “long and wrong” crowd? It could.

I don’t mean to be “wishy-washy” but this is an art form and not an exact science. As much as the market could be breaking down due to the increased intensity of the war in Iran, the low on Friday was still higher than the low on June 26. What that does, in essence, is increase the size and scope of said pennant. Meaning, that potentially, should the market rally on Monday, the closure of that pattern may have been pushed out to a later date chronologically. Key to note also, that while my favorite indicators, the Relative Strength Index and daily moving average convergence divergence have both taken negative turns… neither enters this week in awful shape.

Earnings

As of July 17, according to FactSet, for the second quarter, Wall Street now sees blended (results and expectations) year-over-year earnings growth for the S&P 500 of 24.7%, up sharply from 23.6% last week. Wall Street also sees revenue growth of 12.8%, up significantly from 12.3% one week ago. With 10% of S&P 500 companies having already reported for the season, 88% have beaten earnings expectations, while 85% have beaten revenue expectations.

For the full year of 2026, Wall Street now looks for earnings growth of 24.5%, up from 24.2% last week, and up from 14.7% more than two months ago. This would come on revenue growth of 10.9%, up from 10.7% last week and up from 7.7% almost three months ago. The outlook for the third quarter is also very positive. Third quarter S&P 500 earnings growth is now estimated at 27% year over year, up from 26.6% last week.

At the moment, the energy and technology sectors are projected to have grown Q2 earnings by an absolutely jaw-dropping 124.8% and 63.4% respectively. Just one sector, health care (at an ugly -18.2%) is currently projected to have suffered a Q2 earnings contraction.

Valuation

Still using data provided by FactSet, the S&P 500 ended last week trading at 20.3 times twelve months’ forward-looking earnings, down from 20.5 times last week and down from 21.6 times a rough three months ago. This is still well above the five-year average of 19.9 times for the index as well as being well above its ten-year average of 19 times.

The S&P 500 also ended last week trading at 27.6 times trailing twelve months’ earnings, down from 28 times just one week ago, and also above levels that the index reached more than two months back. This also stands well above the five-year (24.5 times) and ten-year (23.5 times) averages for the index.

Only four of the eleven sectors are now trading below their five-year average valuations, down from six sectors one week ago. Seven sectors, led by the Industrials (25.5 times) are trading at a premium to their five-year average valuation.

Fed Funds Futures

Fed Funds futures trading in Chicago are currently pricing in an 86% probability (up from 74% a week ago) for no change to be made to the current target range (3.5% to 3.75) for the Fed Funds Rate at the culmination of the next FOMC policy meeting next week on July 29. There is no visible chance for a rate cut at the moment, but there is now just a 14% likelihood being priced in for a rate hike being factored for.

There are no rate cuts fully priced in at any point in the future looking out towards year’s end 2027. though there is now a minority probability being price in as early as June of 2027. There is still a rate hike priced in for September 16th of this year, but that likelihood is now much lower than it had been (53% probability, down from 73%). That probability rises to 80% if given the rest of the calendar year 2026.

Economics (All Times Eastern)

10:00 – CB Leading Indicators (June): Expecting 0.0% m/m, Last 0.1% m/m.

The Fed (All Times Eastern)

Fed Blackout Period.

Today’s Earnings Highlights (Consensus EPS Expectations)

Before the Open: DPZ (4.17)
After the Close: CCK (2.16)

At the time of publication, Guilfoyle was long SNDK, IBM, LMT, RTX equity.