All It Takes Is a Headline

Stocks were meandering around the unchanged line for most of the morning.  Then, just as I was finishing a meeting and getting ready to type out this piece, I noticed that major indices surged a bit higher as oil futures dipped.  It didn’t take long to figure out why – at 11:17, Reuters reported, “Pakistan, Iran explore path towards new talks with US in a China-initiated push, sources say.”  That was enough to improve the market’s mood, at least for the time it took me to write this.

Crude was already off yesterday’s levels when most US traders turned on their screens.  There was little to spur another leg higher, so there was some natural profit-taking among oil traders ahead of the weekend.  Yields had dipped slightly as well, since there is now a very tight relationship between WTI futures (CL) and the 10-year Treasury yield, as shown below:

Month-to-Date July 2026, Front Month WTI Futures (white bars, right scale), 10-Year Treasury Yield (magenta line, left scale)

Source: Bloomberg

Thus, when crude dipped today, it was understandable to see yields also dip by a couple of basis points.  Stocks, at least as measured by the S&P 500 (SPX), have not been inversely correlated, as one might expect – that is, at least not until yesterday and today:

Month-to-Date July 2026, Front Month WTI Futures (white bars, near right scale), 10-Year Treasury Yield (magenta line, left scale), Front Month ES Futures (orange line, far right scale)

Source: Bloomberg

As we have discussed several times recently, rather than closely tracking the input prices emanating from the conflict in the Persian Gulf, stocks had tended to spend much of the past couple of months ratcheting higher whenever there was a piece of even mildly credible news about the prospects for a lasting ceasefire, while generally ignoring the “inconvenient” news about a ceasefire agreement that backslid into open hostilities.

3-Months, Front Month WTI Futures (white bars, near right scale), 10-Year Treasury Yield (magenta line, left scale), Front Month ES Futures (orange line, far right scale)

Source: Bloomberg

Thus, all it took for a lackluster market to lurch into solidly positive territory was a hopeful article from a credible news source. 

To be fair, most SPX sectors were higher even before the Reuters story, with only technology as a notable laggard.  Shortly after noon, all were higher, though the Nasdaq 100 (NDX) had not yet returned to the green.  Semiconductors were a notable laggard, with SOX down by more than 1.5%.  One key component, Intel (INTC), was down by nearly 5% even after a positive earnings report that had pushed the stock up by more than 10% after yesterday’s close. 

This is becoming an all-too-familiar pattern for high-flying semis, where a good report is greeted with a yawn – or worse.  It started after Nvidia’s (NVDA) last earnings report about two months ago, when the stock sank by 1.8% despite a solid beat and guidance.  One month ago, Micron Technology (MU) zoomed up by 15% after its own excellent report, but after the stock made a $1,254 high, the shares remain far below that level (though they have bounced off July 16^th’s $804 low).  On July 13, Samsung Electronics (005930) fell more than 10% after positive profit commentary.  INTC falls into that unfortunate pattern of high-flyers failing to leap over a hurdle of raised expectations.

After yesterday’s sharp selloff, triggered by the seemingly sudden recognition that the situation in the Gulf was pushing oil prices and yields to uncomfortable levels, along with concerns about Alphabet’s (GOOG, GOOGL) increasing AI-related spending, it is neither surprising nor concerning to see a bit of bargain hunting today.  We’ll see if the tentatively positive sentiment is overtaken by traders’ concerns about going home with long positions over the weekend.