US Equities Close Lower Ahead of Q2 US Earnings on AI and Middle East Tensions

US Equities Close Lower Ahead of Q2 US Earnings on AI and Middle East Tensions

US equity markets closed lower on Friday as a renewed sell-off in chipmakers — triggered by a breakthrough from a Chinese AI startup — and ongoing geopolitical tensions in the Middle East weighed on sentiment. For the week, the Nasdaq 100 lost 4.13%, the S&P 500 finished 1.55% lower, and the Dow Jones lost 491 points or 0.93%.

A surprise breakthrough from Chinese AI startup Moonshot sent fresh ripples through markets, with the company claiming its new Kimi K3 model rivals top offerings from OpenAI and Anthropic. This has resulted in IG’s Anthropic Pre-IPO market (which measures the company’s implied market cap at the end of Day 1 of its debut) moving lower from $1.79 trillion to $1.66 trillion (-7.26%), while IG’s OpenAI Pre-IPO fell from $1.32 trillion to $1.25 trillion (-5.30%).

This came on top of already frayed tech sentiment following the sharp unwind in the Korean stock market. The KOSPI, which had gained around 120% in 2026 as investors chased exposure to memory chips, has fallen more than 30% from its mid-June high at last week’s lows. The more damaging hit to sentiment has come from the impact of leverage products in Korea, both at the index level (including the KORU 3x ETF, which fell over 70%) and in single-name stocks such as SK Hynix and Samsung Electronics.

Whether the pressure on tech stocks continues this week will likely depend to a large degree on Q2 earnings results from Tesla, Alphabet (Google), IBM, and ServiceNow. Away from earnings season, there will be a nervous eye on the Middle East, where last week’s rapid escalation resulted in a 14.52% gain in WTI — a move that has extended this morning, with crude oil hitting a high of $84.60, its highest level in more than five weeks, as the US launched a ninth consecutive night of strikes against Iran.

On the data front, the flash PMIs previewed below will be the main focus of investor interest.

US – S&P Global Composite PMI Flash: Friday, July 24 at 11.45pm AEST. 

The S&P Global US Composite PMI rose to 51.9 in June from 51.5 in May, marking the strongest expansion in business activity for several months. The services sector led the way with a modest acceleration (51.2 vs 50.7 prior), while manufacturing gained (53.9 vs 53.0 prior) supported by output and new orders, though employment trends remained softer.

Friday night’s July reading will offer an early snapshot of whether that momentum is holding as the third quarter begins. Consensus expects the composite to rise to 52.5, led by a rise in manufacturing to 54.5 while services are expected to rise to 51.5. An inline or stronger-than-expected outcome would reinforce the narrative of a still-solid US economy. Weaker figures, on the other hand, would help ease expectations of tighter monetary policy before year-end.

The US rates market starts the week pricing in just 3bp of hikes for the Fed’s meeting at month-end, with 29bp of tightening priced in by year-end, down from 44bp this time last week.

Chart – US Composite PMI

Nasdaq 100 Technical Analysis

From its late-March low of 22,841, the Nasdaq 100 launched a powerful 35% rally in just over nine weeks to reach a record high of 30,762 in early June. The move was very much in line with our bullish outlook, although it hit the 30,000 target some six months earlier than we had anticipated. 

In that context, the current pullback is hardly surprising and continues to evolve. Last Friday’s break below the early July low of 28,814 has opened the door for a test of the key 28,200–28,000 support zone, where we would look for signs of basing.

A successful hold in that support area would set up a retest and eventual break of the 30,762-record high, with scope to extend toward 32,000. Conversely, a sustained loss of support in the 28,200–28,000 zone would warn that a deeper pullback toward the 200-day moving average at 26,336 is underway.

Nasdaq 100 Cash Daily Chart 

Dow Jones Cash Technical Analysis

From its late-March low of 45,063, the Dow Jones staged an impressive 14.5% rally in just over nine weeks to reach a fresh record high of 51,665 in early June. After a brief pullback that found support at the psychologically important 50,000 level in mid-June, the index regained momentum and hit a new all-time high of 53,294 in early July.

Since then, a correction has developed. As long as the Dow holds above the key support band of 51,600–51,300 — which includes the early June highs and late June lows — the broader uptrend remains intact, keeping the door open for a push toward 54,000. That said, a decisive break below the 51,600–51,300 zone would signal that a deeper pullback toward the 50,000 level is underway.

Dow Jones Cash Daily Chart  

The figures stated are as of July 20th, 2026. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.