A Rising Bar

Per the note below, tech stocks (with the exception of Microsoft, which we recently added to) are getting hammered today despite some remarkable, nearly breathtaking, good news from the world's largest memory-chip maker overnight.

Stocks falling on good news is, let's say, not a good sign... That said, chip stocks, that one in particular, have gone so far, so fast, that the proverbial "buy-the-rumor-sell-the-news" event was for certain priced into the cards.

The "healthy" news is that some rotation continues... I.e., while the global tech sector gets hammered, our healthcare, staples and communication exposures are up solidly, financials are up marginally.

The other issue rocking global markets today is the resumption of kinetic action in the Strait of Hormuz (details below) which is adding to the pain in virtually all things, save for the positives mentioned above.

Here's your morning macro rundown*:

Morning Note: Rotation, the Strait, and a Higher Bar — July 7, 2026*

This morning's tape tells two stories at once, and both are worth a few minutes of your time.

Story one: the market is broadening out. The Dow closed above 53,000 for the first time yesterday and touched fresh records again this morning, even as the tech-heavy Nasdaq pulled back more than 1% (down over 2% this morning). Under the surface, money continues to rotate out of the artificial intelligence and semiconductor names that dominated the first half of the year and into healthcare, financials, consumer staples, energy infrastructure and communication services — areas that had been left behind while the AI trade ran.

The proximate trigger this time: the world's largest memory-chip maker reported quarterly results overnight that were, by any historical standard, spectacular — profits up nearly twenty-fold from a year ago. The stock fell hard anyway. When "spectacular" isn't good enough, that tells you less about the company and more about what the market had already priced in. The chip sector just finished its best quarter on record; expectations have a way of catching up with prices. We'd frame the recent chip volatility not as a warning about the economy, but as a healthy reminder of why we don't concentrate portfolios in whatever has worked most recently.

That framing matters heading into second-quarter earnings season, which kicks off in earnest next week. Results will likely be strong in absolute terms — but the bar is markedly higher than it was three months ago, with the S&P 500 sitting roughly a thousand points above where it entered the last reporting season. Strong-but-not-strong-enough is a real risk for the market's most crowded names. It's also, historically, the kind of environment where diversification quietly earns its keep — and where active managers and the average stock, not just the biggest handful, get a chance to shine. June's improvement in market breadth was a welcome development on that front.

Story two: the Middle East is back on the front page — and this time it's the kind of headline we actually pay attention to. Overnight, a commercial tanker was struck by a projectile near the Strait of Hormuz, and reports indicate attacks on shipping in the strait have resumed. Oil rose about 1% on the news — its biggest gain in over a week — after having drifted all the way back to pre-conflict levels on ceasefire optimism.

Longtime clients know our discipline here: we distinguish between diplomatic headlines and physical flows. Peace-talk optimism and saber-rattling both come and go; what matters for the global economy is whether oil and gas actually move through that strait, through which roughly a fifth of the world's oil transits. An actual strike on shipping is a physical-flow event, not a headline event, and it's why we treat the recent calm in energy prices as provisional rather than permanent.

The thread connecting both stories runs through interest rates. The 10-year Treasury yield ticked up to 4.50% this morning, a two-week high, as firmer oil rekindled inflation concerns. Meanwhile, last week's June jobs report came in decidedly soft — 57,000 jobs added versus expectations of 115,000, with downward revisions to prior months. So the bond market finds itself pulled in two directions: a cooling labor market argues the Fed can stay put, while energy-driven inflation risk argues it may yet need to tighten. Markets currently handicap a September rate hike at roughly a coin flip, and tomorrow's release of the minutes from the Fed's June meeting will be parsed closely for clues. Notably, long-term yields keep grinding higher even as short-term yields ease — a pattern consistent with our view that investors are demanding more compensation for holding long-term government debt in a world of large deficits and sticky inflation.

Gold, for its part, continues to hover near around $4,175 — behaving, as it has all year, less like a crisis hedge and more like a barometer of real (inflation-adjusted) interest rates and the fiscal backdrop.

Where our own dashboard stands: our internal conditions gauge for last week's scoring landed at exactly zero — neutral — snapping a multi-week run of improvement, with the soft jobs number the dominant input. Neutral is not bearish; it's the data telling us the economy is neither accelerating nor rolling over, which is consistent with our base case of sticky-but-not-spiraling inflation alongside slowing-but-not-stalling growth. In that world, we believe the right posture is the one we've maintained: globally diversified, deliberately balanced across exposures that don't all move together, with dry powder on hand for the opportunities that volatility — and this earnings season may supply some — tends to serve up.

This material is provided for informational purposes only and does not constitute investment advice or a recommendation or solicitation to buy or sell any security. Past performance is no guarantee of future results.

*Prepared by Marty Mazorra, Chief Investment Officer, Private Wealth Advisors. Research synthesis and drafting assisted by AI tools under advisor review.