Stocks pulled back last week as a sharp selloff in semiconductor stocks overshadowed encouraging inflation data and a solid start to earnings season. For the Major Markets, the Nasdaq fell 2.9%, the S&P 500 lost 1.6%, and the Dow slipped 0.9%.

Semiconductor stocks remained under heavy pressure, with the PHLX Semiconductor Index dropping 10% as investors continued taking profits across AI-related names despite strong earnings from companies like Taiwan Semiconductor Manufacturing Company (TSMC) and ASML.

Technology fell 3.8%, weighing heavily on the broader market. This week, market participants will be watching the Magnificent Seven as they report their Q2 earnings results, waiting to see how the AI and semiconductor landscape continues to move forward.

Outside of tech, energy led the market as oil prices jumped about 9% amid escalating tensions between the U.S. and Iran. Financials, real estate, and consumer staples also outperformed as investors rotated into more defensive sectors.

That said Economic news was largely positive. Both CPI and PPI showed cooler inflation, retail sales remained resilient, and early bank earnings beat expectations. This is welcome information ahead of next week’s FOMC Meeting. As it stands presently, the CME Group’s FedWatch Tool shows the greatest probability that rates will remain unchanged next week for the July Meeting. However, the greater probability is that we might see an uptick in interest rates at the following meeting in September.