Welcome back. It's been a busy week on Wall Street, wrapping up with a twist — the Dow, S&P, and Nasdaq all posted gains at the end of the week on cooler inflation and strong bank earnings. But this morning futures are on the lower end as a global chip selloff sends things lower. Eric Criscuolo, market strategist at the New York Stock Exchange, joins us now. Eric, futures are waking up in the red this morning. Is this a chip sector hangover or a sign the rally is losing steam?
The chips are definitely weaker in the premarket right now. And they've been weaker for the past few sessions. They had an incredible rally — Micron and some of the memory chip names in particular have been on an absolute tear over the past couple of months. Seeing them come off those gains is not terribly surprising. What's also driving some concern is commentary from major companies like TSMC and ASML saying they're ramping up capacity to meet demand. Investors who've been through the semiconductor boom-bust cycles before know that when capacity ramps up to meet demand and then demand falls, the stocks can come down hard. The question now is whether AI changes that cyclicality and makes semiconductor demand more permanent and structural. We don't know yet. But with all the talk of capacity expansion, some investors are asking — are we approaching a cyclical high? That's contributing to the weakness today.
Bank earnings were another big story this week — broadly higher than expected. What does that tell you about the health of the broader economy?
The banks are essentially saying the economy looks good. They're not reporting any meaningful signs of stress — whether that's their Wall Street businesses, consumer lending, or credit metrics. Everything is pointing to a strong economy. Loans are up, credit performance is solid, and consumer spending remains resilient despite the inflation pressure consumers have been under. The CEOs and CFOs are saying everything looks good while staying cautious about what's around the corner. But they're not seeing cracks yet. So far, so good.
Cooler inflation data helped fuel this week's rally. Where does that leave the Fed on rates heading into the fall and winter?
A few days ago, before the CPI print, some Fed officials were signalling they could see a case for raising rates if it came in hot. Then the CPI came in cool. That has taken a potential hike largely off the table for now. But inflation is still relatively high — it's above target and only gradually coming down. And you have Kevin Warsh now in the chair, wanting to make significant changes to how the Fed looks at data, uses its tools, and communicates. I'm not sure the Fed will want to start moving rates while all of that is in flux. Ultimately it's a vote, and the committee will need to align. I think we're in steady state for a little while longer until those task forces report and Warsh sits down with the committee to chart the path forward.
If you're an investor putting new money to work heading into next week — chip wobble, solid bank earnings, steady Fed — what would you do?
I have to be clear — I don't make stock recommendations, please do your own due diligence. But if you look at the sectors and what's happening, it wouldn't be surprising if chip weakness continues for a little while. On the other hand, the hyperscalers — the mega-caps like Google and Amazon — have started to perk up as the semiconductor space has pulled back. That strength could continue, potentially retesting recent highs. Financials have held up well and have earnings tailwinds from a strong reporting season. And healthcare is an interesting one — it's lagged for several years, started to perk up, with biotech doing well while medical devices have not. If tech froth continues to ease, there could be a catch-up trade there. There are still tactically solid pockets for investors who are cautious on tech broadly.
Awesome. Eric, thanks for joining us. Always great to have your insights on what's moving the market.
Always happy to be here. Thank you.
