The most crowded macro morning of the year arrived Tuesday and broke dovish. June CPI fell 0.4% on the month, the largest one-month decline since April 2020, taking the annual rate to 3.5% from 4.2%; core prices were flat for the month at 2.6% annual, energy fell 5.7%, and gasoline dropped 9.7%. Treasury yields fell sharply and September hike odds slid to 63% from better than 75%. The same open, five major banks reported: JPMorgan earned $6.14 a share against $5.85 expected on $58.0 billion in revenue, one of its largest beats on record, while Goldman grew revenue 39% to $20.3 billion with equities trading up 86% and investment banking fees at their best level since 2021. Kevin Warsh delivered his first congressional testimony as chair the same morning, and industrywide M&A rose 72% in the first half. Wednesday Morgan Stanley followed. Thursday UnitedHealth beat at $6.38 against $4.94 expected, retail sales rose 0.2% in June, claims fell to 208,000, and a last-second Starship abort left SPCX below its $135 issue price with a retry set for Monday, July 20. Friday the chip trade broke: a model release from Chinese AI startup Moonshot, competitive with the U.S. frontier labs, deepened a selloff that left the SOX down 9.97% for the week, 18% for the month, and 20% off its record, a bear market and its worst week since April 2025, while renewed U.S. and Iran strikes drove crude up 13.3% to $81.16. The damage stayed contained. The S&P 500 lost 1.55% to 7,457.67 and the Dow fell 0.93% to 52,146.39, but eight of eleven sectors rose, led by energy at 4.7%, REITs at 2.2%, and staples at 1.3%, as equal-weight and value outperformed and the VIX held in the mid-teens.
The chip bear arrived and the market did not. A 20% drawdown in the semiconductor index, its worst week since April 2025, produced a 1.55% index loss and eight green sectors. That is the rotation doing precisely what this desk has described for two months: absorbing a crowded unwind instead of amplifying it. Money leaving chips moved to financials, staples, energy, and healthcare, and the equal-weight index beat the cap-weighted one. The trigger matters as much as the move. A Chinese model competitive with the U.S. frontier labs reprices the certainty premium in the AI capex story, and certainty premiums live in multiples.
The CPI takes discipline to read. A negative headline built on a 9.7% gasoline drop is relief, not a trend; the flat core print at 2.6% annual is the real news, and it undershot as well. September hike odds fell to 63%. But crude rose 13% in the same week the June data celebrated cheap energy, which means the July print re-inflates on arrival. The line this desk wrote in #022 stands: until the Iran variable resolves, every CPI print is a crude oil derivative. The banks are the second signal. Record trading revenue, investment banking fees at their best level since 2021, and M&A up 72% in the first half mean the capital markets have reopened, and reopened exit paths eventually reach the bottom of the cap table. SPCX below issue inside six weeks is the reminder the desk gave at the filing: an allocation is not an entry, and the lockups are still ahead.
Coverage ledger: CLPS sells IT services to the financial institutions that just printed records; a reopened capital markets cycle is direct demand for its client base. BTBT carries the chip beta this week repriced and remains the honest risk read in the library. GLMD and ACON hold the cash floors that matter more, not less, when a crowded trade unwinds. AEYE compounds on recurring revenue straight through chip volatility. Full dossiers in the research library.