US Stock Market Preview | Major Index Futures Mixed; TSMC (TSM.US) Posts Outstanding Earnings But Still Faces Sell-Off

Pre-market Market Movements

1. On the morning of July 16 (Thursday) before the US market opened, the three major US stock index futures showed mixed performance. As of this writing, Dow futures rose 0.17%, S&P 500 futures dropped 0.26%, and Nasdaq futures fell 0.93%.

2. As of this writing, Germany’s DAX Index dropped 0.90%, the UK’s FTSE 100 fell 0.19%, France’s CAC40 dropped 0.83%, and the Euro Stoxx 50 shed 0.56%.

3. As of this writing, WTI crude oil was up 0.18% to $79.74 per barrel. Brent crude oil was down 0.08% to $84.88 per barrel.

Market News

Extreme optimism becomes a shackle? The perfect “Goldilocks” scenario is here, but US stocks struggle to rise further. Bullish stock investors are immersed in the “Goldilocks” scenario, with risk appetite escalating to extreme highs, making it increasingly difficult to identify new momentum for further market gains. Richard Privorotsky, Partner at Goldman Sachs, stated: “Whether the stock market rally continues ultimately depends on earnings guidance and positioning, rather than on headlines. Energy remains a key macro risk, but for now, the inflation environment is improving.” Privorotsky noted that this earnings season will likely yield solid results, with the banking sector having essentially cleared the performance bar, and ASML’s (ASML.US) report showing a healthy demand for semiconductor capex. “As with most AI-related stocks, the issue is no longer about the data itself, but whether the data is impressive enough relative to current positioning,” he added. A Bank of America fund manager survey released this week showed that professional investors’ cash holdings have fallen to extremely low levels, and the bank’s “Bull & Bear Indicator” has also flashed warning signals. Moreover, Deutsche Bank’s data indicates that systematic strategies are currently holding highly overweight positions, with little room left for further incremental buying. Trend-following CTAs now hold stock positions at the upper end of historical ranges, at the 72nd percentile, while volatility-targeting funds stand at a more extreme 91st percentile.

Bank of Korea rate hike for the first time in three and a half years: AI chip boom drives policy shift, tightening cycle officially begins. On July 16, the Bank of Korea raised its policy interest rate by 25 basis points from 2.50% to 2.75%, marking the first hike since January 2023, in line with market expectations. This move marks the official end of four consecutive rate cuts since late 2024, ushering in a new tightening cycle. The root of this hike lies in a structural economic transformation driven by artificial intelligence. Economic growth far exceeded expectations, with the South Korean government on July 14 sharply raising its 2026 GDP growth forecast from 2.0% at the beginning of the year to 3.0%. If achieved, this would be the fastest growth since 2021. The nominal GDP growth rate is expected to reach 12.3%, the highest in 30 years since 1996. The IMF had already raised Korea’s 2026 growth projection to 2.6%, the biggest upgrade among 30 major economies. The Bank of Korea explicitly pointed out that this chip cycle is “very different from previous ones.” In a report to the National Assembly, the central bank noted that the current expansionary cycle began in March 2023 and has lasted 40 months, well above the five-cycle average of 29 months from 2000 to 2020. The core driver is competitive investment by global tech companies to adapt to AI-driven industrial transformation, rather than traditional cyclical demand.

Korean regulators launch a “combination punch” to cool the market! Raising margin requirements, urgently halting the listing of single-stock leveraged ETFs. South Korea will temporarily halt the listing of new single-stock leveraged exchange-traded funds (ETFs) to curb market volatility. Previously, funds linked to Samsung Electronics and SK Hynix surged in popularity, causing large market swings. The Financial Services Commission (FSC) said in a statement Thursday that the ban will remain until market conditions stabilize. Regulators will also increase the minimum margin required to trade leveraged ETFs (i.e., the minimum cash account balance) from 10 million won to 30 million won (about $20,300), effective August 5. These steps mark the most comprehensive effort by the Korean government to cool retail trading frenzy. This frenzy had turned the 4.1-trillion-dollar stock market into one of the world’s hottest yet most volatile. The rules were announced after a meeting of regulators, finance ministry officials, and the central bank governor, amid growing concerns that leveraged ETFs linked to Samsung and SK Hynix were causing excessive volatility.

IEA chief issues a “weeks-long” ultimatum: If the Strait of Hormuz remains closed, the global economy faces fresh shocks. Fatih Birol, head of the International Energy Agency (IEA), issued a stern warning at the Aspen Security Forum in Colorado on Wednesday: if the transportation blockage in the Strait of Hormuz is not resolved within a few weeks, the world economy will again face severe challenges. Birol noted that rising US-Iran tensions have left the “market nervous” and facing “tremendous uncertainty,” with shipments of crude oil, fertilizers, natural gas, and other goods through this critical passageway seriously threatened. “If the Strait of Hormuz remains closed, the global economy — including the Middle East, developing countries, and Asia — may again face some difficulties,” Birol emphasized, adding that “the window to resolve the crisis should be counted in weeks, not months,” and the strait must be “fully open, unconditionally.”

After signaling domestic investment last week, Japan’s finance minister says economic growth may support GPIF’s reassessment of asset allocation. On Thursday in parliament, Japan’s finance minister Kaoru Katayama delivered a key speech. She said the government's current policy transformation is significantly boosting Japan’s potential economic growth rate, and this positive change provides a strong rationale for the Government Pension Investment Fund (GPIF) to adjust its asset allocation and increase holdings of domestic assets in its future annual reviews. Katayama pointed out that, as the world’s largest public pension fund, GPIF evaluates its investment portfolio timely and appropriately every fiscal year based on changes in macroeconomic assumptions. She emphasized that with government policy now placing major focus on expanding investment, the Japanese economy is encountering a key structural turning point, and the upward adjustment of potential growth rate should naturally be a central consideration in GPIF’s reassessment of the balance between domestic and overseas assets.

Individual Stock News

“Buy the rumor, sell the fact” plays out again! TSMC (TSM.US) Q2 net profit soars 77% to a record high, yet shares plunge nearly 5%. Driven by robust global demand for artificial intelligence (AI) chips, TSMC (TSM.US) reported much better-than-expected second quarter profits on Thursday. TSMC’s Q2 revenue reached TWD 1.27 trillion ($39.45B), up 36% year-on-year (market consensus TWD 1.264 trillion); net profit was TWD 706.562 billion, up 77.4% YoY and 23.4% quarter-on-quarter (market expectation TWD 632.64 billion). The world’s largest chip foundry has now posted record net profit for five consecutive quarters. The strong performance is mainly due to the explosive growth in global AI infrastructure demand, driving robust orders for advanced process nodes and advanced packaging. TSMC said that process technologies at 7nm and below accounted for 77% of total wafer revenue. TSMC now expects 2026 capital expenditures to reach $60–64B, above the previous expectation of $52–56B, and anticipates US dollar revenue growth slightly above 40%, higher than the previously guided “over 30%.” However, despite the stellar financial results, TSMC shares tumbled nearly 5% pre-market, as some investors opted to take profits once the good news was priced in.

Eli Lilly (LLY.US) splurges $3.8 billion to enter the psychedelics race! Acquires AtaiBeckley (ATAI.US) at a 26% premium. Eli Lilly (LLY.US) has agreed to acquire AtaiBeckley Inc. (ATAI.US) for up to $3.8 billion, highlighting the growing interest among major pharmaceutical companies in hallucinogenic medicine, once seen as a fringe field. Lilly will pay $6.75 in cash per share, with up to $2.50 extra per share in milestone payments tied to drug development. The base price is a 26% premium over AtaiBeckley’s Wednesday close.

Japan aims to create a “national robotics team,” plans to purchase 27,500 NVIDIA (NVDA.US) Rubin chips! AI compute supercycle moves from the cloud to “physical AI”. Japan's government and major Japanese enterprises, working together within the newly established company Noetra Corp, plan to buy 27,500 next-generation AI GPUs from NVIDIA to build a massive AI compute infrastructure cluster. The goal is to accelerate the development of Japan’s domestic foundational robot AI models and create a large-scale robot cluster under government leadership, with policy support and the involvement of top enterprises.

AI boom sparks surging demand for lithography machines! ASML seeks price hike, TSMC says “no.” According to media reports citing people familiar with the matter, ASML plans to increase prices for its chip-making equipment, which may bring it into conflict with its biggest customer, TSMC. TSMC has reportedly opposed the Dutch equipment maker's planned price hikes. ASML has recently discussed raising the price of its extreme ultraviolet (EUV) lithography systems with TSMC, and has informed some customers in recent weeks that it plans to raise prices for deep ultraviolet (DUV) lithography systems by 10%. However, TSMC has stated that ASML’s most advanced high numerical aperture (High NA) EUV lithography machines cost over €350 million (about $410 million) each, making them too expensive for mass production, though TSMC is using the machines for research and development purposes.

Hardware and services prices rise in turn! Apple (AAPL.US) raises AppleCare+ monthly subscription by $0.50. Apple has slightly increased the price of its AppleCare+ service subscription, marking another round of price increases amid a global storage chip shortage and multiple industry headwinds. The AppleCare+ monthly package for Mac and iPad is rising by $0.50, while the annual package is up by $5. This price increase applies only to new users; existing users will continue to pay the original rate. The move continues the tech giant’s trend of price hikes. Last month, Apple raised prices on iPad, Mac, Vision Pro headset, HomePod smart speaker, and the Apple TV set-top box. The market expects Apple to increase prices for its most profitable iPhone model line when new models are announced this September.

Stripe and Advent make $53.4 billion cash offer for PayPal (PYPL.US) with a 28% premium in a “competitive bid.” It has been confirmed that digital payments giant Stripe and private equity firm Advent International have jointly made an offer to acquire PayPal, valuing the deal at about $53.4 billion. According to sources, the acquirers have offered to buy the payments company for $60.50 per share in cash. Stripe, Advent, and Block have collectively provided $17 billion in equity funding for the bid. PayPal’s board is expected to meet as soon as July 20 to discuss the offer. The proposal was submitted earlier this month and includes about $50 billion in committed bank financing—a 28% premium over PayPal’s Tuesday closing price.

UnitedHealth (UNH.US) raises full-year guidance sharply, with earnings beating expectations to signal a recovery. UnitedHealth raised its full-year outlook and reported quarterly profits far above Wall Street estimates, underscoring its earnings recovery after a historic rout. Q2 revenue was $112 billion, up 0.3% YoY and $1.14 billion above expectations; adjusted earnings per share were $6.38, beating by $1.46. The healthcare giant now sees adjusted EPS for the year at $19.50–20, a significant increase from “above $18.25” previously, and above analyst expectations. As a key measure of medical costs, performance was much better than Wall Street forecasts in a Bloomberg survey, and profits exceeded the highest estimate. CFO Wayne DeVeydt said the new outlook sets a starting point for next year’s profit growth at the company’s historical target pace. UnitedHealth has long sought annual EPS growth of 13–16%. In an interview, he said better medical cost data in H1 gives the company confidence to raise guidance.

GE Aerospace (GE.US) Q2 beats expectations, strong order growth, guidance raised again. GE Aerospace’s Q2 report showed earnings per share of $2.02 and revenue of $12.6 billion, both beating Street estimates of $1.86 and $11.9 billion, respectively. Total new orders hit $16.5 billion in the quarter, exceeding revenue and up 17% YoY, demonstrating strong demand for its products and services. For the full year 2026, the company now expects revenue growth to be in the “high double digits” (up from 10–12%), and EPS guidance increased from $7.10–7.40 to $7.65–7.85.

Abbott Labs (ABT.US) Q2 beats estimates as multiple businesses advance, raising profit guidance. Abbott delivered stronger-than-expected results in Q2, with most business units continuing to improve, leading the company to raise its 2026 profit outlook. In a statement Thursday, Abbott said Q2 sales were $12.6 billion (vs. Street forecast of $12.5B); adjusted EPS was $1.31 (vs. $1.28 estimate). Looking ahead, the company sees this year’s adjusted EPS at $5.45 to $5.60, with the midpoint raised by $0.05.

Key Economic Data & Events Announcement

At 20:30 Beijing time: US Initial Jobless Claims for the week ending July 11, US July Philadelphia Fed Manufacturing Index, US June Retail Sales (monthly rate).

At 22:00 Beijing time: US June Pending Home Sales Index (seasonally adjusted, monthly rate).

At 00:30 the next day Beijing time: 2026 FOMC voting member, Dallas Fed President Logan speaks.

At 01:25 the next day Beijing time: 2028 FOMC voting member, Kansas City Fed President Schmid speaks.

At 07:00 the next day Beijing time: Fed Vice Chair Jefferson speaks about the economy and monetary policy.

At 09:00 the next day Beijing time: President Trump gives a national address.

Earnings Preview

Friday morning: Netflix (NFLX.US), Alcoa (AA.US)