Happy Friday,
 
Welcome to the final trading session in July. Coming into today the S&P 500 is down 0.8% for the month but that does no justice to the volatility that we’ve seen beneath the surface. During the month there was a momentum unwind of historic proportions which had a clearing event yesterday after a forced liquidation of a supernova hedge fund heavily exposed, and apparently levered, to the AI trade. Situational Awareness was launched in 2024 with $225ml by a former 24-year-old OpenAI researcher. It had reportedly grown to >$40B and was up >400% and was running with 4X leverage at the end of June according to sources. As the AI trade began to unwind and its positions were falling sharply it was facing margin calls and trying to raise additional capital. The WSJ reported that Citadel had bought its levered positions, though the firm reportedly continues to hold cash backed positions and its ownership in Anthropic. This helped to explain some of the wild price action seen particularly over the last week and along with a round of solid earnings sent tech stocks sharply higher during yesterday’s session. The ICE Semi Index was up >8% while the DRAM ETF was up 2X that amount. The firm was heavily exposed to neoclouds companies which were up >20%. Software stocks were under pressure as the firm reportedly had multiple short positions across the sector. However, Microsoft had the biggest one-day increase in market capitalization in history following its earnings, nearly $450B. Yesterday the S&P 500 was up 1.7% reversing pretty much all of the selloff during the final hour of trade on Wednesday though the equal-weight version of the index ended modestly lower as the defensive/yield-oriented sectors that have benefited from the rotation throughout the month sold off. The other notable development was the reportedly coordinated currency intervention in the Yen and South Korean Won ahead of the BOJ rate decision last night.  
 
Overnight tech heavy markets in Asia ripped following the US move. US futures are extending to the upside with the tech strength continuing in the pre-market as traders feel like it is safe to get back in the water. It was another big night of mega-cap tech earnings which like yesterday were a mixed bag. Amazon (+10%) is trading sharply higher after very strong AWS revenue growth which was up 37% and strength in its chip business which had a run rate of >$25B. The company increased its Capex by ~10% to ~$220B in 2026 but investment is translating into AWS strength with Andy Jassy suggesting the business could possibly be a $1T revenue business. Apple (-8%) is under pressure after its revenue guidance disappointed with the company highlighting supply constraints which also impacted margins. Both Exxon and Chevron reported this morning and are currently trading around unchanged levels. S&P futures are modestly higher but have pulled back from the highs after testing its 50d ma, which has served as resistance over the last couple of weeks.
 

 
This morning the Employee Cost index came in a tenth higher than estimates at 0.9%. Treasury yields started to move higher ~5:00am following a slightly hotter EU inflation report and as oil prices ticked up on headlines out of the Strait. We’ve also gotten comments from the Fed dissenters highlighting their preference to increase rates now before inflation is any more entrenched so that more aggressive action isn’t needed later. 2yr yields are up 4bps while the long is up about half that amount with the 10yr is retesting 4.7% again.
 
Japanese officials confirmed they intervened in the FX market yesterday, driving the substantial mid-day strengthening against the Dollar. The Treasury reportedly conducted a rate check (one-two, one-two) as well, which would suggest a coordinated response. Bessent also commented yesterday that the yen is “very undervalued”. Reports put the expenditure at up to $50 billion. Intervention in the South Korean won is also highly suspected. The BOJ held rates as expected and takeaways from the meeting were dovish. That has contributed to a reversal in the USDJPY, which hit the 157 level on the intervention and is back up to ~160.  The US Dollar Index is up 0.5% and back above 100 after falling below 100 yesterday.
 

• US 2yr -2bps to 4.30%, 5yr -2bps to 4.38%, 10yr -2bps to 4.63%, 30yr -2bps to 5.12%
• USD index: -$0.01 to $101.38

 
Over in Asia South Korea’s KOSPI rose 18% on the expected vicious snap back in SK Hynix and Samsung (both up ~30%). Outsized gains were widely distributed across other sectors as well. Despite the rip, the KOSPI fell ~20% for the month. China saw broad gains as well though overall gains were modest. Official July Manufacturing and Service PMIs were weaker than expected and fell versus last month, slipping below 50 (i.e. contracting). The groundwork ahead of the Trump-Xi summit in September has begun to be laid, with Bessent and Greer speaking with Chinese Vice Premier He Lifeng about various trade topics. For July the Hang Seng led gains, rising 13%. Japan closed sharply higher, up 4%. Softbank and Advantest traded limit-up, while Kioxia was the latest memory name to post huge earnings numbers after the local close. Revenue rose over 400% y.y and 76% q.q.  However, the results actually missed estimates. For the month, the Nikkei fell 8% with sharp declines in tech leaders (Kioxia down ~50%, Tokyo Electron -30%) far outweighing solid gains in most other areas. European equites are trading higher as the STOXX 600 and FTSE 100 set new record highs. Tech, Basic Resources and Utilities are leading while consumer goods and telecom are lagging. Major indexes are up ~2% for the month, with the FTSE 100 up 4%. Eurozone inflation ticked higher in June, with core (2.5% y.y) slightly above consensus. The EU has begun soliciting bids to build up to 7 large AI datacenters in the region, with total investment of ~$30 billion. Note that NextEra and Brookfield are planning a $100 billion data center in Kentucky.
 

 
Crude oil is up modestly, near best levels after finishing yesterday at its lows. It’s back above $90 after briefly slipping below the 100d ma ~$88. For the month of July Brent is up over 20%, rising from $73 to $102 before pulling back to current levels. Natural gas is higher as well. Metals are flat to lower, with gold down 1% following a 3% gain yesterday. The metals is down over 10% this month as rates have climbed 10-30bp across the curve. Bloomberg is reporting that Vitol Group, Cargill and Glencore have stopped doing business with Radiant World, a large metal trader, due to concerns over invoices and other business operations. Jefferies (-5% pre-market) and Intesa Sanpaolo were noted as reviewing their exposure to Radiant World. Ag is mostly unchanged. Bitcoin is down 2%, bouncing along its 50d ma, though it rose about 10% this month.
 
 

 
Earnings:
After-market: AAPL, ADC, AEE, AGM, AMH, AMZN, ATR, AJG, AX, BFAM, COIN, CPT, CS.CN, CNO, CTVA, CUZ, CUBE, DLB, DXC, DXCM, EMN, EIX, EGO, ES, FHI, FND, FET, GDDY, HR, HTGC, HUN, IR, ILMN, INGM, LYV, MTZ, MTD, MTX, MHK, MSA, MSTR, OLN, KWR, RDDT, RBLX, RYAN, SAFE, SNDR, SPXC, SYK, VALE, WU, WY
Pre-Market: ABBV, AN, ARES, AU, BBUC, BEN, BEP, BSAC, CBOE, CHD, CL, CVX, D, ETN, FRT, GTES, LEA, LIN, LYB, MOG.A, MRNA, NVT, NWL, POR, PRLB, RBC, TROW, WT, XOM
 
Economic Data:
US:

• Employee Cost Index: 0.9% vs. 0.8% cons., prior 0.9%
• 9:45 Chicago PMI
• 10:00 U of Mich Sentiment
• 1:00 Rig Count

Global:

• China NBS Manufacturing PMI: 49.2 vs. 50 cons. prior 50.3
• China NBS Non-Manufacturing PMI: 49 vs. 50 cons. prior 50.2
• Japan Unemployment: 2.5% vs. 2.5% cons, .prior 2.5%
• Japan Retail Sales: 0.5% vs. 3.1% cons., prior 5%
• Japan Tokyo CPI: 1.9% vs. 1.7% cons., prior 1.6%
• EU CPI/Core: 2.9%/2.5% y/y vs. 2.9%/2.4% cons., prior 2.8%/2.4%
• France CPI: 0.6%/2.1% m.m/y.y vs. 0.3%/1.8% cons., prior -0.3%/1.8%