Most US stocks rose yesterday, but the selloff in semiconductors deepened. The S&P 500 gained 0.2% and the Dow Jones rose 1%, while the Nasdaq Composite fell 0.2%; SMH, the semiconductor ETF, dropped 3.5%. Overnight in Asia, SK Hynix's record profit fell short of lofty expectations, and the selloff in South Korean stocks continued.

Oil has become a risk again. Brent rose to $87 in Asian trading Wednesday on reports of renewed tensions between the US and Iran. The market now faces two separate tests: the Fed decision at 9:00 pm TRT and earnings from Microsoft and Meta after the US close.

Key takeaways

  • The S&P 500 gained 15.60 points Tuesday to close at 7,428.78. The Dow Jones rose 1% and the Russell 2000 0.2%, while the Nasdaq Composite fell 0.2%. This shows that investors are not fleeing the entire market; money is rotating into sectors outside semiconductors.
  • Damage within technology worsened. QQQ fell 1.0% and SMH 3.5%, while IGV, the software ETF, rose 1.0%. SMH fell as low as $518.25 intraday, while IGV touched $92.73. The artificial-intelligence theme is no longer being priced as a single unit.
  • According to the Associated Press, South Korea's Kospi fell 8% intraday Wednesday; SK Hynix dropped 12.6% and Samsung Electronics 8%. SK Hynix's profit rose sharply but still fell short of analysts' expectations. The problem is not a lack of profit; it is that investors now demand extraordinary results.
  • Bloomberg Television reported that oil rose after the US military said it had thwarted an attack by Iran on American forces. Brent climbed to about $87 and WTI to about $83 in Asian trading. This military claim could not be corroborated through a separate official statement; the account of the market impact is based on Bloomberg's broadcast.
  • The US 10-year Treasury yield fell to about 4.60% Tuesday, and TLT, the long-duration Treasury ETF, rose 0.6%. Lower yields should have helped technology valuations; the fact that semiconductors still fell shows that the selloff was not driven by interest rates or oil alone.
  • Tunç Şatıroğlu (@tuncsatiroglu) views the move as a correction within a bull market rather than a new bear market because he sees no signs of recession in the economic indicators, no unusual increase in bond yields and no sharp strengthening of the dollar. He believes the market is nearing a bottom, but does not name a date for the turn and warns of renewed selling risk in late August and early September.
  • Bitcoin was near $63,829 Wednesday morning, Ethereum at $1,900 and XRP at $1.073. Bitcoin still has not reclaimed $64,000-$64,400; Ethereum and XRP are near their initial recovery thresholds. Crypto has not yet delivered a strong, unified response to the divergence in equities.

What happened?

  • Tuesday's US close was positive for the broader market. Dow stocks such as Coca-Cola, IBM and Sherwin-Williams rose, while semiconductor shares pulled the Nasdaq lower. The S&P 500's gain should not obscure the decline within technology.
  • Two concerns are converging in semiconductors. First, lofty expectations for memory and data-center investment. Second, whether major technology companies can convert rising artificial-intelligence spending into revenue, profit and free cash flow. SK Hynix's failure to meet expectations despite record profit reinforced the market's selectivity.
  • Software has been more resilient than semiconductors. IGV reaching the $92 area is positive, but it is too early to say that relief has begun across technology before SMH reclaims $535-$540. Software rising as chips fall could signal a broadening of gains within technology, or a flight from expensive artificial-intelligence hardware.
  • Oil's return toward $87 marks a rapid reversal from Tuesday's $84 level. If Brent clears $90-$92, energy-driven inflation and Fed risk will strengthen again. A return below $85-$86 would show that tensions have had only a limited effect on prices.
  • The Fed decision and Microsoft and Meta earnings fall on the same day. A rate increase or hawkish inflation message could intensify pressure on QQQ and SMH. Keeping rates unchanged will not be enough on its own; investors will also see cloud growth, artificial-intelligence spending and free cash flow that evening.

Market levels

Global risk and rates

  • Brent was near $87 in Asian trading Wednesday. The first support is $85-$86, the first resistance $90-$92 and the main risk threshold $95. Staying below $90 would limit the oil shock; a return above $95 would show that military tensions are again disrupting inflation expectations.
  • The US 10-year Treasury yield was near 4.60% Tuesday. Support is at 4.55%-4.60%, the first resistance at 4.65% and the main risk area at 4.75%. A return above 4.65% after the Fed would increase valuation pressure on growth stocks.

US indices

  • The S&P 500 closed at 7,428.78. The first support is 7,400, followed by lower support at 7,350; the first resistance is 7,450 and 7,500 is the stronger upside level. As long as the index holds above 7,400, the possibility that the selloff remains confined to technology is intact.
  • QQQ ($QQQ), which I use to track the Nasdaq 100, closed at $675.49. The first support is $668-$675, followed by lower support at $660; the first resistance is $680 and $690 is the stronger recovery threshold. A move below $668 would show selling accelerating, while a move above $690 would indicate that the damage is easing.

Themes and ETFs

  • SMH, the semiconductor ETF ($SMH), closed at $529.60. The first support is $518-$520, followed by lower support at $500; the first resistance is $535-$540 and $550 is the stronger recovery level. A move below $518 would increase the risk of a new wave of selling; a bottom cannot be called before $540 is reclaimed.
  • IGV, the software ETF ($IGV), closed at $91.78. Support is at $89-$90, the first resistance at $92.70-$93 and the stronger confirmation area at $94-$95. Holding above $90 is positive, but a healthy recovery across technology also requires SMH to reclaim at least $540.

Crypto and precious metals

  • Bitcoin is near $63,829. The first support is $63,000, followed by lower support at $62,000; $64,000-$64,400 is the first area to reclaim and $65,800 the first resistance. A strong recovery in crypto cannot be considered underway before $64,400 is reclaimed.
  • Ethereum is near $1,900. Support is at $1,880-$1,855, the first resistance at $1,927 and the stronger recovery area at $1,970-$2,000. Holding above $1,880 would preserve the structure; the move could remain limited until $1,970 is cleared.
  • XRP is near $1.073. Support is at $1.065 and $1.05, the first resistance at $1.08 and the stronger confirmation level at $1.13. A move above $1.08 would be positive for XRP; a move on its own carries greater risk until Bitcoin reclaims $64,400.
  • GLD, the gold ETF ($GLD), fell 1.4% to close at $369.37. Support is at $368 and $365, the first resistance at $371-$372 and the stronger recovery level at $375.50. Its decline despite lower Treasury yields shows that precious metals also remained weak.
  • SLV, the silver ETF ($SLV), fell 2.3% to close at $51.70. The first support is $51.20-$51.50, followed by lower support at $50; the first resistance is $52-$52.50 and $53.30 is the stronger recovery level. A move below $51.20 would deepen the decline.

Red flags

  • If Brent clears $90-$92 and the US 10-year Treasury yield rises back above 4.65%, pressure from oil and interest rates would again combine with the technology selloff.
  • If QQQ loses $668 and SMH $518 as the S&P 500 also falls below 7,400, the view that selling is confined to semiconductors would weaken.
  • If IGV falls below $89 while SMH fails to reclaim $540, software's resilience could remain a temporary haven trade rather than a lasting sector shift.
  • If the Fed delivers a surprise rate increase or is more hawkish than expected on inflation, Treasury yields and the dollar could rise together. Gold, silver, crypto and growth stocks could then come under pressure at the same time.
  • If Microsoft or Meta increases its artificial-intelligence investment but cloud revenue, advertising revenue and free cash flow do not grow at the same pace, the high-expectations problem seen at SK Hynix and in semiconductors could spread to major technology companies.

Calendar

  • July 29, 9:00 pm TRT: The Fed's interest-rate decision will be announced; the press conference begins at 9:30 pm TRT. Because the market has not completely ruled out a rate increase, the tone of the statement matters as much as the decision.
  • July 29, after the US close: Microsoft, Meta and Qualcomm will report results. Cloud growth, artificial-intelligence investment, advertising demand and free cash flow will determine the direction of the divergence within technology.
  • July 30, 3:30 pm TRT: The US second-quarter GDP report and June personal income and spending figures, along with the personal consumption expenditures price index closely watched by the Fed, will be released.
  • July 30, after the US close: Apple and Amazon will report results. Device and services revenue will be watched at Apple; AWS growth and data-center investment at Amazon.

My analysis

Tuesday's central message is that the whole market was not sold off, but the pricing of artificial-intelligence hardware came under serious scrutiny. The Dow and S&P 500 rose while SMH fell 3.5%, clearly illustrating that distinction.

Tunç Şatıroğlu's view that this is a correction, not a bear market, is not entirely inconsistent with the broader-market data. The S&P 500 is above 7,400, the Dow is strong and Treasury yields are falling. But semiconductors also need to respond before a bottom can be called. The broader market's strength alone is not enough before SMH reclaims $540 and QQQ $680.

Today's challenge is that two risks have returned at the same time. The high-expectations problem in semiconductors persists, while oil has jumped to about $87. The Fed's inflation message and Microsoft and Meta's investment plans will show whether these two risks converge.

A cleaner positive scenario requires Brent to stay below $90, the US 10-year Treasury yield below 4.65% and the S&P 500 above 7,400, while QQQ reclaims $680 and SMH $540. Otherwise, the selloff could turn from a correction within technology into a broader risk-reduction move.

Sources

This material is for research and monitoring purposes only and is not investment advice.