Wall Street Rallies on Chip Recovery as Megacap Earnings Loom, July 21

US stock futures rallied on July 21 as semiconductor stocks staged a recovery from last week’s bear-market decline. Nasdaq-100 futures jumped 1.3%, S&P 500 futures gained 0.4%, and Dow futures rose 0.2%. Chip stocks led the rebound, with memory makers and AI chipmakers climbing ahead of major tech earnings from Alphabet, Tesla, Intel, and IBM later this week. Investors are hunting for confirmation that AI capital spending remains robust despite Middle East tensions and new US tariffs on Canadian goods.

Chip stocks bounce back from bear-market territory

Semiconductor stocks rebounded sharply on Tuesday after falling more than 20% below their late-June record high. The Philadelphia SE Semiconductor Index confirmed a bear-market decline on Friday but reversed course on Monday. Micron Technology, SanDisk, and Marvell Technology each climbed roughly 5-6% in premarket trading. The VanEck Semiconductor ETF (SMH) gained more than 3%. In Asia, South Korea’s KOSPI Composite index rose over 3%, driven by strength in Samsung Electronics and Taiwan Semiconductor Manufacturing Company.

Earnings season kicks off with strong early results

Of the roughly 54 S&P 500 companies that have reported second-quarter results, 87% topped bottom-line estimates, per FactSet. 3M jumped more than 5% after posting better-than-expected earnings, while General Motors rose about 2%. Markets are expecting S&P 500 earnings growth of 26% for the second quarter year-on-year, up from an earlier estimate of 23.7%, according to data compiled by LSEG. Major tech names including Alphabet, IBM, and Tesla are set to report later this week.

Geopolitical tensions and trade policy add uncertainty

Oil prices seesawed as traders monitored escalating US-Iran tensions. West Texas Intermediate crude futures rose more than 1% to above $84 a barrel. President Trump unveiled 50% tariffs on Canadian goods including beer, hockey sticks, milk, and chemicals, effective in 30 days, though Canadian oil imports were exempted. Brent crude fell 0.7% to about $88.55 a barrel on Tuesday. Jack Herr, senior investment analyst at GuideStone Funds, said “There’s just a little less room for error in the market at this point. Any sort of events or earnings news could probably move the market down.”

AI spending remains the key driver for investors

Traders are closely watching earnings calls this week for details on artificial intelligence capital spending by hyperscalers. Nvidia edged up before the bell after revealing it has taken a stake in neocloud provider Nebius. Alphabet added 3.4% on a report that the Google parent is developing new chips to run its AI models. The surge in AI capital spending has been a major driver behind this year’s market gains, lifting chip stocks and helping US indexes hit record highs. Investors are seeking confirmation that executives are not becoming more cautious about the second half of the year.

Final Thoughts

The chip sector’s recovery and strong early earnings results suggest the AI-driven rally has room to run, but elevated geopolitical risk and new trade tariffs add volatility. This week’s megacap earnings will determine whether the market can sustain momentum into the second half of 2026.

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