Market Watch: Tech and AI Stocks Bounce Back as Crypto Finds Support
U.S. Equities
Technology and artificial intelligence stocks clawed back gains on Tuesday, July 1, 2026, as investors rotated back into AI-linked names following a week of consolidation. The S&P 500 rose 0.34% to 5,978, the Nasdaq Composite added 0.79% to 19,543, while the Dow Jones Industrial Average advanced 0.38% to 39,412. The small-cap Russell 2000 edged 0.22% higher to 2,051, reflecting renewed risk appetite. Market participants pointed to a pullback in Treasury yields and positive signals from US-Iran nuclear talks in Doha as catalysts for the equity bounce. Volume remained below the 30-day average, suggesting the rally lacked broad participation, with gains concentrated in a handful of megacap technology names. The Philadelphia Semiconductor Index surged 1.4%, reclaiming territory lost during last week’s AI chip selloff, as investors seized upon discounted valuations in the AI infrastructure trade.
Fixed Income
The 10-year US Treasury yield fell 10 basis points to 4.35%, while the 2-year yield slipped 8 basis points to 3.99%, as traders recalibrated expectations for Federal Reserve rate cuts following a softer-than-expected ISM Manufacturing PMI print. The yield curve steepened modestly, with the 2s10s spread widening to +36 basis points from +28 basis points the prior session. The VIX, Wall Street’s fear gauge, dipped to 17.45 from 18.20, indicating reduced options premium for portfolio hedges. Credit spreads tightened marginally, with investment-grade corporate bond spreads over comparable Treasuries narrowing to 98 basis points. High-yield spreads held steady at 312 basis points, suggesting credit markets remained constructive but cautious. Federal Reserve funds futures now price approximately 38 basis points of cuts by year-end, up from 32 basis points priced on Monday, reflecting a shift in rate expectations following comments from Fed Governor Christopher Waller that left the door open for a potential September reduction if inflation data continues to cool.
Energy Markets
Oil prices remained elevated as Brent crude held above $73 per barrel and West Texas Intermediate hovered near $70, after crude posted its steepest quarterly decline since the COVID-19 pandemic. The recent sell-off was driven by expectations that oil flows through the Strait of Hormuz — a route that carries about one-fifth of global crude and liquefied natural gas shipments — would continue to normalise following the 60-day ceasefire framework between the United States and Iran. Senior US officials described indirect discussions between Washington and Tehran in Doha as constructive, with Jared Kushner and Steve Witkoff representing the American side. Technical discussions between the two nations continued as efforts to secure a more durable ceasefire gathered pace, easing concerns about a renewed disruption to shipments through the critical waterway. Natural gas futures rose 0.83% to $3.17 per million British thermal units as weather forecasts pointed to above-normal temperatures across the US South and Southwest through mid-July. The Energy Information Administration’s next weekly inventory report, due Thursday, is expected to show a draw of 2.5 million barrels in crude stockpiles.
Currencies, Commodities & Crypto
The US dollar index edged 0.12% lower to 106.52, giving back some of Monday’s gains as softer economic data reinforced rate-cut expectations. The euro traded at $1.0864, flat on the day, while the British pound held at $1.2735. The Japanese yen strengthened marginally to 151.23 per dollar, as Bank of Japan Governor Kazuo Ueda reiterated the central bank’s data-dependent approach to further rate normalisation. Gold futures fell $11.90 to $3,388.10 per troy ounce, pressured by a firmer dollar and receding geopolitical risk premium following positive signals from the Doha nuclear talks. Gold has now given back nearly 3% from its June highs above $3,490, as investors rotated back into higher-yielding assets. Bitcoin added 0.47% to $58,827, while Ethereum rose 0.80% to $1,582. Both cryptocurrencies remained below their late-June peaks but found technical support near their respective 50-day moving averages. Total crypto market capitalisation stood at approximately $2.1 trillion, little changed from the prior session. A wallet exchange reported net inflows of $142 million into spot Bitcoin ETFs on Tuesday, reversing four consecutive days of outflows and suggesting renewed institutional demand at current price levels.
Forward Look
Traders are bracing for a busy data calendar this week, with the June Consumer Price Index report due Wednesday and the Producer Price Index due Thursday — both critical inputs for the Federal Reserve’s rate decision calculus. Economists surveyed by the Wall Street Journal expect headline CPI to rise 0.1% month-over-month and core CPI to advance 0.2%, which would represent the smallest monthly increases in three years. The Federal Reserve’s Beige Book, due Wednesday, will offer a qualitative assessment of regional economic conditions across all 12 Federal Reserve districts. In geopolitics, the next round of US-Iran nuclear discussions is scheduled to resume in Doha on Thursday, according to a Qatari Foreign Ministry statement, with a preliminary framework on nuclear inspections the primary sticking point. The European Central Bank holds its rate decision on Thursday, with markets pricing a 94% probability of an unchanged deposit rate at 2.50%, though ECB President Christine Lagarde’s press conference will be scrutinised for signals on the pace of further easing. Earnings season unofficially kicks off Friday with reports from major US banks, offering the first read on corporate America through the second quarter.
