Such a figure has not been seen for almost 20 years in the markets, and investors are worried: five things to know ahead of the trading day
The local stock exchange will open against the backdrop of a sharp escalation in the conflict between the USA and Iran, and a negative arbitrage gap in chip stocks. US bond yields are jumping to new highs after the interest rate remained unchanged, and the hawkish message from Fed Chair Warsh: "We will not hesitate to act". Also: MFS's warning shakes AI and the quiet stocks that are now marked as a growth opportunity. Globes organizes the order ahead of the opening of trading.
Trading review: current reports, trends, indices, stock prices, bonds, currency, commodities, and analyst recommendations.
08:25
1. Stock Market
The trading on the local stock exchange will open this morning against the backdrop of a sharp escalation in the conflict between the USA and Iran, after the US military attacked dozens of targets of the Revolutionary Guards in the south of the country overnight. The American move, which came following Iranian launches towards Jordan and direct threats from President Donald Trump, raises the level of alertness in the markets — especially against the backdrop of reports in the "Wall Street Journal" that Trump is considering expanding military activity to 10 to 14 days of intensive strikes with the goal of eradicating Tehran's missile capabilities. The fear of the expansion of naval combat in the Strait of Hormuz area and its implications for energy prices and regional stability is expected to continue to weigh on trading on Ahad Ha'am.
Dual-listed stocks will return to trading today, and they are expected to weigh on the Tel Aviv Stock Exchange, with a negative weighted arbitrage gap of about 1.05% on the TA-35 index. The downward pressure comes mainly from the chip and technology sector in New York, with Tower stock returning with a negative gap of 6.3%, Camtek weakening by 4.4%, Nova by 3.6%, and Elbit Systems by 1.6%. On the other hand, Teva stock stands out positively and offsets some of the negative trend with a positive gap of 1.2%, alongside Nice, which returns without a material change (+0.02%).
In Asia, this morning, trading is taking place in a mixed trend with a tendency towards price declines: the Nikkei index in Japan stands out positively and climbs by 0.5%, while the rest of the leading indices in the region are trading in negative territory. The declines are led by the Shanghai index in China and the KOSPI index in South Korea, which are falling by about 1.2%. In the rest of the markets, a more moderate trend is recorded, with the Hang Seng in Hong Kong trading around the baseline levels.
Futures on Wall Street indicate slight price increases this morning, led by Nasdaq futures, which are climbing by 0.4%, while S&P 500 futures are rising by 0.2% and Dow Jones futures are adding 0.1%.
One of the busiest weeks for corporate earnings reports will continue today, with Bristol-Myers Squibb expected to release reports before the close of trading. Amazon, Apple, and Coinbase Global are expected to report after the close.
In the Israeli sector on Wall Street, Pagaya Technologies and Check Point are expected to report their financial results for the second quarter today.
Yesterday, the Tel Aviv Stock Exchange closed trading with declines, against the backdrop of the renewal of mutual attacks between the USA and Iran, the jump in oil prices, and the negative sentiment towards chip stocks around the world. The TA-35 index fell by about 1%, while the TA-90 index lost about 0.4% of its value.
The declines were led by the Cleantech, technology, and insurance indices — all three shed about 2.5% of their value. The technology index weakened by nearly 2% and the banking index lost about 1.5% of its value. All sectoral indices finished yesterday in negative territory.
Standing out in trading yesterday positively was Teva stock, which jumped sharply after its financial results for the second quarter, thus returning to being the largest company in terms of market capitalization currently included in the stock exchange indices (Palo Alto will enter the indices on August 6). The market value of Teva in Tel Aviv rose to about 122 billion shekels, above Elbit Systems, whose value fell to about 112 billion shekels.
Another stock that drew interest is Shikun & Binui Energy, which jumped against the backdrop of signing a sale deal with the Generation fund, which will acquire it for 4.45 billion shekels.
On the other hand, among the stocks that led the declines in the TA-125 index, one can find Opko Health (which jumped by a sharp rate of 33% after its financial results the day before yesterday), Nofar Energy, Yochananof, Enlight Renewable Energy, and Next Vision.
On Wall Street, at the end of a volatile evening, the main indices recorded declines yesterday, as investors had to digest three negative factors: a hawkish message from the Federal Reserve, a jump in oil prices following the escalation with Iran, and continued weakness in chip stocks against the backdrop of concerns surrounding giant investments in artificial intelligence.
The Dow Jones index plummeted by 2.1% — the sharpest daily decline since April 2025. The S&P 500 index fell by 1%, and the Nasdaq weakened by 1.2%. The main trigger was the Fed's decision to leave the interest rate unchanged, but three committee members voted in favor of a hike — more than expected in the market. Interest rate futures are now pricing in a probability of about 63% for an interest rate hike of a quarter of a percentage point as early as September.
It seems the problem is not only the current interest rate, but the fear that the Fed will be forced to continue fighting inflation precisely at a time when the market's main growth engine, AI investments, is beginning to be examined under a magnifying glass. Investors are moving from "Will AI grow?" to the harder question: Will the huge investments in AI yield a return that justifies the price?
In yesterday's trading, chip stocks continued to be hit. The SOXX chip fund fell by about 3%, after four consecutive days of declines, and for the week, it lost about 9%. Micron fell by 6%, AMD by more than 3%, and KLA plummeted by more than 8%. Investors continue to fear the enormous scale of investments in AI infrastructure, the return on them, and the increase in competition from China.
Israelis on Wall Street:
Teva jumped following the reports and the raising of forecasts. The market is encouraged by the fact that Teva is updating its revenue forecast for 2026 upwards to the range of 16.5-16.85 billion dollars.
Lemonade stock plummeted despite beating forecasts. The digital insurance company beat the analysts' revenue forecast in the second quarter and its own forecast, but the forecast it provided for the rest of the year disappointed investors.
Another Israeli company that fell is Fiverr. The results in the second quarter of 2026 were in line with the range of the forecast the company had provided in the past, but slightly lower than the analysts' forecasts.
Silicom stock rose by a double-digit rate after beating forecasts in the second quarter reports. The company is jumping its revenue forecast and expects to return to profitability by the end of the year.
Tech giant Meta published its financial results for the second quarter of 2026 yesterday evening, and presented a mixed picture that sent the stock to a fall of about 7% in after-hours trading. While the company's revenues met expectations and totaled 60.8 billion dollars, the profit per share disappointed sharply and stood at only 6.18 dollars — much lower than the analysts' forecasts (7.19 dollars). The parent company of Facebook and Instagram continues to pay a heavy price for its long-term bet in the fields of AI and virtual reality: the Reality Labs division recorded a difficult operating loss of 4.62 billion dollars, and at the same time, Meta updated its capital expenditure forecast floor upwards to 130 billion dollars this year. Against the backdrop of the fear of erosion in profitability, investors will now examine closely the intentions of CEO Mark Zuckerberg to introduce models for renting computing infrastructure to external clients in cooperation with BlackRock, with the goal of generating new revenue engines from the giant investments in this infrastructure.
Unlike Meta, tech giant Microsoft presented strong reports yesterday evening that sent the stock to rises in after-hours trading. The company beat analysts' forecasts from end to end, with quarterly revenues of 90 billion dollars and a profit per share of 4.74 dollars (against expectations of 87.7 billion and 4.25 dollars respectively). The main buzz around the report came from the Azure cloud arm, which recorded an impressive growth of 43% for the quarter, above expectations, and crossed the 100 billion dollar threshold in annual revenues for the first time. In addition, the company marketed a significant jump in the use of Microsoft 365 Copilot, which passed 30 million paid users. The excellent results provide investors with tangible proof that the giant investments in AI infrastructure are beginning to translate themselves into real business growth, even if the continued growth in capital expenditures continues to be put to the test.
2. Debt Market
The yield curve of government bonds in Israel presents a normal structure with a moderate positive slope (positive convergence), starting from a level of about 3.28% for a short duration of one year up to 4.46% for long-term bonds of 30 years. In trading, relative stability stands out along the curve with only slight movements: the short-term yield for two years weakens slightly by 0.14% (a reduction of about 0.5 basis points) to a level of 3.493%, while the long-term yield for 10 years records a minor increase of 0.08% (about 0.3 basis points) to a level of 3.882%.
The government bond market in the USA records sharp fluctuations following the Federal Reserve's decision to leave the interest rate unchanged in the range of 3.5%-3.75%. The Fed's decision, which was accepted by a split majority alongside the opposition of three members who demanded an interest rate hike, sent the yields of long-term bonds to new highs: the 30-year bond yield jumped to 5.201% and even touched its highest level since July 2007 (5.244%) during trading, while the 10-year yield climbed to 4.671%. The rise in long-term yields, alongside a slight decrease in short-term yields for 2 years (4.236%), reflects investors' fears of renewed inflationary pressures — especially against the backdrop of the jump in oil prices and the security escalation in the Middle East.
3. Commodities and Currency Markets
Oil prices retreated slightly this morning, while oil tankers continue to find bypass routes out of the Middle East and take black gold out of the region. This is despite the security escalation and the expansion of the conflict between the USA and Iran to additional fronts, which include joint attacks by the USA and Saudi Arabia in Iraq, drone attacks by the Houthis in the Red Sea, and reports of damage to tankers in the Strait of Hormuz. The slight retreat in prices comes after sharp jumps of about 7% were recorded in Brent and WTI contracts in the previous trading day, in one of the sharpest waves of increases since the outbreak of the fighting.
This morning, a barrel of Brent type is falling by 1.04% to a level of 89.80 dollars, while the price of a barrel of American oil (WTI) is weakening by 0.83% and is trading at 83.76 dollars.
The carving of alternative shipping routes, as reflected in the increase in ship passage in the Bab el-Mandeb Strait, is beginning to affect the geopolitical balance of power as well. As Tony Sycamore, a market analyst at IG, explains: "Although total trading volumes are limited, oil continues to leak out of the region through multiple channels, and now additional bypass solutions are being tested. The longer this situation continues, the more these alternative routes and methods will erode Iran's leverage over the Strait of Hormuz".
In currency trading, the dollar strengthened against the shekel. At Altshuler Shaham Financial Services, they noted that the weight of geopolitical risk is increasing — and continues to lead to volatility in the energy and currency markets in the world. At Poria Finance, they estimated that the stability trend in the shekel will continue in the near future, while in the medium-long term, they predict a strengthening of the shekel against the major currencies — supported by the economic data of the Israeli economy. This morning, the dollar is trading with a slight increase of 0.55% against the shekel at a level of 3.0604 shekels.
Gold prices show slight increases and are trading at a level of about 4,047 dollars per ounce, as investors re-evaluate the messages of Fed Chair Kevin Warsh regarding the fight against inflation after the central bank left the interest rate unchanged. In the market, they interpret the Fed's dragging approach as a growth engine for the precious metal, which serves as a shelter against inflation. As Edward Meir, an analyst at Marex, explains: "The markets were surprised and disappointed by Warsh's general approach, which seemed detached from the need for an interest rate hike — and that is what helped gold to rise". Alongside the monetary turmoil and the escalation of fighting with Iran, at the investment house TD Securities, they provide a more cautious forecast and estimate that the jump will not last for long, when gold prices may retreat back towards 3,900 dollars per ounce if oil prices continue to climb during the summer.
4. Macro
The Federal Reserve announced yesterday (Wednesday) its decision to leave the interest rate in the USA unchanged at a level of 3.75%, in accordance with expectations in the markets.
This is the second decision of the new Fed Chair Kevin Warsh, after also in the meeting of the Open Market Committee in June, the interest rate remained unchanged, when the central bank retreated from the assessment that it would decrease sometime during the current year. Warsh emphasized then his firm commitment to returning inflation in the USA to the 2% target, as well as his aspiration to reduce the amount of signals and forecasts that the Fed provides to the markets.
In the press conference after the announcement, Federal Reserve Chair Kevin Warsh adopted a hawkish message in the press conference after the interest rate decision and clarified that the central bank "will not hesitate to act" if it is necessary.
According to him, the nominal and real yields on US government bonds are significantly higher compared to the yields that were in the previous meeting, partly because the markets rely more on economic data and less on prior guidance from the Fed, after the bank reduced the use of forward guidance.
Warsh emphasized that the 2% inflation target is not flexible. "There is no soft inflation target, and there is no soft implied target — at least not as long as this committee is serving", he said. By this, he conveyed a clear message that the Fed is not ready to settle for inflation higher than 2%, even if it is a moderate deviation, and that he is ready to take additional steps to return inflation to the target.
Members of the Open Market Committee (FOMC) voted by a majority of 9 against 3. The three dissenters were the presidents of the regional Fed of Cleveland, Minneapolis, and Dallas — Beth Hammack, Neel Kashkari, and Lorie Logan — who advocated for an additional interest rate hike. The three have expressed in recent months an especially hawkish position, arguing that there is a need for additional monetary tightening to return inflation to the target of 2%, after it remained above the target for more than five years.
The next interest rate decision in Israel is expected only in about a month (1.9), but already now, economists are analyzing what might influence the governor's decision. According to Rafi Gozlan, chief economist at IBI Investment House, "The increase in geopolitical uncertainty affects the local market through several channels, most of which reduce the probability of an interest rate cut", led by: the arena in the Middle East and "the question mark around Israeli involvement, relative weakness in the stock markets that supports a weakening of the shekel, and the potential for a renewed increase in supply constraints and a rise in the inflation environment".
However, he estimates that assuming Trump will not strive for a prolonged confrontation due to the midterm elections in the USA, "a calming of the situation and oil prices may allow one additional reduction move by the end of the year".
Today, at 14:00 (Israel time), the interest rate decision in the UK for the month of July is expected to be published, when the forecast in the market estimates that the interest rate will remain unchanged at a level of 3.75%.
5. Forecast
At the investment house MFS Investment Management, they suggest that investors stop engaging in over-analysis of the central bank's steps, and turn their gaze to the truly critical parameter in the American market, the return on invested capital.
Robert Almeida, the chief strategist and portfolio manager at MFS, estimates that the technology sector and hardware companies that benefited from the artificial intelligence wave are facing significant erosion of profitability, while precisely traditional and less flashy sectors are now offering opportunities for excess return.
"What is important is what will be the return on invested capital for a company or for the market in 6, 12, or 18 months — and what multiplier you are paying for it", explains Almeida. "I experienced a paradigm shift in the capital cycle: in the past, capital financed financial engineering, now, it finances disruptive technology. But the rise in labor costs, capital raising, and competition will weigh on the bottom line".
In his strategic review, Almeida presents a disturbing parallel between the current investment cycle in AI infrastructure and the period that preceded the global financial crisis in 2008. Similar to 2006, when the rise in house prices stopped and prevented leveraged borrowers from refinancing debts, which led to a destructive domino effect, so now doubts regarding the profitability of tech giants could shake the entire supply chain.
"We don't need companies like Anthropic or OpenAI to be unprofitable", warns Almeida. "But once the market starts to doubt the return on invested capital for the big model providers, this will have a widespread effect on the entire supply chain".
Against this backdrop, at MFS, they estimate that cyclical hardware and chip stocks will eventually face a risk of oversupply in the market towards 2028 — both due to the increase in competition from China and due to an expected slowdown in the capital expenditures of tech giants.
Under this counter-approach, Almeida places a strategic long position on "complex growth companies" — companies that present consistent growth in profits above average and enjoy rigid demand. Almeida suggests investing in the stocks of industrial and infrastructure companies, companies like Honeywell, which has risen over 20% since the beginning of the year. These companies provide critical components for building data centers and electric vehicle factories, and trade at high multipliers that indicate long-term structural growth.
Additional stocks that Almeida recommends are software and life sciences stocks. Software players such as Salesforce, MongoDB, and Pegasystems, which provide an infrastructure shell around AI that is difficult to replace, alongside laboratory equipment companies such as Danaher and Thermo Fisher that will provide essential equipment for drug discovery.
Finally, Almeida also recommends stocks of basic consumer goods, and alcohol giants such as Diageo and Pernod Ricard. Almeida rejects the claim that the future generation will stop drinking, and emphasizes that these are especially cheap stocks that need only moderate growth to generate excess returns for investors.
