A Critical Week for Investors Ahead: Your Next Move 7/27/26

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**Mike Santoli** (1:01)
Thank you, Carl. Welcome to the Halftime Report. I'm Mike Santoli, in for Scott Wapner. Front and center this hour, a critical week for your money as earnings for more than a third of the S&P 500 and a Fed rate decision loom large. We'll discuss and debate with the Investment Committee. Joining me for the hour is Joe Terranova, Jim Labenthal, Jason Snipe and Steve Weiss. Thanks for all being here, guys. Thanks very much.
Take a look at the markets.
Backed off earlier, attempts to rally on a broad-based way, the S&P 500 just below the flat line right around 7,400. NASDAQ source of pressure was leading the way to the upside earlier. Chips have sold off. Really dramatic break in crude prices in response to the apparent de-escalation in Iran over the weekend. Ten-year treasury yield, modest decline, just under 465 Joe, I'll start with you here. This market processes every new bit of information as an excuse to rotate or unwind the rotation. And it's apparent again today, look, we didn't rally in a broad way on the de-escalation. So maybe no surprise we're not, you know, I mean, vice versa, you know, actually, that we didn't actually get hit very broadly last week on the re-escalation. And so we're not seeing the inverse now. However, anxiety about AI continues to filter through pressure on semis and a little bit of a short covering bid in software.

**Joe Terranova** (2:20)
Well, first of all, Mike, great to have you here. A little bit of a frustrating day, and I think that's been the consistent theme, hasn't it, for the month of July.
You identify it as rotation. The market, I think, is ultimately trying to figure out where the next leg of momentum ultimately goes. If you look at the momentum factor, we're seeing a precipitous decline, double digit in the month of July. Why is that? Because the momentum factor is directly allocated in the direction of the AI trade, memory, semiconductors, really growth and hyper growth. So I think the question becomes, people will say, well, momentum rolls over. That doesn't mean the end of momentum. Momentum might go to a different place. And the appearance in the month of July is that it's maybe going to financials, maybe it's going to health care. That leads to a frustrating environment, no doubt. And we are in the midst of a very frustrating July period. If you want to try and find some comfort, look at the S&P equal weight, that's the one index that's up modestly for the month. But I think this has to play out over the next several weeks. I wouldn't be really aggressive in trying to identify where that momentum ultimately goes in taking positions. I think really right now, patience is your best position.

**Mike Santoli** (3:28)
You know, Jim, the tricky part of sort of saying this momentum factor unwind is obviously a strong mechanical force. It's been going on for a while, but it also means something else, which is there was a fundamental theme that drove momentum to be what it is. And now you're having a rethink of that theme. And I think broadly speaking, everyone is dealing with a market that at the end of the second quarter seemed over concentrated in AI. Semi's were almost 20% of the index. And there was maybe some over belief in the sustainability here. So are we, you know, how far are we in the process of trying to retreat from those extremes?

**Jim Labenthal** (4:06)
Yeah, thanks Mike. Good to see you as always. But your question went right to where my head was anyway, which is what's the fundamental basis of what Joe, you're speaking about with momentum doing what it's doing. And I think that explanation is very clear. Look at what happened to Google and Tesla last week. They reported high CAPEX numbers and they got beat up for it. Look at a high CAPEX spender like SpaceX, relatively new, but they're going to do a lot of CAPEX in the coming years. And they're getting beat up as well. So clearly the market is saying right now, don't spend. And I think what you're seeing in the chips in particular is the flow through that if these hyperscalers and the likes of Tesla and SpaceX don't spend, then a lot of the growth assumptions that are built into the price of the chips is maybe overblown. And I think what's also feeding into that are the Chinese large language models, these open source models that are showing themselves to have some capabilities, all right?