TSM Blowout, Chip Rout Test Wall Street’s Record Rally

TSMC blowout meets a 7% Kospi rout as Wall Street awaits June retail sales, jobless claims, UNH beat, and Netflix earnings. Cool PPI cut July hike odds to 10%.

TLDR

Wall Street closed higher for a second straight session on Wednesday after a cool June PPI print extended the disinflation story from Tuesday’s CPI. The tape walks into Thursday facing a strange split: TSMC delivered a Q2 blowout overnight with a 77 percent profit surge and a $60-64B capex raise, but Asian chips still cracked. South Korea’s Kospi tumbled around 7 percent, Japan’s Nikkei 225 fell 2.79 percent to close near 66,835, and TSMC’s US ADRs dropped 3.2 percent premarket on a higher-price warning. At 8:30 AM ET the market gets June retail sales, weekly jobless claims, the Philadelphia Fed Manufacturing Index, and import/export prices in a single window. UnitedHealth and GE Aerospace beat before the open. Netflix reports after the close. Overnight, the US launched fresh airstrikes on Iran with the Wall Street Journal reporting Trump was briefed on expanding the conflict.

Market Regime

The two catalysts of the week – cool CPI on Tuesday and cool PPI on Wednesday – have taken the July hike out of the conversation. CME FedWatch now shows just a 10.2 percent probability of a 25 basis point hike at the July meeting, down from around 42 percent on Monday. October remains the disputed date: traders continue to price in roughly a 60 percent chance that rates end that meeting at least a quarter point higher. Yesterday’s Wall Street tape rewarded the megacap complex over semis, with Apple hitting a fresh all-time high, Alphabet, Amazon, Meta and Microsoft all up around 3 percent, while Micron fell 9 percent and AMD, Intel, and Marvell each dropped more than 5 percent.

That rotation extended overnight in Asia at a much larger scale. Kospi lost around 7 percent, its worst single-day drop this year, and the Nikkei fell 2.79 percent even after TSMC’s blowout, which normally lifts the entire supply chain. The signal is that investors have started to scrutinize AI-related valuations more carefully rather than take every capex-raise headline as unconditional good news. TSMC raised 2026 capital spending guidance by up to 14 percent to $60-64B from $52-56B and committed an additional $100B to its Arizona footprint, and the stock still fell 3.2 percent in US premarket. The read is that at these prices, an incremental capex raise is being interpreted as a margin worry rather than a demand tailwind.

Bullish Factors

• June PPI came in cool: Headline fell 0.3 percent month over month against a 0.0 percent consensus, with annual PPI at 5.5 percent versus the 6.2 percent forecast. Core PPI rose 0.2 percent, below the 0.3 percent estimate; core PPI ex trade services rose just 0.1 percent and is up 5.1 percent year over year.
• TSMC Q2 blowout: Revenue T$706.6B beat the T$632.6B consensus with profit up around 77 percent year over year. 2026 capex raised to $60-64B from $52-56B on continued strong AI demand. Additional $100B committed to Arizona on top of the previously announced $165B.
• Megacap rotation continues: Apple hit a fresh all-time high with a 4 percent Wednesday gain, Alphabet +3.17 percent, Meta +3.07 percent, Amazon +3.02 percent, Microsoft +2.78 percent. Financials also stayed strong with BAC, BNY, GS, JPM, MTB, MS, and BLK all touching 52-week highs.
• July hike odds collapsed: CME FedWatch shows just 10.2 percent probability of a July hike, down from 42 percent on Monday, letting duration-sensitive names run.
• BlackRock ATH: BLK jumped more than 6 percent Wednesday – its best session in over a year – after reporting Q2 earnings with iShares ETF business assets surpassing $6 trillion.
• Morgan Stanley record: MS posted $3.46 EPS versus $2.94 estimate on record revenue of $21.35B versus $19.64B, with strength across trading and wealth management.
• US strikes largely ignored: Fresh US airstrikes on Iran overnight and further tensions in the Strait of Hormuz were shrugged off by risk assets, keeping the disinflation-driven rally intact.

Bearish Factors

• Asia chip rout: Kospi -7 percent, Nikkei -2.79 percent, Shanghai down 1.9 percent, with the Philadelphia Semiconductor Index (SOX) now down roughly 15 percent from its late-June peak. Rotation out of semis has become a global de-risking event.
• TSMC premarket softness: TSM ADRs -3.2 percent in US premarket despite the beat, on price-raise commentary and market discomfort with a capex profile that keeps compounding.
• Iran escalation risk: The Wall Street Journal reported Trump was briefed on options to widen the Iran conflict, including additional bombing runs and potential ground deployment. Any material escalation risks re-lifting crude and undoing the June-PPI relief.
• SPX still under 1 percent from record: The S&P closed Wednesday at 7,572.40, roughly 1 percent from its June record. That leaves very little room for a disappointing retail sales or Netflix print.
• SpaceX broke IPO price: SPCX fell below $135 for the first time on a fourth-straight losing session, a headline drag on the mega-IPO narrative.
• Pentair CFO exit and cut guide: PNR -20.7 percent on Q2 revenue guide cut plus CFO Nicholas Brazis departure. Elevance -8.3 percent as managed care pulled back into UNH.
• Warsh still hawkish: The Fed Chair told the Senate on Wednesday that the committee has “no tolerance for persistently elevated inflation.” One cool print does not clear the runway.

Asian Markets This Morning

The overnight tape reset the AI-trade sentiment sharply. South Korea’s Kospi tumbled around 7 percent, its deepest one-day drop of 2026, led by semiconductor names that unwound the Kospi’s early-week 6.3 percent open-day surge. Japan’s Nikkei 225 fell 2.79 percent to close at 66,835, shedding nearly 1,915 points in a session that saw the Topix drop in line and Advantest, Tokyo Electron, and Lasertec all sell off. The move came despite TSMC’s blowout print – normally a supply-chain positive – and reflects investors questioning whether AI capex is being paid for with margin discipline or with balance sheet risk.

The picture in China was more mixed. Hong Kong’s Hang Seng advanced around 1.3 percent to about 25,008, helped by tech and export data. Shanghai’s Composite slipped roughly 1.9 percent to 3,882 as investors digested a soft China Q2 GDP release from Wednesday. Australia’s ASX 200 was firmer and India’s Nifty 50 futures were steady. The clean signal: North Asian benchmarks are highly correlated to the AI supply chain, and today’s rout is not about macro – it is about the semi complex being repriced from record highs.

What Moved Wall Street Yesterday

The S&P 500 gained 0.38 percent to close at 7,572.40, the Nasdaq Composite added 0.62 percent to 26,269.23, the Dow Jones Industrial Average rose 0.29 percent (up 150.37 points) to 52,658.64, and the Russell 2000 climbed 0.39 percent to close near 2,976. It was a second straight advance driven entirely by inflation relief: June PPI fell 0.3 percent month over month against a 0.0 percent consensus, and core PPI rose just 0.2 percent versus the 0.3 percent estimate. Two-year Treasury yields fell 6.5 basis points to 4.126 percent and 10-year yields fell 4.2 basis points to 4.545 percent. The dollar softened. The VIX slid 3.9 percent to 16.50.

Under the hood, the rotation from Tuesday intensified. Megacaps led with Apple up 4 percent to a fresh all-time high, Alphabet +3.17 percent, Meta +3.07 percent, Amazon +3.02 percent, Microsoft +2.78 percent. Financials extended their earnings-driven leg with BAC, BNY, GS, JPM, MTB, MS, and BLK all touching 52-week highs, and BlackRock jumped over 6 percent on its Q2 beat. On the losing side, memory-chip maker Micron fell around 9 percent, and AMD, Intel, and Marvell each dropped more than 5 percent as the semiconductor rotation continued. Pentair collapsed 20.7 percent after a Q2 revenue guide cut and CFO departure. Elevance Health lost 8.3 percent on managed care weakness ahead of UnitedHealth’s print. SpaceX slipped 2 percent to break below its $135 IPO price.

Assets in Focus

TSM

TSMC posted a Q2 blowout with revenue of T$706.6B versus T$632.6B expected and profit surging around 77 percent year over year, driven by advanced-node pricing power and the ramp of the 2nm N2 production node. Management raised 2026 capex to a $60-64B range from $52-56B, an increase of up to 14 percent, and committed an additional $100B to its Arizona footprint. The stock, however, fell 3.2 percent in US premarket. The market is reading TSMC’s price-raise commentary as a margin risk for its customers, and the aggressive capex profile is being viewed as a two-sided story: bullish for demand, cautious for near-term free cash flow. Every AI-linked name across the semi supply chain traded off overnight as Kospi and Nikkei took the brunt of the reset.

NFLX

Netflix reports after the close and is the most-watched name of the day. Consensus wants roughly $7.10 in EPS on $11.05B in revenue. Focus items are ad-supported tier subscriber growth, live-sports monetization progress, content-spend guide, and any early read on H2 pricing. With Apple, Alphabet, Meta, and Amazon all up around 3 percent yesterday on the same rotation trade, a Netflix beat has room to extend the megacap leadership. A miss is the single biggest downside catalyst on tonight’s tape.

UNH

UnitedHealth beat before the open with a Q2 print that came in ahead of consensus on both EPS and revenue. The focus for the tape is any refresh to the full-year guide after H1 headwinds tied to Medicare Advantage rate resets and utilization trends. Managed care as a group traded off yesterday even after Elevance beat, so UNH’s guide language matters more than the print itself into next week’s peer reports.

AAPL

Apple hit a fresh all-time high on Wednesday, up 4 percent, taking year-to-date gains to roughly 22 percent. The setup into the July 30 earnings print is now tighter than the tape implies, with the calendar putting the report on top of the Q2 GDP advance estimate and the Bank of Japan decision. Any pullback in the rest of the megacap complex on today’s Netflix or retail sales prints would test whether Apple’s leadership holds without the group tailwind.

NSDQ100

The Nasdaq 100 sits inside a rising range with the semi complex weakening but megacaps compensating. US100 futures were subdued overnight after Wednesday’s 0.62 percent Composite gain. First resistance is at the June range top around 26,400; first support is at 26,000 (Wednesday intraday low area); major support is at 25,600 (Monday session low). A cool retail sales print plus a Netflix beat keeps the index bid; a hot retail sales print plus a Netflix miss is the direct downside combo.

XLE

Energy remains reactive to the Iran escalation. Trump’s decision to scrap the 20 percent Hormuz shipper fee earlier in the week eased crude, but fresh US airstrikes overnight and Wall Street Journal reporting on expanded conflict options have kept the risk premium alive. WTI and Brent both ticked up into Thursday, and any material escalation into ground deployment or persistent oil supply disruption would flip the sector positioning back to its early-July regime.

Index Levels to Watch

S&P 500 (7,572.40 close)

• Immediate resistance: 7,650 (June record area, ~1 percent above close)
• First support: 7,500 (round-number pivot)
• Major support: 7,470 (June breakout retest)

Nasdaq Composite (26,269.23 close)

• Immediate resistance: 26,400 (June range top)
• First support: 26,000 (Wednesday intraday low)
• Major support: 25,600 (Monday session low)

Nikkei 225 (66,835 close today)

• Immediate resistance: 68,000 (Tuesday close area)
• First support: 66,000 (last week’s swing low)
• Major support: 65,000 (June lower channel)

Disclaimer

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