Market Focus: Micron Earnings, PCE Data Drive Week
Key Metrics
| Metric | Value | Change | Baseline |
|---|---|---|---|
| S&P 500 (^GSPC) | 7,500.58 | +1.08% | Weekly +1.4% |
| Nasdaq (^IXIC) | - | +1.91% | Weekly +2.7% |
| Gas Price (National Avg) | $3.99 | -11.1% | $4.50 a month ago |
| PCE Inflation (Expected) | +4.1% YoY | +0.3% | +3.8% prior |
Market Outlook: Key Data Points Dominate Trading Week
Investors enter the trading week with a market pushed and pulled in multiple directions. The Nasdaq Composite led gains with a 1.9% rise on Thursday, bringing its five-day return to 2.7%, while the S&P 500 closed 1.1% higher to end the week up 1.4%. This comes after a Middle East peace deal and a surprisingly hawkish Federal Reserve meeting, setting up a week where economic data and corporate earnings will take center stage.
Semiconductor Sector in Focus
Micron Technology's (MU) earnings on Wednesday will provide critical insight into the semiconductor trade, which has seen significant momentum recently. The stock has climbed approximately 360% in the past six months, with analysts expecting continued strength in memory demand.
"We believe DRAM bit demand is still set to vastly outpace supply growth in the coming years driven by more memory-intensive AI workloads," UBS analyst Melissa Weathers wrote in a client note. Weathers raised the bank's price target for Micron to $1,500 per share, representing a roughly 31% premium over where the stock traded on Thursday.
UBS isn't alone in this bullish outlook. Morgan Stanley raised its price target for Western Digital (WDC) to $650 from $488, maintaining an Overweight rating. In Asia, SK Hynix has raised unit prices as their costs have risen from tightened supply.
"Memory prices have materially increased in recent months as fabs shift capacity to produce high bandwidth memory (HBM) to serve surging datacenter demand," UBS analyst Nate Svensson noted to clients. "Supply for memory is expected to be constrained through 2027 and into 2028, even with new supply expected to hit the market next year."
Inflation Data Takes Center Stage
The May PCE figures on Thursday represent the Fed's preferred measure of inflation and will be closely watched after both consumer prices and wholesale prices for the month read hotter than expected.
If PCE comes in similarly hot, that would support the nine members of the FOMC who indicated they see a rate hike coming in 2026—a move the market has now fully priced in. Traders are pricing a greater than 70% chance of a quarter-point hike by October, earlier than previously expected.
"The Committee will deliver price stability," stated Kevin Warsh in his first press conference as Fed chairman. James Egelhof, chief US economist at BNP Paribas, noted that "this statement, shorn of its Powell-era conditionality on the labor market, suggested that officials now see inflation as the primary policy risk and one requiring action even if that could pose a risk to employment."
Energy Prices Provide Relief
Gas prices fell below $4 per gallon on Thursday, reaching a national average of $3.99 and providing relief to consumers just as the summer driving season begins. This represents a significant decline from the national average above $4.50 per gallon observed one month ago during the peak of the Iran conflict.
"National average prices should head toward $3.70/gal now that a deal with Iran has been signed—and seeing movements resume in the Strait [of Hormuz]," GasBuddy's Patrick de Haan said Thursday. "Good news for motorists. Diesel will soon fall below $5/gal as well."
The decline in gas prices tracks with falling crude oil prices. Brent crude has fallen roughly 13% over the past five trading sessions, putting it below $80 per barrel for the first time since the early days of the war. Contracts on US benchmark WTI crude have shed a stronger 15% to trade below $75.
Economic and Earnings Calendar
Monday
- Economic data: No notable economic data
- Earnings: Fervo Energy Company (FRVO)
Tuesday
- Economic data: ADP weekly employment change (+25,500 previously); Philadelphia Fed non-manufacturing activity (-23.6 previously); S&P Global US manufacturing PMI (54.8 expected); S&P Global US services PMI (51.0 expected)
- Earnings: FedEx (FDX), Cerebras Systems (CBRS), Carnival Corporation (CCL)
Wednesday
- Economic data: MBA mortgage applications (-3.8% previously); New home sales, month-on-month, May (+3.3% expected)
- Earnings: Micron Technology (MU), Paychex (PAYX), Jefferies Financial Group (JEF), Levi Strauss & Co. (LEVI)
Thursday
- Economic data: Personal income (+0.4% expected); Personal spending (+0.5% expected); PCE price index (+0.4% MoM, +4.1% YoY expected); Core PCE (+0.3% MoM, +3.4% YoY expected)
- Earnings: Darden Restaurants (DRI), McCormick & Company (MKC), Acuity (AYI), BlackBerry (BB)
Friday
- Economic data: U. Mich. sentiment (50.5 expected); U. Mich. inflation expectations (4.6% 1-year, 3.4% 5-10 year)
- Earnings: No notable earnings
Outlook and Risks
The market faces several key uncertainties this week:
Inflation Persistence: Hotter-than-expected PCE data could accelerate Fed tightening expectations, potentially weighing on growth stocks despite recent strength.
Semiconductor Cycle: While demand for memory appears strong, any signs of weakening demand from datacenter customers could pressure the semiconductor sector.
Geopolitical Risks: The Middle East peace deal remains fragile, and renewed tensions could quickly reverse the recent decline in energy prices.
Economic Growth: With inflation remaining elevated, the risk of the Fed over-tightening and pushing the economy into recession remains a key concern for investors.