Mixed Market Open Expected Amid Global Tensions and Strong Chip Earnings
The stock market is set to open with mixed trends following a negative global sentiment triggered by reports of an Iranian attack on a tanker in the Strait of Hormuz. Dual-listed Israeli chip stocks Tower, Nova, and Camtek are expected to drop 3%-4%, despite a recovery in the US chip sector. Asian markets are sharply down, led by Seoul's 8% plunge due to Samsung and SK Hynix shares falling about 10% each, despite Samsung's record Q2 earnings forecast projecting a 19-fold increase in operating profit year-over-year. This has raised investor concerns about the sustainability of the memory chip rally, which saw hundreds of percent gains last year. US futures are mostly down, with Nasdaq contracts falling over 1%.
In Tel Aviv, the market closed higher yesterday after the Bank of Israel cut interest rates by 0.25%, signaling two more cuts this year. The TA-35 rose 1.1%, TA-90 jumped 1.3%, and the banking index surged 1.5% after initial declines. Real estate and insurance sectors also gained, while G City soared over 20% following a premium acquisition deal. Individual stocks like Wiser Globaltech, Qualita, Ampa, Electra, and Econergy rose over 5%, while Delta Brands, Rami Levy, and Doral Energy declined.
US markets opened the week positively, with Nasdaq up 1.1%, S&P 500 up 0.7%, and Dow Jones hitting a record above 53,000 points. Technology and communication sectors led gains, while defensive sectors declined. Chip ETFs rebounded strongly after last week's selloff. Market strategist Anthony Scaglione noted high expectations for chip stocks but sees potential for further gains if fundamentals remain strong. Microsoft announced 4,800 job cuts, mainly in its Xbox division, reflecting AI-era cost efficiencies, while Dell surged after public endorsement from former President Trump.
In bonds, Tel Aviv's bond index gained about 3% year-to-date with yields falling to 2.93%, though analysts warn that Israel's rising debt-to-GDP ratio and geopolitical risks may limit further rate cuts. US Treasury yields remain steady ahead of the Federal Reserve's rate meeting minutes and NATO summit.
Currency markets saw volatility with the shekel weakening before the Bank of Israel rate cut announcement, then recovering. Analyst Yossi Menashe highlighted factors affecting the shekel including local risk premiums and geopolitical tensions. Oil prices edged up amid the Iranian tanker attack and OPEC+ production increase plans, but structural demand weakness and geopolitical uncertainties persist.
Finally, the US Aerospace & Defense ETF (ITA) hit a record high after five consecutive days of gains, driven by strong drone maker AeroVironment earnings and a shift in investor focus toward AI and software-driven defense companies. Analysts note growing selectivity in the sector, favoring electronic warfare and AI platforms over traditional weapons manufacturers. Northrop Grumman and RTX stocks rose significantly, reflecting this technological shift.