Global Market Declines Impact Israeli Stocks and Shekel Ahead of Fed Rate Decision

The stock market is expected to open lower following significant declines in U.S. tech stocks and negative global sentiment. Despite pressure on U.S. chip stocks, Israeli dual-listed shares are anticipated to rise slightly by about 0.3%. Tower Semiconductor and Camtek are forecasted to increase by approximately 1% and 2.4%, respectively, while software companies Nice and Formula Systems may jump 6% and 2% due to gains in the U.S. software sector. Asian markets are sharply down, with Tokyo falling 4% and Seoul nearly 10%, dragged by Samsung and SK Hynix, while Hong Kong remains stable and Shanghai drops 1%. Futures for Nasdaq, S&P 500, and Dow Jones are mostly down or flat. The Israeli shekel weakened by about 0.6% amid these global declines, crossing below 3.06 shekels per dollar.

Yesterday, geopolitical developments such as potential Abraham Accords progress with Saudi Arabia and a U.S.-Iran ceasefire failed to boost the Tel Aviv Stock Exchange, which closed down 2.1%, led by chip stocks. Tower’s shares plunged over 14%, Camtek and Nova fell about 7%. A key factor was a report that a Chinese state-backed company began mass-producing domestic DUV lithography machines, critical for advanced chip manufacturing, signaling Beijing’s push for chip supply chain independence. Additionally, Chinese chipmaker ChangXin Memory Technologies surged 470% on its Shanghai debut, becoming the largest chip company by market cap in China. The security sector also dropped 3.7% after a recent 9% rise, with declines in major defense firms like Elbit Systems and Eye-D.

July is ending with positive trends in Israeli indices, up 1%-2% after a sharp 10% drop in June. Banks and energy stocks lead gains with about 9%-10% increases, while real estate and SME60 stocks decline. In New York, the market closed mixed amid chip sector weakness and oil price drops. The SOXX ETF fell 2%, hitting a two-month low, with notable declines in ASML, Nvidia, AMD, and Micron. Nvidia’s drop is linked to rising credit default swap costs amid concerns it may provide up to $250 billion in guarantees for OpenAI projects and a $500 billion initiative with SK Hynix, increasing its financial exposure beyond chip sales. Apple surpassed Nvidia as the world’s second-largest company by market cap, reaching $4.95 trillion.

In bonds, Bank of Jerusalem issued a private AA-rated mortgage-backed bond worth about 530 million shekels, reflecting high-quality assets. U.S. Treasury yields fell amid the U.S.-Iran ceasefire, with 10-year yields down to 4.64% and 2-year yields at 5.12%, still high enough to pressure equities.

The shekel’s volatility continues, influenced more by geopolitical events and U.S. policy than fundamentals, with expected trading between 3.03 and 3.08 shekels per dollar. Oil prices plunged over 7%-9% due to the ceasefire, with Brent near $88 and WTI around $82.4 per barrel.

The Federal Reserve is set to announce its interest rate decision Wednesday, likely holding at 3.75%, though markets price a 38% chance of a hike. Experts expect no major policy changes or new economic forecasts, with Chair Jerome Powell avoiding forward guidance. The Bank of Japan will also decide on rates Friday amid accelerating inflation and a weak yen, likely maintaining the 1% rate but updating growth and inflation forecasts. Unexpected moves could impact global liquidity and markets.

In tech stocks, U.S. cybersecurity firm SailPoint, listed on Nasdaq about 18 months ago, has lost 35% of its value but is rated overweight by Cantor with a 53.8% upside target. Despite a double-digit drop this year, SailPoint benefits from AI agent growth and projects over 30% annual recurring revenue growth through 2029, with significant free cash flow. Cantor highlights its strong technological moat and data expertise as competitive advantages.