WS #12892

The dominant narrative remains the AI/semiconductor selloff, which is ESCALATING. The cost of protecting Nvidia debt against default surged by the most on record, and South Korea's Kospi plunged 11%, dragging global risk assets. Bitcoin fell 2% as the Senate shelved the Crypto Clarity Act. However, a massive wave of Q2 earnings beats provides a strong counter-narrative: Coca-Cola, Sherwin-Williams, Corning, PayPal, American Tower, Incyte, IQVIA, Repligen, and others all beat estimates and raised guidance. Coca-Cola raised its full-year EPS forecast. This earnings strength may support a rotation out of AI into value/defensive names. Geopolitically, the US and Iran halted strikes for a third straight day, with Trump claiming a ceasefire is near, pushing oil prices lower. This de-escalation counters the energy crisis narrative. A magnitude 7.1 earthquake struck southern Japan, triggering tsunami warnings, but no major market impact yet. Meta and BlackRock announced a $14B AI data center partnership in El Paso, but this is overshadowed by the broader AI selloff. The AI/semiconductor selloff is ESCALATING, while the oil crisis is DE-ESCALATING.