Stock and bond prices rose on Monday as the latest signs of easing tensions between the US and Iran drove oil prices lower, alleviating concerns about accelerating inflation. Simultaneously, the yen strengthened to a three-month high after the US and Japan confirmed a joint intervention to support the weak Japanese currency.

As of the time of writing, Dow Jones futures were up 1.08%, S&P 500 futures had gained 0.64%, and Nasdaq futures were 0.32% higher. A heavy schedule of major economic data and corporate earnings reports is expected this week.

In Europe, the pan-European Stoxx 600 index rose 0.4%, led by travel and leisure stocks and automakers. Germany's DAX index hit a new all-time high intraday, recently trading 1.3% higher.

Bruno Schneller, Managing Partner at Erlen Capital Management, stated, "The fundamental environment remains encouraging for the stock market. Corporate earnings are broadly holding up well, and companies with strong pricing power and robust business models continue to outperform."

However, Asian stocks declined, with South Korean chipmakers experiencing significant drops, indicating that the sharp volatility in AI-related stocks is not yet over. July witnessed intense market swings, with ongoing investor concerns about massive capital expenditures in the AI sector and whether these investments can generate returns quickly enough.

In US pre-market trading, among individual stocks, Bristol-Myers Squibb rose over 8%. This followed reports that British pharmaceutical giant AstraZeneca PLC is exploring the acquisition of Bristol-Myers Squibb, which is headquartered in Princeton, New Jersey. Following the news, AstraZeneca PLC's London-listed shares fell more than 7%.

Research released Monday by Florian Ielpo, Macro Head at Lombard Odier Investment Managers, showed that over half of S&P 500 companies have reported earnings, with 86% exceeding market expectations.

A Deluge of Earnings Reports

While the Middle East conflict, AI stock valuations, and inflation concerns continue to dominate the market, traders are also turning their attention to the US July jobs report due Friday to gauge the future path of the Federal Reserve. Space X will release its first quarterly earnings report since its record IPO on Tuesday, and major European companies including HSBC Holdings and Novo Nordisk will also report results.

Alexandre Baradez, Chief Market Analyst at IG Group in Paris, commented, "The geopolitical news this morning is helping the market as oil prices fall, which also eases pressure on yields. But there are still real questions about bond yields, leverage levels, and Fed policy. Until there is clear direction on these fronts, it's hard to say the stock market is completely out of the woods."

Trump Cancels Military Action Against Iran

Brent crude oil fell as much as 7.3% to $81.55 per barrel after US President Donald Trump canceled the planned military operation against Iran.

Iran stated on Monday that negotiations to facilitate the resumption of ship traffic through the Strait of Hormuz are making progress. This came after Trump indicated that talks between the US and Iran would resume following the decision to call off the attack. Supply disruptions caused by the conflict had driven up fuel costs, sparking renewed fears of a spike in inflation and weighing on investor sentiment.

Nick Twidale, Chief Market Analyst at AT Global Markets, said, "If we can see a concrete peace deal, or more importantly, the reopening of the Strait of Hormuz, then the entire market could see a strong relief rally. But for now, different markets will continue to remain volatile, especially as the AI trade remains the dominant theme in equities."

Skylar Montgomery Koning, Macro Strategist at Bloomberg, noted, "The oil market can't fully put the US-Iran conflict behind it yet; risks are still skewed to the upside. The options market still shows investors are more concerned about oil prices rising than falling. This means the market still sees the risk of a supply shock driving prices higher as more likely than a sharp decline in Brent."

Carole Nakhle of Crystol Energy stated that the oil market is taking a "cautiously optimistic" view of the latest US-Iran talks.

Rare Joint US-Japan Intervention

US Treasury yields fell as oil prices dropped. US Treasuries rallied across the board, with the benchmark 10-year yield falling 5 basis points to 4.69%, retreating from its highest level since January. During July, the 30-year bond yield accumulated a rise of about 37 basis points as investors sought direction amid the Iran conflict and Fed policy outlook.

The Japanese yen surged sharply on speculation that authorities might intervene again in the market to support the currency after coordinated action by the US and Japan last week. The US dollar index fell 0.2%.

In early Tokyo trading, the yen quickly reversed a small decline, appreciating as much as 1.4% against the dollar. It later pared some of those gains, trading around 156.70 yen per dollar during the London session. Market participants suggested that nervous trader sentiment or algorithmic trading may have amplified the move.

Japan's Ministry of Finance stated that it coordinated a joint action with the US Treasury on July 31st US time and indicated it would not hesitate to take further coordinated intervention measures in the future.

Industry veterans noted that Japan is the largest foreign holder of US Treasuries, and one of Washington's worst fears is that Japan might be forced to sell massive amounts of US debt to conduct unilateral currency intervention.

Louis Lu, Chief Asia Economist at Oxford Economics, suggested this might be a core reason for the US decision to participate in the intervention. "The US move has an element of self-preservation. Aggressive fiscal policy in Japan could trigger significant market volatility, which could spill over to the US Treasury market and destabilize the dollar," he said.

President Trump said on Sunday that the US is helping Japan support the yen as a sign of the friendly relations between the two countries and to help stabilize the global economy.

Japan had previously intervened in the currency market unilaterally from late April to early May, but the yen's rebound was brief. The Bank of Japan's interest rate hike in June also failed to provide a significant boost. This highlights the challenge facing Japanese policymakers: rising oil prices increase import costs on one hand, while on the other, there remains a significant interest rate differential between Japan and other major economies.

Julia Wang, Chief Investment Officer for North Asia at Nomura International, said, "The market may continue to see more volatility over the next week or so, with the yen potentially strengthening in phases. But we don't think this changes the overall direction of the dollar-yen pair. Once the intervention effect fades, the dollar could continue to rise against the yen."

Prior to the latest intervention, the yen had been hovering near its 40-year low. The dollar-yen pair had previously reached 163.99. US regulatory data shows that net short yen positions in the market were around $12.5 billion, the highest level in two years.

Masahiko Loo, Senior Fixed Income Strategist at State Street Investment Management, indicated that the 155 level is a key area for the market to watch in the short term.

Bitcoin Under Pressure

Bitcoin fell on concerns about an ongoing attack on a popular Bitcoin storage device. Canadian company Coinkite Inc. urged Coldcard digital wallet users to transfer their Bitcoin after security researchers claimed a software vulnerability could allow attackers to steal approximately $70 million worth of cryptocurrency in under an hour.

The market will focus heavily on US employment data this week, as investors look to gauge the resilience of the US labor market. Job openings data is due on Tuesday, the ADP employment report on Wednesday, and the July jobs report on Friday.

US Stocks Face Non-Farm Payrolls and Super Earnings Week

This week, global markets are bracing for the latest US non-farm payrolls data, Purchasing Managers' Index (PMI) data, and a new wave of intensive US corporate earnings releases.

On Friday, the US Bureau of Labor Statistics will release the July non-farm payrolls report. If July employment growth significantly exceeds expectations, Treasury yields and the dollar could continue to climb. Conversely, if the labor market cools rapidly, the market's focus might shift from inflation back to economic growth risks.

On the earnings front, Space X will also report its first quarterly earnings since its IPO on Tuesday after the market close. Given the significant volatility in Space X's stock price since its listing, this initial report will help investors assess the company's business model, profitability, and cash flow to see if they can support its high valuation.

Additionally, earnings reports from Palantir, AMD, and SanDisk will serve as important windows for the market to gauge demand for AI software and data center chip growth.

Wall Street Consensus: AI Investment Enters a 'Verification Phase,' Only Profitability Can Navigate the Volatility

As the second-quarter earnings season of 2026 winds down, global investors are undergoing a cognitive shift: the artificial intelligence (AI) narrative is far from over, but the days of universal gains, where 'a rising tide lifts all boats,' are gone. Faced with massive corporate investments, the market is now voting with its feet, strictly distinguishing between 'money burners' and 'rent collectors.'

Despite this, some major Wall Street banks, like Goldman Sachs, believe the current sharp volatility in the AI sector does not signal the start of a market crash. Instead, they view it as a normal consolidation within a long-term bull market supported by strong earnings. Notably, the force underpinning the market is broadening beyond a single AI winner, providing a thicker safety cushion for the current bull market.

Goldman Sachs emphasizes that the S&P 500 equal-weight index, which measures market breadth, is steadily rising alongside improving earnings expectations. This suggests that even excluding the immense push from a few tech giants, the broader corporate fundamentals remain healthy.

Major Wall Street Banks: The Most Intense Selling in US Stocks May Be Over, but 'Bottom Fishing' Still Carries Risk

After a month of intense volatility, the US stock market stands at a critical crossroads. On one hand, data from institutions like JPMorgan Chase indicates that the multi-month deleveraging process in the tech sector is nearing its end. Leverage in ETFs, net exposure of hedge funds, and CTA positions have all fallen significantly from extreme levels.

On the other hand, inflation concerns are re-emerging, the interest rate path remains uncertain, and doubts about the returns on AI capital expenditure persist. Macro risks are replacing position unwinding as the core driver of market pricing.

Entering August, major Wall Street banks such as JPMorgan Chase, Goldman Sachs, and Societe Generale have released dense strategy reports, outlining a complex picture of 'deleveraging nearing its end, valuations becoming reasonable again, but macro risks still accumulating.'

For example, Goldman Sachs' top trading team warned that while the deleveraging process is close to completion, risks have not fully cleared, and multiple key events will continue to weigh on the market. Due to seasonal fund outflows and a lack of institutional offensive appetite, the August US stock market lacks the 'fuel' for an upward move.

Key Stocks

AstraZeneca PLC and Bristol-Myers Squibb — The Financial Times reported that the two pharmaceutical companies are in talks about a merger. Following the news, their stock prices moved in opposite directions. AstraZeneca PLC fell over 4%, while Bristol-Myers Squibb surged over 5%.

ArcelorMittal rose over 2%. The company announced a deepening of its technical cooperation with Microsoft. ArcelorMittal stated that the Microsoft Azure cloud platform will serve as the core foundation for upgrading its factory technology systems, and other Microsoft infrastructure services will be implemented within the enterprise. Microsoft's shares also rose 2%.

Alibaba rose 4% after releasing a new AI large model on Monday. Tongyi Qianwen Qwen3.8-Max is one of Alibaba's most powerful models to date and will be officially launched next week.

S&P Dow Jones Indices announced on Friday that Ferguson Enterprises will be added to the S&P 500 index. Ferguson's shares surged nearly 8%. The stock will replace Electronic Arts before the market opens on Wednesday.

Wells Fargo downgraded eBay from 'Equal Weight' to 'Underweight,' causing the e-commerce platform's shares to fall over 3%. The investment bank stated that eBay's completed acquisition of Depop last week will pressure earnings for fiscal year 2027. Additionally, marketing spending may increase to compete with rivals targeting the acquired brands.

Memory chip sector — Following last week's volatility, memory chip stocks were generally weaker at the start of this week. SanDisk and Micron Technology both fell over 3%, while Seagate Technology dropped 2.5%.

Circle Internet Group — Morgan Stanley downgraded the stablecoin issuer from 'Equal Weight' to 'Underweight,' causing its shares to fall 5%. The investment bank believes the company faces short-term operational pressures and long-term structural headwinds. The core factor is the USD-pegged stablecoin USDC, for which the outlook for circulation in 2027 is considered unfavorable.

Disclaimer: The content above is for informational purposes only and does not constitute investment advice.