Market at a Glance: AI Stocks Pull Back as Inflation Cools

Week of July 20, 2026

Markets took a step backward last week as investors reconsidered the lofty expectations surrounding artificial intelligence and semiconductor companies. At the same time, inflation data improved, consumers continued spending, and the broader economy showed few signs of an immediate slowdown.

In other words, it was not a week where every piece of news was bad. It was a week where investors became a little more selective.

Last Week’s Market Performance

For the week ending Friday, July 17:

• S&P 500: down 1.6%

• Nasdaq Composite: down 2.9%

• Dow Jones Industrial Average: down 0.9%

• Russell 2000: down 0.5%

The technology-heavy Nasdaq experienced the largest decline as semiconductor and other AI-related stocks came under pressure. Despite the pullback, all four major indexes remained positive for 2026 through Friday’s close.[1]

Why Did the Market Fall?

Investors Questioned AI Valuations

Artificial intelligence has been one of the market’s biggest growth stories, but strong long-term expectations can also create high stock valuations.

Last week, investors appeared less willing to pay increasingly expensive prices for some AI and semiconductor companies. The decline intensified Friday, pulling the S&P 500 down 1% and the Nasdaq down 1.4% for the day.[1]

This does not necessarily mean that the AI investment trend is ending. It does mean that companies may need to demonstrate that their enormous spending on chips, data centers, and infrastructure is producing sustainable revenue and profits.

That makes this week’s corporate earnings reports particularly important.

Inflation Provided Some Encouragement

The Consumer Price Index declined 0.4% in June, while the annual inflation rate slowed from 4.2% to 3.5%. Core inflation, which excludes food and energy, increased 2.6% over the previous 12 months.[2]

Producer prices also declined 0.3% during June. However, the Producer Price Index remained 5.5% higher than it was one year earlier.[3]

That creates a mixed inflation picture:

Consumer inflation moved in the right direction, but price pressures have not disappeared. Investors will continue watching whether lower inflation persists or whether rising energy prices begin pushing inflation higher again.

The Economy Remained Relatively Steady

Other economic reports suggested that the economy continued growing at a moderate pace.

U.S. retail and food-service sales increased 0.2% in June and were 6.7% higher than one year earlier.[4]

Industrial production increased 0.1% in June. Production grew at a 4% annualized rate during the second quarter, although manufacturing output was unchanged during June itself.[5]

Initial unemployment claims also declined to 208,000 for the week ending July 11, suggesting that employers were not substantially increasing layoffs.[6]

Taken together, the data showed an economy that was still moving forward, even though growth was not especially rapid.

Oil Prices Added More Uncertainty

Oil prices rose sharply Friday as conflict involving Iran increased concerns about global energy supplies. Brent crude gained 4.6% during Friday’s session.[1]

Oil matters far beyond the energy sector. Higher oil prices can eventually affect:

• Gasoline and transportation costs

• Airline and shipping expenses

• Manufacturing costs

• Consumer spending

• Inflation expectations

• Interest-rate decisions

Energy prices can change quickly when geopolitical tensions are involved, so oil will remain an important market indicator this week.

What Investors Should Watch This Week

Major Corporate Earnings

Several large technology companies are scheduled to report second-quarter results.

Alphabet and IBM are scheduled to release earnings Wednesday, July 22. Intel is scheduled to report Thursday, July 23.[7]

Investors will be paying close attention to:

• Revenue generated from AI products

• Spending on data centers and computing infrastructure

• Profit margins

• Management’s outlook for the remainder of 2026

• Whether AI investments are beginning to produce measurable returns

Strong results could help stabilize technology stocks. Disappointing guidance could create additional volatility.

Housing and Employment Data

Weekly unemployment claims will provide another update on the labor market.

The government is also scheduled to release June new-home sales Friday, July 24. Housing remains sensitive to mortgage rates, affordability, and consumer confidence.[8]

The Upcoming Federal Reserve Meeting

The Federal Reserve’s next policy meeting will take place July 28–29.[9]

Although that meeting is next week, markets may begin positioning ahead of it. Investors will be evaluating whether cooler inflation gives the Federal Reserve room to remain patient or whether energy prices and other inflation risks could influence its decision.

What Does This Mean for Long-Term Investors?

A losing week can feel significant when financial headlines focus on every market movement. However, a one-week decline does not automatically change a long-term financial plan.

Markets regularly rotate between industries. The companies leading the market one month may lag during the next. That is one reason diversification, appropriate risk levels, and disciplined rebalancing can be more dependable than attempting to predict each short-term move.

To borrow a lesson from football: you generally do not throw away the entire playbook because of one ugly possession.

Investors should instead consider whether:

• Their portfolio matches their time horizon

• Their risk level remains appropriate

• Their investments are sufficiently diversified

• Their emergency savings are adequate

• Their contributions remain consistent

• Their retirement or income strategy is still on track

For additional information, read What Is an ETF? to learn how diversified funds work. Investors wondering whether they have enough money to begin can also read How Much Do I Need to Invest?

The Bottom Line

Last week’s market decline was driven primarily by weakness in technology and AI-related companies. Inflation improved, consumer spending remained positive, and the labor market continued to appear stable.

This week, earnings reports, oil prices, housing data, and expectations for the upcoming Federal Reserve meeting will likely receive the most attention.

Volatility may continue, but investors should be careful not to let one week of market movement outweigh years of financial planning.

Liberty Point Financial helps individuals and families throughout Northern Utah and across the country create investment strategies based on their goals, risk tolerance, and financial circumstances.

Sources

[1] Associated Press, “How Major U.S. Stock Indexes Fared Friday,” July 17, 2026.
[2] U.S. Bureau of Labor Statistics, Consumer Price Index, June 2026.
[3] U.S. Bureau of Labor Statistics, Producer Price Index, June 2026.
[4] U.S. Census Bureau, Advance Monthly Retail Sales, June 2026.
[5] Federal Reserve, Industrial Production and Capacity Utilization, June 2026.
[6] U.S. Department of Labor, Unemployment Insurance Weekly Claims.
[7] Alphabet, IBM, and Intel investor-relations calendars.
[8] U.S. Census Bureau, Economic Indicator Release Schedule.
[9] Federal Reserve, 2026 FOMC Meeting Calendar.

Disclosure

This material is provided for informational and educational purposes only and should not be considered individualized investment, tax, or legal advice. Investing involves risk, including the potential loss of principal. Market indexes are unmanaged and cannot be invested in directly. Past performance does not guarantee future results. Consult an appropriately qualified professional regarding your individual circumstances.