The Daily: Waiting on GOOGL (and TSLA)

MACRO - What’s Driving Overnight Risk?

Overnight Price Action

• Asia: Mixed; MSCI Asia Pacific rose 0.3% after giving back gains of as much as 1.7%, with tech shares in South Korea, Japan, and Taiwan losing momentum intraday
• Europe: Softer; Euro Stoxx 50 fell 0.3%, while the FTSE 100 traded flat after U.K. CPI cooled more than expected
• U.S.: Futures lower; Nasdaq contracts are leading the downside with a decline near 0.8% before Alphabet and Tesla earnings
• Rates: Treasury yields are firmer; oil risk, tariff headlines, and today’s 20Y auction keep duration under pressure
• FX: Dollar firmer; tariff risk, Gulf stress, and a cautious pre-earnings tape are supporting the U.S. Dollar
• Commodities: Oil is higher again; crude remains bid as Hormuz traffic slows, the Red Sea threat grows, and EIA inventory data arrives later this morning

Catalysts

• U.K. CPI cooled to 2.6% y/y in June, below the 2.7% forecast and the lowest since March 2025, while core CPI held at 2.6% y/y, above expectations for a dip to 2.5%, showing the headline decline came mainly from lower fuel costs.
• U.S. crude inventories are expected to fall by 1.5M barrels for the week ending July 17, but API estimated a 2.6M barrel build.
• Hormuz traffic fell again Tuesday, with only three commodity ships observed and no VLCCs or LNG tankers reported. Trump minimized the prospect of immediate Iran talks and vowed to respond if the Houthis disrupt Red Sea shipping.
• The U.S. is reportedly preparing tariffs of at least 10% on 60 trading partners by Friday, citing forced-labor standards.
• Trump said imported generic drugs will face a 100% duty starting in August 2028, rising to 200% in August 2029 if production is not moved to the U.S.
• Alphabet and Tesla report after the close, putting AI capex, cloud growth, EV margins, and valuation risk in the center of the tape.
• Super Micro rose sharply after saying quarterly orders topped $60B and gross margins should land between 15% and 17%.
• SpaceX faces a potential $116B share unlock on August 6, with 911.5M shares becoming eligible for sale.

Stat of the Day: Data centers in the US will account for about 20% of the nation's electricity consumption in 2035, up from 5.9% today, according to Bloomberg.

Market Implication

The market has a cleaner inflation backdrop from last week’s CPI and PPI, a softer U.K. headline CPI print, and a stronger bank earnings floor. The problem is that today’s risk stack is getting heavier. Oil is higher. Hormuz traffic is thinner. The Houthis are threatening the Red Sea. Trump is adding tariff pressure to Canada, generic drugs, and potentially 60 trading partners. Alphabet and Tesla now have to carry the AI and growth trade through a tape that is less forgiving than it was a month ago.

THEMATIC - Forces Behind the Tape

1. Tech Earnings Have to Prove the AI Trade Still Has Breadth

Alphabet and Tesla kick off the real test for megacap growth after the close. Alphabet options price an implied move of about 5.16%, or $17.87. Last quarter, the company beat EPS by $2.47 and the stock jumped close to 10%, nearly doubling the implied move. That is the standard traders now have in their heads. A normal beat may not be enough if cloud margins, AI capex, or search monetization disappoint.

Tesla has a different setup. Options price an implied move of about 5.06%, or $19.18, and the company has missed earnings forecasts for four straight quarters. The stock needs cleaner margin language, better delivery quality, energy-storage strength, and credible AI commentary. Robotaxi talk alone will not carry the quarter if the core EV margin still looks weak.

SpaceX adds a supply-overhang problem for speculative AI infrastructure. Up to $116B of stock can become eligible for sale on August 6. That is a massive liquidity event sitting in front of a stock already pressured by short interest, valuation questions, and insider-sale risk.

2. Oil is a Supply and Demand Gut Check

Crude inventories give traders the next energy read this morning. The market expects a 1.5M barrel draw, which would fit a pattern of falling stockpiles in eleven of the past twelve weeks. API estimated a 2.6M barrel build. If EIA confirms anything close to that, the oil story gets more complicated. It would raise questions about demand destruction at the same time the geopolitical premium remains elevated.

The supply side is still tense. Hormuz vessel traffic fell again Tuesday, with only three commodity ships observed and no VLCCs or LNG tankers reported. That is a bad flow signal! It means the market is still dealing with insurance, shipping, routing, and cargo-timing risk even before pricing another full escalation. Trump also reduced expectations for immediate talks with Iran. Tehran has dismissed U.S. claims that it is seeking more negotiations. The Houthis are threatening Red Sea shipping, and Trump has said the U.S. will respond if the waterway is disrupted. That creates a two-chokepoint problem: Hormuz for crude and LNG, Bab el-Mandeb for Red Sea flows.

For traders, the EIA number decides the next crude reaction. A draw keeps the supply-risk trade alive while a build gives the market a demand-destruction angle. Either way, energy remains too active for the Fed and equity multiples to ignore for much longer.

3. Tariffs are Rebuilding the Inflation Wave

The tariff channel is getting wider. Last week’s CPI and PPI gave the market real relief, but Trump seems determined to push new cost channels into that relief. The administration already announced 50% tariffs on select Canadian goods while the next round is broader. The U.S. is reportedly preparing tariffs of at least 10% on 60 trading partners by Friday, citing lax forced-labor standards. That can hit apparel, electronics, industrial inputs, consumer goods, and cross-border supply chains. The stated target is labor standards. The market reads the mechanism as another import-cost shock.

Generic drugs are now in the tariff stack too. Trump said imported generics will face a 100% duty starting in August 2028, then 200% a year later if production does not move to the U.S. The two-year window gives companies time to respond, but healthcare supply chains are slow, regulated, and heavily dependent on foreign manufacturing. This is no small corner of inflation. Generics are supposed to be the cheap part of medicine.

MICRO - Today’s Catalysts

Economic Calendar (CT)

• 6:00 – MBA 30-year Mortgage Rate
• 9:30 - EIA Crude Oil Inventories
• 12:00 - 20Y Treasury Bond Auction
• Thursday - Weekly Jobless Claims, Weekly Economic Index
• Friday - New Home Sales, PMIs

TRENDING - Retail Radar

KEY LEVELS TO WATCH

S&P 500 (/ESU6) – Support/Resistance: 7452/7648

Nasdaq 100 (/NQU6) – Support/Resistance: 28408/30094

Crude Oil (/CLQ6) – Support/Resistance: 83.39/89.90

U.S. 10Y Yield – 4.626%, would be high close YTD

VIX – 17.61 pre-market, 14.96-19.50 range this month

Trade Setup Bias

Tactical with defined risk into megacap earnings. The bank earnings floor is strong, and Super Micro gave the AI hardware trade a useful backlog signal. Alphabet and Tesla are large enough to decide whether that support broadens or breaks. I would avoid chasing Nasdaq exposure before the prints without defined-risk structures. Energy remains headline-driven, and EIA inventories can swing the crude trade quickly. Tariffs keep margin risk alive for autos, retail, industrials, healthcare, and consumer goods. If yields stay capped and Alphabet gives a clean AI capex answer, the tape can stabilize. If crude, tariffs, and megacap guidance all push the wrong way, the index has very little cushion.

Bottom Line

Wednesday is a megacap earnings day with oil, tariffs, and market structure all leaning on the tape. Alphabet has to defend AI spending. Tesla has to defend margins. Super Micro showed AI server demand is still there, while SpaceX’s August unlock reminds traders that supply can overwhelm enthusiasm. U.K. inflation cooled at the headline level, but core stayed sticky. U.S. crude inventories now decide whether higher oil is a supply shock or a demand problem. Banks already gave the market an earnings floor. Tech has to turn that floor into leadership.

Christopher Vecchio, CFA, tastylive’s head of futures and forex, has been trading for over 20 years. He has consulted with multinational firms on FX hedging and lectured at Duke Law School on FX derivatives. Vecchio searches for high-convexity opportunities at the crossroads of macroeconomics and global politics. He hosts Futures Power Hour Monday-Friday and Let Me Explain on Tuesdays, and co-hosts Overtime, Monday-Thursday. @cvecchiofx