Cautious Open Looms as Powell Waits, Verizon Leads Comm-Services

Introduction#

Tuesday, 22 July 2025 opens with a notable pause in risk appetite. According to Monexa AI, S&P 500 futures were trading roughly -0.1 % at 07:45 ET, echoing a Bloomberg headline that “traders take a breath after a run of record highs.” The hesitation follows a mixed Monday close that still left the S&P 500 at 6,305.60, its 34th record of the year. Overnight news flow has been dominated by anticipation of Federal Reserve Chair Jerome Powell’s 10:00 ET speech, a fresh round of tariff rhetoric from Washington and Brussels, and the first of the "Magnificent 7" earnings later in the week. The tone is neither risk-off nor euphoric; rather it is one of selective positioning, with investors rewarding defensive growth stories such as VZ and KO while shunning deep-cyclical Energy names like EQT.

Market Overview#

Yesterday’s Close Recap#

The Monday tape showed sector dispersion instead of broad momentum. Communication Services finished strongest, aided by a +4.04 % jump in VZ after an earnings beat and raised guidance, while Energy slid -1.55 % on profit-taking and softer crude quotes. Equity volatility ticked up: the CBOE Volatility Index closed at 16.92, up +1.62 %, and the CBOE Russell 2000 Volatility Index popped +2.51 %, hinting at weaker breadth below the surface.

The NASDAQ Composite once again did the heavy lifting, closing within one percent of its fresh intraday high as gains in GOOG (+2.80 %), GOOGL (+2.72 %), and NFLX (+1.99 %) offset a -0.60 % dip in AI-bellwether NVDA. The Dow Industrials lagged, hurt by rotation out of Financials and Industrials.

Overnight Developments#

Asia-Pacific bourses traded without conviction. The Nikkei 225 slipped roughly a third of a percent on yen strength, Shanghai edged higher on hopes of policy easing, and Australia’s ASX fell on Energy weakness. In Europe, the STOXX 600 opened modestly lower as investors weighed an EU “anti-coercion instrument” to counter potential U.S. tariffs—a reminder that trade friction remains a headline risk. U.S. index futures echoed the mood: Dow and NASDAQ-100 contracts were down ≈-0.20 %, S&P futures -0.05 %, ahead of Powell as reported at 07:00 ET by Reuters.

News wires also flagged today’s earnings from KO, THC, GM and LMT, plus after-hours numbers from TXN. Meanwhile, the Wall Street Journal highlighted that U.S. stock exchanges expect windfall profit from record trading volumes—another sign that elevated volatility may be here to stay.

Macro Analysis#

Economic Indicators to Watch#

The immediate macro catalyst is Chair Powell’s appearance at the Economic Club of New York. Futures pricing implies only a 12 % probability of a September rate cut, up from 8 % last week (CME FedWatch), so any hint of dovishness could widen that gap and breathe oxygen into crowded duration trades. At 09:45 ET the S&P Global U.S. manufacturing PMI will print; consensus is 52.2, down from 53.0. A downside surprise would play into the market’s “Goldilocks” narrative of cooling growth without recession.

Tomorrow brings June new-home sales, and Thursday carries the first read on Q2 GDP, expected +2.1 % annualised. Friday is the critical core PCE price index, where economists surveyed by Bloomberg look for +0.16 % m/m. In short, the data deck is loaded; Powell’s tone will frame how each print lands in the bond market.

Global / Geopolitical Factors#

Tariff brinkmanship remains front-and-centre. Late Monday, Bloomberg’s MLIV desk pointed out that construction inputs such as rebar and copper could rise +7 – 10 % over the next 12 months if existing levies become entrenched, a headwind to Infrastructure-heavy Industrials. Europe’s “trade bazooka” threat underscores a tit-for-tat risk that keeps multinational earnings forecasts fragile. Meanwhile, oil markets took note of reports that OPEC+ compliance dipped in June, yet Brent slid under $78 as traders faded demand growth forecasts.

Sector Analysis#

Sector Performance Table#

Communication Services has displaced Technology as the market’s momentum engine. The sector’s outperformance rests on two drivers: (1) telecom re-rating led by VZ on guidance upside and (2) renewed ad-tech optimism after Alphabet’s +2.7 % move. Conversely, Energy’s sell-off felt mechanical: the equal-weighted Energy ETF printed its third biggest one-day drop of the quarter as profit-takers targeted recent outperformers like EQT (-9.55 %).

Communication Services#

Verizon’s earnings ignited the group. Adjusted EBITDA grew +4.1 % YoY to $12.8 bn while management nudged FY-25 EPS growth to +1 – 3 %. Importantly, free-cash-flow guidance is now $19.5 – $20.5 bn, lowering leverage and supporting the 6.6 % dividend. Investors extrapolated the print to peers: TMUS rallied +2.38 % on read-across, while T lagged, down roughly half a percent, suggesting the market is rewarding cap-ex-heavy, network-quality narratives over purely pricing-driven ones.

Technology#

The headline noted a “slight negative performance (-0.09 %)” for the sector, but dispersion was fierce. Mid-cap software names such as ANSS fell -4.69 % after cautious sell-side commentary around backlog digestion, whereas semis enjoyed renewed flows into QCOM (+2.69 %) and cybersecurity favourite PANW (+2.09 %). The stickiness of AI cap-ex remains intact, even as NVDA cooled off into upcoming earnings.

Energy#

Crude softness and worries over Chinese demand trimmed beta names. Natural-gas heavyweight EQT cratered almost double-digits, dragging shale peers lower and steepening the underperformance. A relative bright spot was renewables: FSLR added +1.41 % as investors rotated within the space toward policy-aligned beneficiaries.

Financial Services#

Banks and asset managers suffered duration nerves. The KBW Bank Index slid -1.0 %. Notable laggards included APO (-2.18 %) and FDS (-2.14 %). Conversely, fintech stalwart PYPL eked out a +0.88 % gain, demonstrating that secular-growth narratives can absorb macro chop.

Consumer#

Retailers offered a study in contrasts. Off-price chain ROST gained +3.14 % on whispers of improving traffic, while premium athleisure name LULU fell -2.86 % as inventory build concerns resurfaced. Barclays’ upgrade of DLTR to “Overweight” (price target $150) catalysed a +1.99 % pop and reinforces the “trade-down” thesis as tariffs bite disposable income.

Company-Specific Insights#

Earnings and Key Movers#

Verizon (VZ). Yesterday’s star turn matters for a broader read on pricing power. The company added 300 k wireless net adds and 293 k fixed-wireless broadband subs, the latter now north of 5 m. Average revenue per user rose +2.1 %, proof that premium bundles are sticking despite general price fatigue. For income investors, the dividend payout ratio is poised to shrink below 55 % on revised free-cash-flow numbers, a credible catalyst for multiple expansion toward its five-year average 13.4× forward P/E (currently 11.9×).

Coca-Cola (KO). Pre-market, the beverage titan reported Q2 EPS of $0.86 versus consensus $0.84; organic revenue rose +6 %, aided by pricing. Unit case volume dipped -0.3 %, but management nudged FY organic-revenue growth guidance to +8 – 9 % and reaffirmed margin expansion. Shares were bid up about +0.7 % pre-open, signalling that investors value predictability in a tariff-tinged staples universe.

Tenet Healthcare (THC). Before the bell, Tenet posted +10 % same-store revenue growth and boosted FY free-cash-flow outlook to $1.5 bn. Yet the stock was essentially flat overnight; the market remains wary of payer-mix shifts and political chatter on healthcare cost caps.

Domino’s Pizza (DPZ). Despite an EPS miss ($3.81 vs street $3.94), global retail sales expanded +5.6 %, proving the value-price model still resonates. Shares closed -0.80 % but found buyers at the 200-day moving average—evidence that steady same-store sales trump temporary margin drag.

Cloudflare (NET). An RBC target hike to $210 underpinned a mild +0.21 % gain even as high-multiple software sold off. More importantly, the sell-side narrative framed Workers (serverless) adoption as the next leg of growth, which could insulate the stock from macro shocks by expanding its addressable market beyond CDN.

Conclusion#

Morning Recap and Outlook#

The market enters Tuesday’s session with three focal points: Chair Powell’s tone, the durability of earnings beats in defensive growth pockets, and an Energy sector that suddenly looks fragile. Communication Services offers the cleanest momentum-plus-dividend profile; Verizon’s upgraded guidance is no one-off but rather confirms robust demand for premium connectivity even as real yields creep higher. Technology remains a stock-picker’s arena—AI infrastructure names still attract flows, yet mid-cap software can’t escape valuation discipline. Energy’s stumble warns that commodity leverage is a two-way street when recession probability is non-zero.

Investors should track Treasury market response to Powell; a dovish lean may reignite duration and lift rate-sensitives such as Real Estate and Utilities, while a hawkish tilt could extend Financials’ underperformance. On the earnings front, Coca-Cola’s modest volume slip will test the “pricing power over elasticity” mantra across Consumer Defensive. After the bell, Texas Instruments provides the first real check on semi-cycle inventory.

Key takeaway: Maintain a bar-bell stance—pair durable cash-flow generators (VZ, KO with secular growers (NET, PANW—while fading beta pockets exposed to tariff sensitivity and commodity volatility. Sector rotation is alive; capture it rather than fight it.