Greetings,

All eyes are on Q2 earnings -- particularly the extent to which companies are investing in artificial intelligence, and who is generating profits outside of the tech sector. More on that below.

Also in this edition:

• Comments close on SEC semiannual reporting proposal
• AI drives global M&A to record high
• Fed minutes show split over interest rate outlook
• US trade deficit hits 15-month high as imports surge

The approaching second-quarter earnings season presents a significant test for the S&P 500 amid a tech selloff and geopolitical tensions. Earnings are expected to rise by over 24% from last year, driven primarily by the technology sector, which is projected to contribute nearly two-thirds of the earnings gain. Key reports from major tech companies such as Alphabet, Meta Platforms and Nvidia will be closely watched to gauge AI spending. Investors are particularly focused on whether companies will continue to invest heavily in artificial intelligence and if consumer spending will remain robust to support profits outside the tech sector.

A Securities and Exchange Commission proposal to allow companies to report earnings semiannually instead of quarterly is facing significant opposition from investors and trade groups. An analysis by Ohio State University shows that 99% of 8,080 original comments and 59,972 form letters oppose the change, citing concerns about increased information disparity between retail and institutional investors.

Global M&A volume rose 44% year over year to a record $3 trillion in the first half of 2026, driven by AI-related megadeals and a surge in US transactions, according to Mergermarket. While the number of deals declined, large acquisitions dominated activity as companies moved to complete transactions amid favorable regulatory conditions and strong demand for AI infrastructure.

Federal Reserve officials were divided over the path of interest rates at their June meeting, with some seeing a case for future rate hikes if inflation remains elevated and others expecting price pressures to ease. The minutes also cited tariffs, Middle East tensions and strong AI investment as risks that could keep inflation above the Fed's target.

Crypto advocates are pressing the Senate to pass the CLARITY Act before an Aug. 7 deadline, arguing the bill is needed to create a federal framework for digital assets. CFTC Chair Michael Selig said national standards would improve certainty, consumer protection and market oversight, while supporters warn delays could leave rulemaking to regulators or foreign jurisdictions.

The US trade deficit widened to its highest level since March 2025 because of a surge in imports and a decline in exports, according to the Commerce Department. Imports rose 3.3%, driven by consumer goods, semiconductors, computer accessories and autos, as companies sought to get ahead of potential tariffs, while exports fell 3.2%, largely because of a decline in nonmonetary gold.

Financial services and insurance companies are leading a surge in artificial intelligence spending, with 85% planning to increase budgets over the next year, according to a report from PYMNTS Intelligence. The report shows that while financial firms focus on productivity and risk reduction, healthcare companies are still experimenting, and media firms are driven by productivity without a strong focus on financial returns.