Weekly Wrap

The major averages finished lower this week as concerns surrounding the cost of the AI buildout weighed heavily on mega-cap growth stocks, overshadowing strength across semiconductor, energy, and several cyclical sectors. The Nasdaq Composite fell 2.1%, while the S&P 500 declined 0.6% and the DJIA lost 0.4%. Although earnings season produced a number of upbeat corporate results, investor attention increasingly centered on AI spending, rising oil prices, and higher Treasury yields.

The week's defining catalyst came Thursday following earnings from Alphabet and Tesla. Both companies outlined more aggressive investment plans, reinforcing expectations that hyperscalers will continue spending heavily on AI infrastructure while raising fresh questions about margins, free cash flow, and how quickly those investments will generate meaningful returns. The "Magnificent Seven" collectively shed roughly $800 billion in market capitalization during Thursday's session, driving sharp weekly declines in the communication services (-6.2%) and consumer discretionary (-6.1%) sectors. The Vanguard Mega Cap Growth ETF fell 2.3%.

The selling was far more concentrated among the companies funding the AI buildout than those supplying it. The PHLX Semiconductor Index gained 1.2% for the week following a sharp rebound from the prior week's correction, while the information technology sector edged 0.4% higher. The contrast suggested investors remain constructive on AI infrastructure demand but are becoming more sensitive to the growing cost of that investment for the largest technology companies.

Oil prices provided another major theme throughout the week. WTI crude rose roughly 10.5% as escalating tensions involving the U.S., Iran, and Houthi forces fueled concerns about broader regional conflict and potential supply disruptions. The move pushed Treasury yields higher, increased expectations for Federal Reserve tightening, and created a more challenging backdrop for growth stocks.

Despite the weakness in mega-cap technology, leadership broadened elsewhere in the market. Energy (+3.8%) finished as the top-performing sector, while utilities (+2.5%) and industrials (+1.8%) also posted solid gains, helping limit the broader market's losses.

Overall, the week highlighted a subtle but important shift in the market's AI narrative. Demand for AI infrastructure remained robust, but investors became increasingly focused on the economics of the unprecedented capital spending required to support it. That distinction left the broader market only modestly lower while producing a much steeper decline across the Nasdaq and the largest growth stocks.

• DJIA: -0.4% week-to-date
• S&P 500: -0.6% week-to-date
• S&P Mid Cap 400: -0.9% week-to-date
• Russell 2000: -1.1% week-to-date
• Nasdaq Composite: -2.1% week-to-date

Monday:

Stocks finished mostly lower after giving back much of their early strength, as the broader market followed semiconductor stocks lower into the close while rising Treasury yields and higher oil prices added to the afternoon selling pressure. The S&P 500 (-0.2%), Nasdaq Composite (-0.1%), and DJIA (-0.6%) finished lower across the board.

Semiconductor stocks still modestly outperformed, as investors stepped in following the group's recent retreat, which has been widely viewed as a technical correction despite its sharp magnitude. The PHLX Semiconductor Index (+0.6%) ceded the bulk of its early strength, but there were still several notable performances today. Lumentum (LITE 765.55, +32.73, +4.47%) and Teradyne (TER 333.76, +11.40, +3.54%) were among the top performers, while memory names such as Micron (MU 865.46, +16.51, +1.94%) benefited from Bloomberg reporting that Kimi K3, the latest model from Chinese startup Moonshot AI, requires substantial memory to operate.

Advanced Micro Devices (AMD 503.57, +7.81, +1.58%) also outperformed after Microsoft (MSFT 402.29, +8.47, +2.15%) said it will deploy AMD's Helios Rackscale Solution for frontier-model AI inference and expand its use of the company's EPYC processors and Pensando DPUs.

The information technology sector (+0.1%) finished with just a fraction of its earlier gain, facing pressure in several of its largest components including Apple (AAPL 326.59, -7.15, -2.14%) and Oracle (ORCL 121.37, -5.04, -3.99%). The Information reported Oracle is facing multibillion-dollar cost setbacks in the buildout of its data centers.

Meanwhile, Alphabet (GOOG 351.37, +5.25, +1.52%) was a "Magnificent Seven" standout ahead of its earnings release later this week after The Information reported the company aims to introduce a new "frozen" AI chip. The communication services sector (+0.7%) finished with the widest gain as a result.

The energy sector (+0.6%) rounded out the three S&P 500 sectors that notched a gain today. Oil prices were choppy amid a shifting geopolitical atmosphere, with WTI crude oil futures settling today's session $0.92 higher (+1.1%) at $82.59 per barrel. Earlier reports of potential U.S.-Iran negotiations involving intermediaries faded into the background this afternoon after President Trump vowed retaliation for the two American soldiers killed by an Iranian missile in Jordan over the weekend. Additionally, Yemen's Houthis declared a maritime blockade on Saudi Arabia, which could amplify the potential for a broader regional conflict.

The bump in oil prices and Treasury yields put pressure on the broader market, which steadily retreated from a mostly higher open this morning.

While the consumer discretionary sector (-0.4%) finished with a relatively modest loss due to a solid showing from Amazon (AMZN 249.99, +2.76, +1.12%), its weakness largely reflected the rise in Treasury yields today. Carvana (CVNA 64.18, -3.16, -4.69%), which is sensitive to borrowing costs, was the worst-performing S&P 500 component today, while weakness across homebuilder stocks sent the iShares U.S. Home Construction ETF 2.0% lower.

Elsewhere, the health care sector (-1.2%) finished with the widest loss amid a weak showing from biotechnology names, while the industrials sector (-0.8%) faced pressure from Honeywell Aerospace (HONA 202.47, -9.16, -4.33%), which continues to slide following its spinoff from Honeywell (HON 226.18, +1.16, +0.52%) last month.

Outside the S&P 500, the Russell 2000 (-0.7%) and S&P Mid Cap 400 (-0.8%) quickly ceded their opening gains to a lower finish as well.

Though stocks enjoyed a strong opening, it was largely all downhill from there. This morning's "buy-the-dip" bid across semiconductor stocks faded, as the early catalysts were stock-specific and not disruptive enough to change the current downtrend across the group. Rising oil prices and Treasury yields added pressure to the broader market, keeping it on tenuous footing ahead of a consequential week of earnings.

U.S. Treasuries started the week with a steady Monday retreat that drove yields on longer tenors back to last week's highs with this year's highs from May looming not far above. The 2-year note yield settled up four basis points to 4.21%, and the 10-year note yield settled up six basis points to 4.60%. 

Reviewing today's data:

• June Leading Economic Index -0.2% (Briefing.com consensus 0.1%); Prior 0.1%

Tuesday:

The S&P 500 (+0.9%), Nasdaq Composite (+1.3%), and DJIA (+0.7%) finished firmly higher, holding onto the bulk of their gains throughout the afternoon as semiconductor stocks once again led the advance. Unlike yesterday's rebound attempt, buying interest remained intact into the close despite another rise in oil prices and Treasury yields, with the major averages settling near their session highs.

Semiconductor stocks remained the primary driver of the rally as investors continued buying into the group's recent pullback, which has been widely viewed as a technical correction despite its sharp magnitude. While the move lacked a single broad catalyst, the PHLX Semiconductor Index climbed 5.2%, with memory names such as Sandisk (SNDK 1589.40, +198.45, +14.27%) and Micron (MU 970.82, +105.36, +12.17%) leading the advance after a solid overnight session across related names in Asia.

Teradyne (TER 374.15, +40.39, +12.10%) outperformed for a second consecutive day, while Intel (INTC 105.45, +8.39, +8.64%) and Advanced Micro Devices (AMD 544.43, +40.86, +8.11%) also posted strong gains. Taiwan Semiconductor Manufacturing (TSM 424.44, +22.14, +5.50%) traded higher after Nikkei reported the company plans to raise chip-making prices by roughly 10% in 2027.

The information technology sector (+2.4%) finished with the widest gain, while semiconductor leadership helped the market-cap-weighted S&P 500 (+0.9%) comfortably outperform the S&P 500 Equal Weight Index (+0.2%). Elsewhere among the mega-cap names, Tesla (TSLA 378.88, +9.31, +2.52%) helped limit losses in the consumer discretionary sector (flat), while Alphabet (GOOG 346.19, -5.18, -1.47%) weighed on the communication services sector (-0.9%). Both companies are set to report earnings after the close tomorrow.

SpaceX (SPCX 123.46, +3.61, +3.01%) was also a notable outperformer, snapping a seven-day losing streak and contributing to a solid gain in the Vanguard Mega Cap Growth ETF (+1.0%).

Outside of technology, the latest batch of earnings reports continued to generate some notable stock-specific moves.

3M (MMM 170.76, +11.65, +7.32%) was the top-performing Dow component after delivering a beat-and-raise quarter, while Hasbro (HAS 88.78, +7.19, +8.81%) and General Motors (GM 79.51, +3.71, +4.89%) also posted solid gains.

Conversely, Danaher (DHR 179.14, -21.97, -10.92%), Equifax (EFX 173.06, -7.02, -3.90%), and Halliburton (HAL 33.20, -1.91, -5.44%) lagged after issuing cautious guidance despite topping earnings expectations.

In other corporate news, Coinbase Global (COIN 175.85, +15.42, +9.61%) and Robinhood Markets (HOOD 106.36, +7.08, +7.13%) led the financials sector (+0.1%) amid continued strength in Bitcoin and growing optimism that Congress is nearing passage of the Clarity Act, a bill aimed at establishing a clearer regulatory framework for digital assets.

The energy sector (+1.2%) was the only S&P 500 sector outside of information technology to gain more than 0.5%, as WTI crude oil futures settled $2.40 higher (+2.9%) at $84.99 per barrel. President Trump reiterated during a press conference with Lebanese President Joseph Aoun that he has no interest in ending the conflict until Iran agrees to meet in a "meaningful way." Higher oil prices also contributed to another rise in Treasury yields, though those headwinds did little to derail the broader rally.

A total of six S&P 500 sectors finished higher. The consumer staples sector (-0.9%) finished with the widest loss as investors rotated back into higher beta stocks today. The Invesco S&P 500 High Beta ETF gained 3.1%.

Elsewhere, the Russell 2000 (+1.6%) and S&P Mid Cap 400 (+1.0%) also joined the rebound after yesterday's retreat.

Unlike Monday's rally attempt, which steadily unraveled into the close, today's advance proved considerably more durable. Semiconductor leadership continued to support index-level gains throughout the session, allowing the broader market to shrug off higher oil prices and Treasury yields while maintaining its momentum into the closing bell. The major averages now hold week-to-date gains ahead of a busy stretch of earnings reports, with both the volume and importance of releases set to increase.

U.S. Treasuries saw an extension of their defensive start to the week, lifting the 5-year note yield to a fresh high for the year while yields on other tenors crept closer to 2026 highs of their own. The 2-year note yield settled up five basis points to 4.26%, and the 10-year note yield settled up three basis points to 4.63%. 

There was no economic data of note. 

Wednesday:

The major averages spent most of the session drifting near unchanged levels amid lower-than-average trading volume, suggesting investors exercised some caution ahead of Alphabet's (GOOG 341.91, -4.28, -1.24%) and Tesla's (TSLA 374.13, -4.80, -1.27%) earnings reports after the close. The S&P 500 (-0.1%), Nasdaq Composite (-0.6%), and DJIA (flat) finished near their opening levels as stocks gave back some early gains throughout the afternoon.

Semiconductor stocks opened lower following yesterday's rally but quickly attracted buy-the-dip interest, allowing the PHLX Semiconductor Index to reverse an early decline and finish 0.4% higher. NVIDIA (NVDA 212.04, +4.75, +2.29%) was the only "Magnificent Seven" stock that finished higher, while Advanced Micro Devices (AMD 552.33, +7.90, +1.45%) gained after announcing a strategic partnership with Anthropic.

The semiconductor rebound helped the information technology sector (flat) shake off an opening loss, though it was held back by pronounced weakness across software stocks. The iShares Expanded Tech-Software Sector ETF (IGV) fell 3.0% after Pegasystems (PEGA 25.99, -4.95, -16.00%) reported disappointing results and said rapid changes in the AI landscape have caused customers to delay purchasing decisions, echoing similar commentary from IBM (IBM 206.09, -4.41, -2.10%) last week. ServiceNow (NOW 95.45, -6.61, -6.48%) was particularly weak ahead of its earnings report after the close.

Elsewhere in the sector, Super Micro Computer (SMCI 30.56, +5.06, +19.84%) surged after issuing encouraging margin guidance and reporting a record backlog, supporting gains across other AI infrastructure names such as Dell (DELL 441.70, +37.55, +9.29%) and Hewlett Packard Enterprise (HPE 48.14, +1.42, +3.04%).

Despite some notably strong pockets of tech, it was a relatively weak day for mega-cap stocks. The Vanguard Mega Cap Growth ETF shed 0.6%, with Meta Platforms (META 627.17, -16.64, -2.58%), Alphabet (GOOG 341.91, -4.28, -1.24%), Tesla (TSLA 374.13, -4.80, -1.27%), and Amazon (AMZN 244.85, -2.70, -1.09%) all finishing lower. The consumer discretionary sector (-0.8%) and communication services sector (-1.3%) finished as the worst-performing S&P 500 sectors.

The consumer discretionary sector also faced pressure in some of its more rate-sensitive components, such as Carvana (CVNA 62.74, -2.84, -4.32%) and DoorDash (DASH 177.73, -10.31, -5.48%), as rising oil prices put upward pressure on Treasury yields again today.

Unsurprisingly, the energy sector (+1.2%) outperformed amid the bump in oil prices, with crude oil futures settling today's session $1.86 higher (+2.2%) at $86.85 per barrel. Crude remained supported throughout the session after President Trump renewed threats of strikes against Iranian infrastructure, while Iranian Parliament Speaker Mohammad Bagher Ghalibaf warned that regional infrastructure would not be safe if such attacks were carried out, keeping geopolitical tensions elevated.

EQT Corp. (EQT 54.04, +4.24, +8.50%) was also a post-earnings standout after the company modestly missed EPS expectations but signed a five-year offtake agreement with a large Asian integrated energy company during the second quarter, among other deals.

Other notable earnings movers included Wabtec (WAB 289.98, +26.45, +10.04%) and CME Group (CME 249.24, +11.86, +5.00%) to the upside, while GE Vernova (GEV 987.08, -91.73, -8.50%) moved sharply lower.

Meanwhile, the materials sector (+1.5%) outperformed as precious metal prices rose today, while the utilities sector (+2.3%) captured the widest gain despite the bump in Treasury yields, as electrical utility names such as NRG Energy (NRG 139.93, +8.33, +6.33%) and Constellation Energy (CEG 274.90, +12.68, +4.84%) continued to benefit from optimism surrounding AI-driven electricity demand.

The Russell 2000 (-1.0%) lagged significantly, while the S&P MidCap 400 finished flat.

Overall, today's subdued action did little to alter the market's recent trend, with the S&P 500 continuing to hover near the 7,500 level after spending much of the past month in a relatively tight trading range. Investors will now turn their attention to earnings from Alphabet (GOOG 341.91, -4.28, -1.24%) and Tesla (TSLA 374.13, -4.80, -1.27%), which should provide the market's next meaningful catalyst and offer further insight into AI spending, monetization, and broader capital spending trends.

U.S. Treasuries continued this week's retreat on Wednesday with yields on 2-year, 3-year, and 7-year notes joining the 5-year note yield at fresh highs for the year, reflecting worries about more persistent inflation from the price of oil, which has risen steadily over the past three weeks. Treasuries finished the session just above their morning lows with longer tenors dipping back to those levels after the U.S. Treasury reopened $13 billion in 20-year bonds to lukewarm demand. The 2-year note yield settled up four basis points to 4.30%, and the 10-year note yield settled up three basis points to 4.66%.

Reviewing today's data:

• Weekly MBA Mortgage Applications Index 1.9%; Prior -2.7%

Thursday:

The stock market ended sharply lower on Thursday as investors reassessed the cost of the AI arms race following earnings from Alphabet (GOOG 318.34, -23.57, -6.89%) and Tesla (TSLA 319.60, -54.41, -14.55%), while another surge in oil prices added to inflation concerns and pushed Treasury yields higher. The S&P 500 (-1.2%), Nasdaq Composite (-2.2%), and DJIA (-1.0%) all finished near their session lows, with growth stocks bearing the brunt of the selling pressure.

The market's largest technology companies led the retreat after Alphabet substantially increased its FY26 capital expenditure guidance, raising fresh questions about margins, free cash flow, and how quickly massive AI investments will generate meaningful returns. The announcement also reinforced the notion that other hyperscalers may have little choice but to continue raising AI spending to remain competitive, even as investors become increasingly focused on capital discipline. Tesla added to the cautious tone after pairing a disappointing earnings report with an even more aggressive investment outlook, reinforcing concerns that spending on AI and autonomous vehicle initiatives may continue to outpace near-term profitability.

The shift in sentiment weighed heavily on the market's largest growth stocks, with all seven "Magnificent Seven" components finishing lower and the Vanguard Mega Cap Growth ETF declining 2.4%. The communication services (-5.2%) and consumer discretionary (-5.1%) sectors finished as the weakest-performing sectors, reflecting the outsized declines in Alphabet and Tesla, as well as Amazon (AMZN 233.66, -11.19, -4.57%) and Meta Platforms (META 606.10, -21.07, -3.36%).

Technology shares were not universally weak, however. The information technology sector lost 1.1%, but companies tied to AI infrastructure spending continued to outperform their hyperscaler customers. The PHLX Semiconductor Index slipped just 0.5%.

The day's losses were compounded by another sharp advance in oil prices. Crude oil futures settled $5.24 higher (+6.0%) at $92.09 per barrel after reports of Houthi attacks on commercial shipping in the Red Sea intensified geopolitical concerns. The move extended crude's weekly gain to roughly 13%, lifted Treasury yields across the curve, and prompted investors to further price in the possibility of additional Federal Reserve tightening.

According to the CME FedWatch Tool, markets now assign a 35.8% probability of a rate hike at next week's FOMC meeting, up from 11.8% just one week ago. The probability for a September rate hike has increased to 80.1%.

Despite the sharp decline in the major averages, weakness remained significantly more concentrated among the market's largest companies. The S&P 500 Equal Weight Index fell just 0.4%, while the Russell 2000 (-0.7%) and S&P MidCap 400 (-0.4%) both outperformed.

Elsewhere, there were several pockets of strength. The industrials sector (+1.8%) led all sectors behind well-received earnings from United Rentals (URI 1139.71, +104.65, +10.11%), Lockheed Martin (LMT 568.59, +54.23, +10.54%), and Thermo Fisher (TMO 572.32, +45.86, +8.71%), while the energy sector (+0.6%) also finished higher as oil prices rallied.

The defensive healthcare (+1.3%) and utilities (+0.5%) sectors also outperformed, with Quest Diagnostics (DGX 227.90, +18.07, +8.61%) surging after a beat-and-raise report of its own.

Ultimately, today's action reflected a market increasingly focused on the economics of the AI buildout. While investors grew more cautious toward the hyperscalers funding those investments, companies tied to AI infrastructure spending generally proved more resilient, even as rising oil prices and higher Treasury yields created a more challenging backdrop for growth stocks as a whole. 

U.S. Treasuries continued this week's retreat, sending yields on the 10-year note and shorter tenors to their highest levels since early 2025 while the 30-year yield stopped just shy of its highest level since late 2007. The 2-year note yield settled up six basis points to 4.36%, and the 10-year note yield settled up five basis points to 4.70%. 

Reviewing today's data:

• Weekly Initial Claims 187K (Briefing.com consensus 214K); Prior was revised to 209K from 208K, Weekly Continuing Claims 1.796 mln; Prior was revised to 1.798 mln from 1.805 mln
  
  • The key takeaway from the report is that the low level of initial claims is a signpost of a labor market that continues to see low firing activity, which is a good sign for continued increases in consumer spending.

Friday:

The major averages finished mixed today as a pullback in semiconductor stocks erased much of the broader market's earlier advance. The S&P 500 (+0.1%) managed to close just above the 7,400 level after finding support there throughout the session, while the DJIA (+0.5%) outperformed and the Nasdaq Composite (-0.6%) lagged under renewed pressure from technology shares.

The broader tone of the session was nevertheless constructive. Crude oil futures settled $2.75 lower (-3.0%) at $89.34 per barrel, while Treasury yields declined modestly across the curve after a Reuters report suggested Pakistan and Iran are considering a new path toward peace talks with the U.S. following intervention from China. That optimism faded somewhat late in the day after The New York Times reported that President Trump met with top advisers to consider a major military escalation in Iran, though oil still finished well below its recent highs.

Participation remained broad beneath the surface despite the mixed finish. Ten S&P 500 sectors closed higher, and the S&P 500 Equal Weight Index rose 0.7%, outperforming the market-cap-weighted S&P 500 (+0.1%). The real estate sector (+2.5%) led the advance as lower Treasury yields and a beat-and-raise quarter from Digital Realty Trust (DLR 198.93, +19.59, +10.92%) supported the group, while the materials sector (+1.4%) also stood out behind strong gains from Smurfit Westrock plc (SW 48.57, +4.86, +11.13%) and Int'l Paper (IP 42.19, +4.28, +11.29%).

Technology remained the notable weak spot. The information technology sector (-0.9%) was the only S&P 500 sector to finish lower as the PHLX Semiconductor Index fell 4.4%, with AI infrastructure and memory names giving back ground after showing relative resilience following yesterday's hyperscaler capital expenditure announcements. Intel (INTC 92.32, -7.91, -7.89%) also weighed on sentiment after raising its 2026 capital expenditure outlook and indicating spending will increase further in 2027.

The weakness was not uniform across technology, however. The iShares Expanded Tech-Software Sector ETF (IGV) rose 1.1% as investors did some bargain hunting across software names that came under pressure following earnings yesterday.

Meanwhile, buying interest across the mega-cap complex was relatively muted. Apple (AAPL 333.02, +11.36, +3.53%) stood out as the primary "Magnificent Seven" winner, while Tesla (TSLA 313.03, -6.66, -2.08%) extended yesterday's steep decline. The Vanguard Mega Cap Growth ETF slipped 0.3%.

Elsewhere on the earnings front, Verizon (VZ 46.42, +2.60, +5.93%) advanced following a narrow EPS beat, while American Express (AXP 326.28, -14.56, -4.27%) moved lower despite topping earnings expectations after the company maintained, rather than raised, its FY26 guidance.

Looking ahead, investor attention will quickly shift to what will be the busiest week of the second-quarter earnings season, with four "Magnificent Seven" companies set to report alongside Wednesday's FOMC policy decision. Those catalysts should provide greater clarity on both the outlook for AI spending and the path of monetary policy after a volatile week for markets.

U.S. Treasuries ended the week on a higher note, but the shallow Friday bounce only recovered some of yesterday's losses, leaving the complex with solid losses for the week. The 2-year note yield settled down three basis points to 4.33% (+16 basis points this week), and the 10-year note yield settled down two basis points to 4.68% (+14 basis points this week). 

Reviewing today's data:

• July S&P Global U.S. Manufacturing PMI - Prelim 53.8; Prior 53.9
• July S&P Global U.S. Services PMI - Prelim 53.6; Prior 51.2
• June New Home Sales 628K (Briefing.com consensus 620K); Prior was revised to 618K from 580K
  • The key takeaway from the report is that new home sales in May were pressured by affordability constraints tied to rising mortgage rates. Notably, the West region, which features the highest-priced homes, saw the biggest hit to sales month-over-month; however, there was also weakness in the more affordable South region, which is the nation's largest homebuilding market.