07/27/26

So good morning and happy Monday. I am on vacation, hence the change in scenery. But let's recap a the one where Wall Street had really no patience for increased AI spending. And then let's look at the busy week ahead. So for the week, the S&P 500 fell about 0.6% last week and the Nasdaq dropped more than 2% back to back losing weeks for both of those indices. The Dow on the other hand slipped for a third straight week. Now the theme underneath it all for the biggest tech companies, simply beating expectations is just not enough for investors. It started Wednesday night when both Alphabet, Google's parent company and Tesla beat on revenue and the stocks fell anyway. So take Alphabet for example, its quarter was actually excellent, nearly $120 billion in revenue with its cloud business up 82% on AI demand. But it told investors that it now plans as 205 billion this year, building AI infrastructure and its profit narrowly missed expectations. Tesla meanwhile saw its own spending jump 142% from a year ago. Now investors have kind of run out of patience with all that spending and they want proof that it'll actually turn into profit. The reaction was brutal. On Thursday alone, the two lost about half a trillion dollars in value. For the full week, Tesla fell almost 18% and Alphabet almost 8%. Even the credit rating firm Moody's warned that heavy AI spending could weigh on Amazon, Meta and Alphabet. A company's credit rating is kind of like a credit score for you or me. It impacts the interest rate that they pay and can influence investors' impressions of the company. One semi bright spot last week was Intel. It posted its best revenue growth in over 15 years with big progress in its factories. It added Apple and Microsoft as partners, but the stock actually fell on Friday because of a big one time accounting charge. The quarter itself though was exactly what investors had been waiting for. Oil had a roller coaster week. The international benchmark topped $100 per barrel for the first time since May on a shipping disruption in the Red Sea. And then it fell about 4% on Friday as reports of revived US Iran talks calmed things down. It still finished the week up about 7%. So why does that matter to you? Higher oil feeds inflation, which could nudge the Fed toward raising rates. So right now, every oil headline is moving those odds. On the policy side, at midnight on Friday, the old 10% tariff on nearly all imports expired. But that same day, a new two tier system replaced it with most countries now paying either 10 or 12 and a half percent. So less a tax cut and more a reshuffle. This morning futures are pointing sharply higher. Nasdaq futures are up about a percent and a half as tensions in the Middle East eased over the weekend and oil kept falling. Looking ahead on Wednesday, the Federal Reserve decides on interest rates. Markets see about a 31% chance of an increase as of this morning. And the new Fed Chair Kevin Warsh will hold a conference at two thirty PM. Then within about 30 hours, Microsoft, Meta, Apple and Amazon all report earnings, four of the biggest companies in the world, right on top of a Fed decision. So what could go wrong? We will see how it all shakes out. But for even more detail, check out the Bell Club website or my daily newsletter.