Wall Street got back to its winning ways last week after navigating a hawkish Federal Reserve meeting, volatile swings in chip stocks, and a critical round of Big Tech earnings. The Dow Jones Industrial Average rose 1% for the week, snapping a three-week losing streak. The S & P 500 gained 1% last week, while the tech-heavy Nasdaq climbed 1.6%. Both avoided three down weeks in a row. For the month, however, performance was more mixed. The Dow edged up 0.32% in July, extending its monthly win streak to four. It was back-to-back monthly losses for the S & P 500, which slipped 0.13% in July, and the Nasdaq, which fell 3.2%. Here’s a closer look at what drove the market in the final week of the month. Bonds send the Fed a warning While the Fed left interest rates unchanged Wednesday afternoon, three out of the 12 members on the central bank’s policymaking committee voted for a hike. The opposition to holding borrowing costs steady reflected growing concern that inflation has remained above the Fed’s 2% target for too long, with higher energy prices on renewed Iran war tensions adding to the pressure. During his post-July meeting news conference, Fed Chairman Kevin Warsh attempted to reassure markets that policymakers would act when necessary. The bond market that day wanted more than tough talk . The 10-year Treasury yield climbed above 4.67%, while the 30-year yield surged above 5.2% to its highest level since 2007. Stocks sank on that surge in yields, as investors questioned whether the central bank was falling behind in its inflation fight. The Dow on Wednesday plunged more than 1,100 points, or 2.2%, its worst one-day decline since April 2025. While stocks recovered and finished the week higher, the 10-year topped 4.7% on Friday. Oil was higher Friday but lower overall in a topsy-turvy week. Forced selling distorts AI trade It turns out that the recent reversal of the “long AI hardware, short software” trade, which had been working all year, was exacerbated by forced selling by Situational Awareness — a highly leveraged hedge fund founded by former OpenAI researcher Leopold Aschenbrenner. We found out Thursday that the fund had to offload its troubled bets, which ended up stabilizing the rocky AI trade. Jim Cramer on Thursday morning called the liquidation “one of the more sure signals to buy ,” arguing that the unwind could mark a turning point by removing a significant source of indiscriminate selling pressure. The Nasdaq surged Thursday and Friday, though not enough to stay out of the red for the month. Jim also emphasized the implosion of Situational Awareness is a cautionary tale about the dangers of investing with borrowed money . That’s why Jim has consistently cautioned investors against buying stocks on margin. Not all AI spending is created equal Hyperscaler earnings this week reinforced the idea that Wall Street isn’t against AI spending. It just wants evidence that the investments will generate profits. Microsoft and Amazon…
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