Wall Street kicked off the third quarter with mixed results after a blockbuster first half for stocks. The first two days of Q3 and the second half of the year saw the S & P 500 pretty much flat, while the Dow Jones Industrial Average and the Nasdaq moved in opposite directions. The Dow finished the holiday-shortened week with a record close Thursday as a soft jobs report reduced chances of a Federal Reserve interest rate hike. The Nasdaq suffered back-to-back losses, with chip stocks as measured by the PHLX Semiconductor Index sinking 6.3% on Wednesday and 5.4% on Thursday. Despite the lackluster July start marked by a rotation into a new group of AI beneficiaries, all three stock measures were higher for the week. While the market is closed Friday in observance of the Fourth of July, talk about fireworks. The first six months of 2026 were explosive for stocks, with the S & P 500 up 9.6% and the Nasdaq up more than 12%. The Dow delivered its best first-half performance since 2021, rising 8.9%. Small-cap Russell 2000 surged nearly 22% for its strongest start to a year since 1991 . Here’s a closer look at what drove the market this week, including a review of the four trade alerts we sent to members. AI lifts cyber stocks Cybersecurity stocks solidified their status as big winners from the artificial intelligence boom this week —a big reversal from the beginning of the year, when the market feared AI disruption. The group rallied after The Wall Street Journal reported over the weekend that Chinese AI models have become nearly as capable as the leading U.S. platforms at identifying vulnerabilities in code. Rather than viewing that as a negative for the sector, investors saw it as another reason that companies will need to spend more on cybersecurity. Jim has repeatedly said that as AI becomes better at uncovering software flaws, businesses will need increasingly sophisticated tools to identify, patch, and defend against those vulnerabilities before hackers can exploit them. Club stocks Palo Alto Networks and CrowdStrike led the advance, with both reaching all-time highs during the week. We took advantage of Palo Alto’s sharp rally to trim some of our position Tuesday , locking in gains of nearly 150%, while maintaining our long-term conviction in the company. The AI theme received another boost Wednesday after the U.S. lifted export restrictions on Anthropic’s Claude Fable 5 and Mythos 5 models. By week’s end, Palo Alto and CrowdStrike had gained 14.5% and 10.7%, respectively. Meta looks to the cloud Meta Platforms gave investors a reason to believe that its enormous AI spending could finally turn into meaningful revenue . Shares of the Facebook and Instagram parent jumped more than 8% on Wednesday after news that the company is preparing to launch a cloud infrastructure business that would sell excess AI computing power and AI models to outside customers. Meta has faced growing concerns about its massive capital spending on servers, data…
Read More: The hunt for AI’s next winners defined the stock market’s holiday-shortened