The AI trade dominated the market once again this week, upstaging an impressive start to the second-quarter earnings season. Cooler-than-expected June reports on consumer and producer prices offered encouraging signs that inflation continued to ease, while earnings from the nation's largest banks reinforced the strength of capital markets.
At the same time, investors kept one eye on the Middle East as the U.S. and Iran traded airstrikes again, adding to uncertainty around the Strait of Hormuz. West Texas Intermediate crude spiked 15.5% last week to above $82 per barrel, while international benchmark Brent crude jumped nearly 16% to just above $88.
While those are big one-week moves, they finished well off their peaks at the height of the war as hopes for diplomacy persisted.
IBM warning ripples
IBM shocked Wall Street on Tuesday by pre-announcing disappointing second-quarter results, sending the stock down 25% for its worst day on record. CEO Arvind Krishna chalked up the softness to customers increasingly redirecting technology budgets toward cybersecurity, hardware, and AI tokens. That left less money for traditional software and consulting projects and pushed several large deals into future quarters.
The market quickly rewarded the beneficiaries of that shift in corporate spending.
The great AI rotation
Investors spent the week moving money from the AI builders to the buyers. The selling started Monday following SK Hynix's blockbuster U.S. debut on Friday, July 10. The South Korean memory giant fell 9%, sparking a broad sell-off across the AI infrastructure trade.
Wall Street's biggest banks deliver
Banks kicked off a strong start to the second-quarter earnings season. Five of the six major U.S. banks reported on Tuesday. Club holding Goldman Sachs led the group, delivering standout results fueled by strength across investment banking and trading.
