Stocks rebound hard as semis surge 8.5%, MSFT adds $450B — AI was never dead

What a difference a day makes! 24 little hours…. Stocks exploded higher yesterday—and if you listened to the media, you’d think investors suddenly decided AI was alive again. That’s not what happened. The semi’s - which had been crushed nearly 30% from their highs—simply became too cheap to ignore and buyers stepped in and took that sector up 8.5%.

Oh – and MSFT – You know - the one that they tossed out the window? Yeah – that gapped open by 47 pts and by the end of the day had surged by 15.5% or $60 share – adding $450 billion in market value in one day – the largest one-day surge in ‘any stock’ capitalization in history.

The Dow gained 614 pts or 1.2%, the S&P up 121 pts or 1.7%, the Nasdaq up 680 pts or 2.8%, the Russell added 40 pts or 1.4% while the Mag 7 added 640 pts or 2%. Now the other two – the Transports and the Equal Weight S&P lost ground – falling 377 pts and 18 pts respectively.

Of the 11 S&P sectors – it was a mixed performance…. Industrials, Financials, Tech, Consumer Discretionary & Energy all ended the day higher – while Utilities, Consumer Staples, Communications, Healthcare, Basic Materials and Real Estate all ended the day lower.

And let’s be clear about what happened – no matter how the media framed it. Demand for AI didn’t disappear. The AI story hasn’t’ been falling apart. What happened was exactly what we’ve been talking about for weeks. Expectations got way ahead of reality, valuations became stretched, and investors demanded a reset. In the end - it was a recognition that the selling had simply gone too far – creating opportunities everywhere you looked.

The technicals told the story. The Relative Strength Index (RSI) had fallen to oversold levels across the semiconductor sector, while many individual names had pushed even deeper into extreme oversold territory. That’s often where buyers begin to emerge, because markets – like pendulums - have a habit of swinging too far to the left and then too far to the right. – The semi’s had swung way too far to the left – so expect to see a lot of action as they swing back towards the right.

So, let’s put the ‘AI is dead’ nonsense to rest. AI was never dead. Yesterday wasn’t the birth of a new AI boom - it was investors recognizing value after a healthy correction. And the funniest part about it – the same guys who ran OUT the doors over the past month are the same guys who ran IN the doors yesterday! (think Momo guys).

And remember this: a 30% correction in a sector that was up nearly 100% ytd is not the end of the story. It’s the price of admission for the next leg higher.

The eco data – and there was a lot of it – did not raise any concerns …. the KEY data point – the June PCE came in as expected – and that helped relieve some of the angst at least for yesterday…..because next month’s reads on CPI, PPI and PCE could look very different.

Oil was all over the place trading from a low of $82 to a high of $84.30 only to settle at $83.55. This morning it is down $1.20 at $82.455 as the conflict in the Middle east rages on…. At this point – we could go either way – it just depends on the headline of the day and while the headlines this morning once again point to no attacks – that can all change on dime.

Bonds retreated a bit – but yields remain elevated…this morning the 10 yr is at 4.64% while the 30 yr is at 5.18% - still levels that will keep a lid on stocks.

After the bell – APPL & AMZN reported and it was just like MSFT and META - Another AI Story...Two Very Different Messages

Let’s start with Apple. On the surface, the quarter was fine. Revenue beat expectations. Earnings beat expectations. iPhone sales were solid. Mac sales were strong. And the stock got sold! Why?

Because the market wasn’t focused on what Apple just did. It focused on what Apple said next.

Timmy warned that supply constraints - particularly around advanced chips and memory needed for AI-enabled devices - could limit growth in the coming quarter. In other words, demand is there...they just may not be able to build enough products to satisfy it.

That’s not a demand problem. That’s a supply problem. But Wall Street doesn’t like uncertainty, and when management starts talking about constraints, the Momo guys and algo’s hit the pause button. This morning the stock is quoted down 7% at $309.00

Now let’s talk about Amazon.

This report was a completely different story. Revenue beat. AWS revenue surged 37%—its fastest growth in years. Advertising remained strong. And perhaps most importantly, management raised its capital spending plans yet again, taking AI investment to roughly $220 billion.

Now, if this had happened six months ago, investors might have panicked over another massive increase in spending. Not anymore. Why? Because just like MSFT - AMZN showed the money is already generating results. AWS is accelerating, not slowing. Demand for AI infrastructure continues to exceed available capacity. Businesses aren’t pulling back—they’re asking for more.

And that’s the difference. This morning the stock is quoted up 12% at $263.50.

Remember – we have been saying this all season – these companies had to prove that spending IS translating into revenue growth, customer demand and future earnings. Microsoft proved it. Now Amazon proved it – both got rewarded.

Meta is still asking investors to believe the payoff is coming. Apple is now dealing with supply constraints that may delay part of its AI opportunity and so some investors chose to sell them.

And the eco calendar? Well, we’ll get the Employment Cost Index (ECI)—one of the Fed’s favorite inflation gauges because it measures wage growth across the economy. It is expected to come in at +0.8% down from +0.9% and that matters because wages are one of the stickiest components of inflation. If wage pressures continue to moderate, it reinforces the idea that inflation is cooling without the economy rolling over. And while that sounds good – this inflation story is really all about oil. If oil drops in price – the inflation narrative cools, if not – then hold onto your hats.

We’ll also get the final reading on University of Michigan Consumer Sentiment, giving us another look at how confident Americans are feeling about their jobs, their finances and the economy. Here is how it works – 100 is essentially ‘all systems go’. The index will be either above or below 100 depending on how consumers feel. Historically it ranges from 50 (extreme pessimism) to 110 (extreme optimism). Today’s report is expected to be 54 suggesting consumer sentiment remains stuck near recessionary levels despite an economy that continues to expand. That’s the disconnect - Consumers say they’re worried—but they keep spending.

Earnings today are NOT about AI – it’s about Energy, Healthcare, Consumer Staples and Biotech. Look for results from XOM, CVX, ABBV, MRNA & CL. Let’s hope that they are strong – because that would suggest a healthier foundation for the market.

Overnight – the South Korean Kospi surged by 17%, Taiwan up 8%, Japan up 4% - which is not surprising – those markets corrected by 44% for the Kospi and 17% for both Taiwan and Japan. Chip stocks around the world are back in vogue.

European markets are all higher…..all up about 1%.

And to end the week - US futures are up! Dow up 290, S&P’s up 40, Nasdaq up 350 pts while the Russell is up 17. Tech is on fire – and more specifically the chips sector – which is up 4% in pre-mkt trading – this on top of the 8.5% move yesterday.

The S&P closed at 7,437 up 121 pts. It looks like the 7300 level on the S&P did hold and that is causing investors to get more comfortable with wading back into the tech space. Trendline resistance is right here at 7468 – and it looks like we will pierce that on the opening – the question is – can we hold it? And that’s what today is really about. Yesterday proved buyers are willing to step back into tech after a vicious reset. Today we’ll find out whether they have enough conviction to stay there. One day doesn’t make a trend—but it’s how trends begin.

Risotto Al salto

There’s no better metaphor for today’s market than Risotto al Salto. This is a classic dish from Milano. You take yesterday’s leftover risotto and press it into the pan and flip it. What comes out on the other side is crispy, golden, and honestly better than it was the first time around.

That’s MSFT or any of the semi’s in a nutshell.

Ingredients: 2 cups leftover risotto (cold, day-old), butter, fresh grated Parmigiana Reggiano, 1 egg, beaten and finely grated breadcrumbs

Mix the cold risotto with the beaten egg and half the Parmegiana until it holds together.

Melt the butter in a nonstick skillet over medium heat.

Press the risotto in firmly, about 1/2 inch thick, and let it sit undisturbed for 4–5 minutes until a golden crust forms on the bottom — don’t rush this part, the crust is the whole point.

Slide it onto a plate, invert it back into the pan, and crisp the other side for another 3–4 minutes.

When serving – finish it with the remaining Parmegiana.