Tech gets whacked, TSLA and GOOG disappoint on AI spend – Oil surges past $100, yields kiss 4.7%

OK – what happened yesterday? Stocks got slammed! Those ‘exhausted’ sellers – were not as ‘exhausted’ as we thought – they came back with a vengeance – hitting hard, and those buyers that took stocks higher on Wednesday – yeah, they came back too – but let they let the sellers take control……and tech stocks got punched in the face and the gut.

The Dow lost 503 pts or 1%, the S&P down 90 pts or 1.2%, the Nasdaq gave back 553 pts or 2.1%, the Russell lost 20 pts or 0.7%, the Transports gave up 20 pts or 0.1%, the Equal Weight S&P lost 31 pts or 0.4% while the Mag lost a whopping 1642 pts or 4.8%.

News that TSLA and GOOG disappointed, both reporting negative FCF (Free Cash Flow) - a result of spending massive amounts of money on the AI buildout lit the fuse, (this was a first for GOOG and that sent shock waves thru the system), then we witnessed oil surge higher – Brent now back over $100, WTI at $92. Not to be outdone the bond market reacted sending the 10 yr treasuries blasting up and thru the 4.6’s only to run out of steam as they kissed 4.7%. Probabilities of a September rate HIKE are now 70%, up from 51% on Wednesday and 40% a week ago.

OK – so here it is.

Tesla’s earnings didn’t just disappoint—they exposed exactly what investors are worried about. Tesla had to slash prices and offer aggressive financing incentives - crushing profitability in the process. Operating margins collapsed, automotive gross margins fell and high-margin regulatory credit sales plunged 67%. Then came the real gut punch. Management told investors capital spending this year will exceed $25 billion, as Tesla pours money into AI initiatives like the Cybercab Robotaxi, Cortex, and the Optimus humanoid robot. The problem? When do we see ANY meaningful revenue? The story went on, but you get it, no? This wasn’t just about a bad quarter—it was about growing concern that Tesla is asking investors to fund an extraordinarily expensive future while today’s core business is becoming less profitable. TSLA lost 14.5% or $55 and this morning it is quoted up $5.

And then we had to deal with GOOG. They delivered another impressive quarter. Revenues beat, Cloud growth remained strong, Search proved more resilient and AI products continue to be the story. Under normal circumstances, that would have been enough to send the stock higher. But investors weren’t focused on what Google earned—they were focused on what Google plans to spend. Management raised its 2026 capital spending forecast to as much as $205 billion (from $190), confirming that the AI arms race is becoming even more expensive than Wall Street anticipated. That reignited the spending debate because it did not come with a clear timeline for when those investments will generate an acceptable return.

Now, what’s important is not that investors are doubting AI’s potential - they’re questioning the economics and timing. How long can these companies continue writing ever-larger checks? That concern rippled across the entire AI ecosystem, hitting not just Google, but the entire Mag 7 cohort and beyond. GOOG lost 7% or $23. This morning it is quoted up $3.

And again, I’ll ask the question – is anyone really surprised?

Analysts raised the bar. Stocks were priced to perfection. We talked about that. We talked about the risk of a “sell-the-news” reaction. So, what did everyone really expect? That every company would beat, raise guidance, and send stocks another 10% higher?

That’s not how markets work. It doesn’t mean the game is over. It means we’re getting the valuation reset many of us expected. And remember what I said yesterday—buyers didn’t disappear. They simply stepped aside and let sellers push prices lower. For long-term investors, that’s a gift.

Now here’s the part the headlines don’t tell you. Yes, the Dow dropped more than 500 points. But more than 400 of those points came from just four stocks—GOOG, GS, AMZN and SHW.

That isn’t broad liquidation. That’s concentrated selling. Pull back the sheets and it gets even more interesting!

The market-cap weighted S&P 500 fell 1.2%, but the equal-weight S&P lost only 0.4%. If investors were truly running for the exits, if this was a “sell everything” moment, the equal-weight index would have been crushed too. It wasn’t. That tells you this was a mega-cap story—not a market story.

The sector tape confirms it. Industrials, Utilities, Energy and Healthcare all finished higher while the Mag 7 absorbed almost all of the pain. That’s where the selling lived—in eight or nine stocks that had become the most crowded trades on Wall Street.

I’ve been saying for weeks that when the Momo guys decide the narrative has changed, they don’t tiptoe out, they ALL run for the exits – because they all use the same ‘logic’. We watched it happen in the semiconductor complex a few weeks ago. Yesterday it happened again, but remember - the fundamentals didn’t suddenly change, their positions did.

After the bell – INTC reported and they crushed it – earnings much stronger than expected, Robust guidance and the Momo guys loved it! The stock is up 5% in the pre-market.

Next week comes the real test. Microsoft. Meta. Amazon & Apple. It is also the biggest week of earnings season. At the same time, it’s also Fed week. The FOMC announces its decision on Wednesday. While a July rate hike still appears unlikely, the market has increased the odds of a rate hike in September – taking it from 40% last week to 70% this morning and THAT changes the conversation.

And don’t forget the ‘other stuff’. Crude is now back in the $90s, geopolitical tensions continue to escalate, and bond yields remain unsettled. Those are exactly the kinds of macro headwinds that make the Momo guys nervous - and exactly the kind of environment where long-term institutional investors begin sharpening their pencils.

Which brings us right back to where we started. As summer began, we talked about the potential for increased volatility driven by earnings, US politics, geopolitical risk and an unsettled bond market. Nothing that happened yesterday changed that thesis. If anything, it confirmed it.

Eco data today includes the S&P Manufacturing PMI – expected to be 54.4 (bullish), Services PMI of 51.5 (still bullish), New Home Sales up 4.8% vs. last month’s read of -7.3%. (appears bullish) and we’ll get Building Permits – last month they were down 3% - just fyi.

Today’s earnings give us a broad check-up on the economy. AXP tells us whether the consumer is still spending. VZ and CHTR show us the health of communications and broadband demand. HCA gives us a read on healthcare. SLB tells us what is happening in the oil patch now that oil is back in the $90s. NEE gives us insight into utilities and AI-driven power demand. CNR is a barometer for industrial activity and freight, while BAH offers a window into government technology and defense spending.

One final thought: today is about whether investors are willing to buy anything after yesterday’s tech-driven selloff. If these non-tech sectors report solid numbers and their stocks hold up, it reinforces the thesis that this is a rotation—not a liquidation. If they don’t then we need to revisit the thesis!

European markets are all higher…. Spain up 1%, Italy, Eurostoxx and Germany up 0.85%, while France and the UK are up 0.4%.

US futures are UP!!! Dow futures are up 270 pts, S&P’s up15 pts, Nasdaq is up 30 pts while the Russel is up 11 pts.

The S&P closed at 7408 down 90 pts or 1.2% after trading as low as 7,376. We are below trendline support at 7474 – which means that is now resistance. Near term chart support is in the 7300/7350 range but TRENDLINE support is down at 7172 – a level I do NOT think we test at all….….

Let’s just remind ourselves…official S&P sector performance so far ytd: Energy is up 32%, Industrials up 17% ytd, Info Tech up 16.5%, Real Estate is up 12%, Basic Materials up 9.5%, Utilities are up 8.1%, Consumer Staples up 6.5%, Healthcare up 4%, Financials up 1.9% - only Communications and Consumer Discretionary are down on the year at -4.6% and -8.1% respectively.

Don’t let the headlines force you into emotional decisions. Focus on your plan, your timeline and your long-term objectives—not the noise of the day.

Summer lemon spaghetti

For this you need: 1/2 lb. of spaghetti, Olive oil, butter, 2 lemons, fresh grated Pecorino Romano cheese, mint and fresh basil.

Start by bringing a pot of salted water to a rolling boil.

Add the pasta and cook for 8 mins.

In a large sauté pan – melt ½ stick of butter and some olive oil. – Heat it up.

Add in the zest of 2 lemons and the juice.

When the pasta is done – add it to the pan, add in a ladle of the water (tears of the Gods) and toss - Now add the mint and basil - - let it cook for another min…

Now turn the heat off and add plenty of Pecorino Romano cheese and toss.