Market Recap 31 July
| Index | Close | Change |
|---|---|---|
| Dow | 52,485 | -51 (-0.10%) |
| Nasdaq | 25,373 | +174 (+0.69%) |
| S&P 500 | 7,457 | +18 (+0.25%) |
| MSCI EAFE | 3,180.56 | +67.06 (+2.15%) |
| US 10-Year Treasury | 4.741% | +9.8bp (+2.11%) |
| WTI Crude | $84.67/bbl | -$5.71 (-6.32%) |
Market Recap Summer Sabbatical
The weekly recap will be on sabbatical until the week following Labor Day. If circumstances warrant, we'll break the hiatus and post.
Iran, The Fed, and Hyperscalers
During quarter-end reviews with clients, we've maintained that the U.S. economy can keep growing and stocks can keep grinding higher, war, heightened inflation, and AI-bubble fears notwithstanding. We also said three things could break that thesis: real escalation in Iran, a Fed that hikes faster than expected, or the hyperscalers pulling back on capex. This week tested all three.
Iran- No meaningful escalation. Short of troops on the ground, the market is going to keep ignoring this conflict. As of this writing, the President has announced "the perimeters of a deal" with Iran, and oil is trading lower.1As of June 6, he'd made the same claim 38 times.2
Inflation and the Fed- The Fed held rates steady this week. In a rare dissent, 3 members argued that a rate hike was necessary.
Chair Warsh is a study in contradictions. He fought bank regulation after the subprime crisis, built his reputation as an inflation dove, keeps a personal relationship with the President, and has called AI deflationary. On the job, he's said prices are too high and that anyone expecting the Fed to tolerate inflation above 2% "is going to be disappointed."
The bond market is growing impatient and questioning Warsh's credibility; the 10-year Treasury yield rose over 2% last week to close at 4.741%. With only three meetings left this year, the Fed is painting itself into a corner. The FedWatch Tool now prices a 42.1% probability of at least two quarter-point hikes by year end.3
Hyperscalers and Capex- Last week was bullish for semiconductors and the picks and shovels trade.
| Company | 2026 Guidance | Change |
|---|---|---|
| Alphabet | $195-205B | Raised from $180-190B (April) |
| Amazon | ~$220B | Raised from ~$200B, citing higher memory chip costs |
| Microsoft | $190B | +61% YoY |
| Meta | $130-145B | Narrowed from $125-145B (floor raised) |
Combined 2026 capex: about $735 billion, versus about $410 billion in 2025. Up 79.3%.
Nobody's giving hard 2027 numbers yet, but the Street isn't waiting:
| Company | What Management Said | What Analysts Model |
|---|---|---|
| Alphabet | Signaled "materially higher," no hard number | Could approach or exceed $250B |
| Amazon | No explicit 2027 figure; Jassy noted much of 2026 capex "will be monetized in 2027-2028" | Not clearly modeled |
| Microsoft | Confirmed capex "will continue to rise" into FY2027 to match AI demand | Street consensus $220-230B; BNP Paribas outlier at $262B |
| Meta | Declined to guide: "We aren't providing a specific outlook for 2027 capex at this time... it remains a very dynamic planning process" | Wells Fargo raised to $181B; JPMorgan models >$200B; some models ~$205B |
Citi thinks Google, Meta, and Amazon alone could combine for over $800 billion in 2027 capex, up 8.8% year over year.4Every one of the four either raised 2026 guidance this earnings season or signaled 2027 goes higher. Microsoft and Alphabet stated 2027 would be higher. Meta raised its 2026 numbers but called 2027 too fluid to project. Amazon gave no explicit 2027 figure, but its backlog grew from $364 billion to $496 billion, which implies the need to increase spend. Not one hyperscaler signaled a cut in capex.
The Week Ahead
Economic data is heavy this week, with the July jobs numbers stealing the headlines. On earnings, the Street wants to hear what SpaceX (SPCX) CEO Elon Musk can say to stop the stock's slide: down 52% from its 52-week high and down 19.7% from its $135 IPO price.
- Monday - U.S. S&P and ISM Manufacturing Reports. Earnings: None.
- Tuesday - July Job Openings and Labor Turnover Survey (JOLTS). Earnings: Caterpillar (CAT), Advanced Micro Devices (AMD), SpaceX (SPCX).
- Wednesday - July ADP Private Payrolls, July S&P and ISM Services Reports. Earnings: None.
- Thursday - Initial Jobless Claims. Earnings: Constellation Energy (CEG).
- Friday - July Non-Farm Payrolls, Unemployment Rate, Average Hourly Earnings. Earnings: None.
Closing Perspective
None of this week's news changes our thesis. The Iran situation remains unchanged, the Fed won't be heard from again until September, and the hyperscalers are spending more, not less.
Enjoy the rest of your summer. The market recap will return after Labor Day, unless Iran, Warsh, or a hyperscaler earnings call gives us a reason to break early.
Disclaimer: this is neither a recommendation to buy or sell any securities mentioned above. Investing involves risk and the potential loss of principal.
Footnotes
1https://www.cnbc.com/2026/08/02/trump-planned-attack-on-iran-canceled-after-reaching-outline-of-deal.html
2https://www.cnn.com/2026/06/09/politics/times-trump-iran-deal-close
3https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html?redirect=/trading/interest-rates/countdown-to-fomc.html
4https://www.investing.com/news/stock-market-news/citi-sees-google-meta-and-amazon-capex-spending-at-over-800-billion-in-2027-4795118