Fed decision, Big Tech earnings drove a volatile week for stocks

A Fed decision and Big Tech earnings set the tone for a choppy final week of July, but major U.S. stock indexes still finished higher, CNBC reported. For everyday investors, the week showed how quickly higher bond yields and AI spending questions can overpower otherwise strong corporate results.

The Dow Jones Industrial Average rose 1% for the week, ending a three-week slide, according to CNBC. The S&P 500 also gained 1%, while the Nasdaq Composite climbed 1.6%, helping both indexes avoid a third straight weekly decline.

The monthly picture was less clean. CNBC reported that the Dow rose 0.32% in July, its fourth monthly gain in a row. The S&P 500 slipped 0.13% for the month, and the Nasdaq fell 3.2%, marking back-to-back monthly declines for both.

What drove last week's stock market volatility?

The Federal Reserve kept interest rates unchanged Wednesday, but CNBC reported that three of the 12 members on its policy committee voted to raise rates. That split made the meeting read as hawkish, meaning more focused on fighting inflation with tighter policy.

The concern, according to CNBC, was that inflation had stayed above the Fed’s 2% goal for an extended period, while higher energy prices tied to renewed Iran war tensions added pressure. Fed Chair Kevin Warsh said after the July meeting that policymakers would act when needed, CNBC reported.

Bond investors were not satisfied. The 10-year Treasury yield moved above 4.67% that day, and the 30-year yield climbed above 5.2%, its highest level since 2007, according to CNBC. Higher Treasury yields can hurt stocks because they raise borrowing costs and make safer bonds more competitive with equities.

Stocks fell hard as yields jumped. CNBC reported that the Dow dropped more than 1,100 points Wednesday, or 2.2%, its worst one-day loss since April 2025. The market later recovered, though the 10-year yield was still above 4.7% on Friday. Oil rose Friday but finished lower for the week, CNBC reported.

AI trades swung after forced selling

CNBC reported that a reversal in a popular trade favoring AI hardware companies over software stocks was worsened by forced selling at Situational Awareness, a highly leveraged hedge fund founded by former OpenAI researcher Leopold Aschenbrenner. Forced selling can happen when borrowed money magnifies losses and investors must close positions to meet obligations.

CNBC’s Jim Cramer said Thursday that the fund’s liquidation could remove a major source of selling pressure from AI-related stocks. He also described the episode as a warning about using borrowed money to buy stocks, according to CNBC.

Big Tech results split over AI spending

Large cloud companies, often called hyperscalers because they operate enormous data-center networks, gave investors different answers on AI spending. CNBC reported that Microsoft and Amazon were rewarded because investors saw clearer paths from spending to future returns.

Microsoft posted $19 billion in quarterly free cash flow, which is cash left after operating expenses and capital investments, according to CNBC. Amazon raised its full-year capital spending forecast by $20 billion, but CNBC reported that Amazon Web Services posted its fastest revenue growth in 18 quarters and CEO Andy Jassy explained how new data centers could support returns.

Microsoft shares rose 21% for the week, and Amazon gained 17%, CNBC reported. Meta Platforms had a harder reception. Although its advertising business remained strong, CNBC said investors focused on a weaker revenue outlook, higher capital spending and a roughly 91% drop in free cash flow. Meta shares fell more than 6% for the week.

Apple faced a different problem after reporting results Thursday evening. CNBC reported that the company beat revenue and earnings expectations, but investors focused on higher memory costs, supply limits and softer guidance. Apple has already raised prices on some Macs and iPads to offset memory costs, according to CNBC, and investors are watching whether the next iPhone lineup will follow. Apple shares ended the week down more than 7%.

This story draws on original reporting from CNBC.