Dow Jones futures will open Sunday evening, along with S&P 500 futures and Nasdaq futures. An Iran attack killed two U.S. service members as Tehran escalates tensions. Google-parent Alphabet, Tesla, Intel, GE Vernova and Interactive Brokers headline a big week of earnings, along with an AMD AI event.
Market Overview: AI Stocks Hit Hard, But Real Economy Shines
The stock market saw losses this past week, but they were concentrated in the Nasdaq and especially AI stocks. SpaceX (SPCX) dived well below its IPO price. However, many stocks in the medical, financial, energy and transportation sectors are showing strength. Still, investors should be playing more defense than offense, cutting losers and continuing to take profits.
Key Earnings This Week
- Interactive Brokers (IBRK) reports Tuesday night.
- GE Vernova (GEV) reports early Wednesday.
- Alphabet (GOOGL) and Tesla (TSLA) are scheduled for late Wednesday.
- Intel (INTC) is due Thursday evening.
- AMD will hold the AMD Advancing AI event on Wednesday, with CEO Lisa Su a featured speaker.
Iran Attack Escalation
On Saturday, an Iran missile attack killed two U.S. troops and wounded several at a Jordan air base. Iran also launched heavy attacks on Kuwait, striking an oil facility. A top Iranian official said Tehran is suspending all commitments under the 60-day ceasefire. Crude oil prices surged 15.5% last week to $82.49 a barrel, which could hit transportation and other real-economy stocks.
Stock Market Rally: Divergence Between AI and Real Economy
The Dow Jones Industrial Average gave up 0.9% last week. The S&P 500 slumped 1.55% to just below its 50-day line. The Nasdaq composite tumbled 2.9%, diving below its 50-day line. The small-cap Russell 2000 fell only 0.5%. The Invesco S&P 500 Equal Weight ETF (RSP) slipped 0.45%.
AI and chip stocks sold off heavily, including Dell Technologies, Sandisk, and Micron Technology. Many AI names look broken. In contrast, real economy names had a strong week, with buy signals in truckers (J.B. Hunt), banks (Goldman Sachs), payment stocks (Flywire), and big pharma (Merck, Eli Lilly, Johnson & Johnson).
SpaceX and Tesla: A Tale of Two Stocks
SpaceX dived 14.7% to 123.99, falling far below the $135 IPO price. Its market cap is now $1.64 trillion, down $1 trillion from its peak. Tesla stock sank 6.6% for the week, now clearly below all key moving averages. Strong Q2 delivery figures bode well for Thursday's earnings, but TSLA's valuation is largely based on hopes for robotaxis and robotics.
Key Levels to Watch
- Google stock hit resistance at the 50-day line; a decisive move above could provide an early entry.
- GEV reclaimed its 50-day line on Friday; a strong earnings reaction could offer a buying opportunity.
- Intel has fallen well below its 50-day line.
- Interactive Brokers held its 50-day line on Friday.
- AMD shares dived 11.1% last week but nearly held the 50-day line; a strong move above could offer a pullback entry.
Market Outlook: Defense Mode
The stock market is difficult right now. The AI trade is heavily damaged. While many non-AI groups are showing strength, market volatility and the risk of renewed sector rotations make new buys tricky. Earnings season and U.S.-Iran news add to the uncertainty.
Investors can try some new buys, but should consider smaller position sizes and tight stop-losses. Definitely dump losers and follow sell rules on winning positions that have come under pressure. Work on watchlistsâmany stocks are in buy areas or setting up.
Please follow Ed Carson on Threads at @edcarson1971 and X/Twitter at @IBD_ECarson for stock market updates and more.
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