This week in one minute
A sharp AI and chip selloff, and a broadening rally underneath it
The headline this week was a sharp selloff in AI and semiconductor names. Micron fell hard in a single session despite strong earnings, and the pressure spread to Intel, AMD, and chipmakers overseas including Samsung and SK Hynix, on growing doubts about how fast AI data center spending will pay off. At the same time, the Dow and the small cap Russell 2000 both notched fresh all time highs, a sign the rally is broadening well beyond a handful of mega cap names. The Federal Reserve held rates steady last month but turned notably more hawkish, and Thursday's June jobs report came in soft, with hiring well below expectations. The takeaway: leadership is rotating into the real economy, but the tape is choppier and the Fed is less friendly than it was.
Market Risk Score: 52 / 100 (Neutral, leaning cautious and selective).
The risk score grades overall market conditions from 0 (calm) to 100 (high risk). It sets how cautious the week's read is. It is not a signal to buy or sell anything.
This week's five
RTX · RTX Corporation · Industrials / Aerospace and Defense
A dual growth engine most peers lack: a recovering commercial aerospace aftermarket alongside a genuine defense supercycle. Late in June, Raytheon won a roughly $1.1 billion Navy contract for AIM-9X missiles and management raised its full year outlook rather than just reiterating it. A legacy engine inspection issue remains a multi year overhang, and the stock has already rerated this year.
JPM · JPMorgan Chase · Financials / Banks
The cleanest capital return story out of this year's bank stress tests, sitting in the sector leading this week's rotation. After clearing the Fed's test in late June, the bank announced a double digit dividend increase and a fresh multibillion dollar buyback. The stock trades near its all time high and reports earnings in about two weeks, a real near term event risk.
LMT · Lockheed Martin · Industrials / Aerospace and Defense
A historically large run of contract awards gave the market real, dated evidence of multi year revenue visibility, including a roughly $35 billion, seven year THAAD interceptor production contract. The stock has already rallied hard off its spring low, and the F-35 program has a history of surprise margin charges.
NUE · Nucor · Materials / Steel
A direct beneficiary of this week's rotation into Materials. Late in June, Nucor guided current quarter earnings well above expectations on higher steel prices and tariff protected domestic supply. Steel is deeply cyclical, the stock has roughly doubled off its low, and current margins may be closer to a cycle peak than a new normal.
KMI · Kinder Morgan · Energy / Midstream
The clearest bridge between a structurally higher gas price backdrop and the physical infrastructure buildout AI data centers actually need, with a project backlog north of $10 billion, more than half tied to data center and power demand. It trades at a premium to its own history, and its debt load makes it rate sensitive.
Premium Members'
Stock of the week
RTX Corporation (RTX)
It captures the most important idea in the market right now: real, raised guidance and dated contract wins earn a spot in this basket, not a good story about the future. RTX has a recovering commercial aerospace business and a genuine defense production ramp behind it, trades at a discount to its peer group, and just raised its outlook rather than merely meeting it.
Sector rotation
Into: Financials · Energy · Industrials · Materials
Out of: Technology · Communication Services · Consumer Discretionary
Rotation is money moving between industry groups. It shows where big investors added this week and where they pulled back.
Next week's watch
- Whether the semiconductor and memory selloff is a contained reset or the start of something broader
- A fresh inflation print, with a Fed that just turned meaningfully more hawkish
- JPMorgan and the big banks kick off second quarter earnings season
- Middle East headlines and the oil tape, which underpin part of the energy thesis
Terms in this issue
Bank stress test. The Federal Reserve annual check of whether big banks hold enough capital to survive a severe recession. Passing clears them to raise dividends and buy back stock. More in the Learn hub →
Cyclical stock. A company whose profits swing with a repeating boom and bust cycle rather than growing steadily. Steelmakers like Nucor are cyclical, so record margins can sit closer to a peak than a new normal. More in the Learn hub →
Hawkish. A hawkish central bank leans toward higher interest rates to fight inflation. Higher rates tend to pressure stock prices, which is why a hawkish Fed shift matters.
Backlog. The value of orders a company has won but not yet delivered. A large defense backlog gives years of revenue visibility rather than just the next quarter.
Net interest margin. The gap between what a bank earns on loans and pays on deposits. Higher for longer rates tend to widen it, which helps bank profits.
Midstream. The pipeline and storage part of the energy business that moves oil and gas. Midstream cash flows are largely contracted, so they depend less on commodity prices than drillers do.