Another One. The Dow Jones Industrial Average weathered a slide in a handful of key stocks on Wednesday to notch its third closing high in a row.
The blue-chip index rose 263 points, or 0.5%. The S&P 500 dipped 0.2%. The Nasdaq Composite dropped 0.8%.
While the S&P pulled back from its previous closing high, the Dow marked its 24th of the year and third in as many days.
The Dow, up 5.3% in the past five days, is riding its best five-day stretch since April 28, 2025, according to Dow Jones Market Data. It's also within four tenths of a percentage point away from surpassing the Nasdaq's year-to-date performance at 13.4%.
Four Mag 7 stocks were all down 1% or more today, which weighed heavily on all three indexes; Alphabet, Microsoft, and Amazon.com combined to shave 150.6 points from the Dow; Tesla, which is not in the Dow, also fell 1.8%. A rally in Nvidia and a modest gain for Apple and Meta Platforms helped the Roundhill Magnificent Seven ETF cut its losses to 0.8%.
Alphabet's drop was driven by a high-profile AI executive's departure, but the the rest of Big Tech continued its recent pattern of "extreme volatility," according to Mizuho's Daniel O'Regan.
"We've essentially gone from historic weakness to historic strength in the span of a week, underscoring just how violent the factor-driven moves have become," O'Regan writes.
Some of that July volatility was likely exacerbated by Leopold Aschenbrenner's AI-focused Situational Awareness fund, which was forced to sell the majority of its stock portfolio to Citadel at a discount.
"With that risk largely cleared, signs of retail capitulation behind us, and earnings continuing to come in well ahead of expectations, the backdrop feels considerably healthier than it did just a week ago," O'Regan writes.
Even if he's right, don't discount the daily risk of more AI exec turnover. More on that below.
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Google Searching for Direction
Another prominent AI executive dinged Alphabet stock by jumping ship. This time around it was Jeff Dean, who was the 30th employee of Google in 1999.
My colleague Adam Levine reports that Dean led much of the firm's AI research over the past 15 years. Adam writes:
Dean's new company is called Discovery Loop, and it's aimed at automating science and engineering research. He will be joined by three other Google engineering luminaries: Oriol Vinyals, Quoc Le and Sanjay Ghemawat. The four have been responsible for many of the company's breakthroughs in AI research and computing, and their departures could weigh on Google's AI efforts, particularly in the near term.
Four other Google AI scientists left the firm in June, which sent the stock reeling to varying degrees.
Adam reports that Demis Hassabis will stay at the company, but no longer be CEO of Google's DeepMind AI lab. Instead, he will become chairman of DeepMind AI and Alphabet's chief scientist. Hassabis shared a Nobel Prize with John Jumper, who was one of the June departures that sent Alphabet stock lower.
Prominent AI researchers are in hot demand, as firms like Meta, OpenAI, and Anthropic chase the top talent.
While prominent departures present near-term challenges for AI-linked stocks, longer term, investors are more worried about massive AI spending. Rising hiring costs won't ease those pressures.
The Calendar
Aflac, Airbnb, Akamai Technologies, American Insurance Group, Becton Dickinson, Cloudflare, ConocoPhillips, Consolidated Edison, Constellation Energy, Datadog, Evergy, Fiserv, Fox, Howmet Aerospace, Kenvue, Keurig Dr Pepper, Microchip Technology, Molson Coors Beverage, Monster Beverage, Parker-Hannifin, Ralph Lauren, ResMed, Republic Services, Sempra, Targa Resources, Trade Desk, Viatris, Warner Bros. Discovery, and Zoetis announce quarterly results tomorrow.
-- Dan Lam
What We're Reading Today
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