The Dow Jones Industrial Average added 276 points, or 0.5%, while the Nasdaq composite rallied 1% after briefly surrendering an early 1.3% gain. The choppy session capped a month defined by oil-driven inflation fears, questions about Big Tech’s AI spending, and a Federal Reserve that investors increasingly distrust.
Amazon Leads as Cloud Acceleration Triples Profit
Amazon jumped 15.3%, the single largest driver of the day’s advance, after reporting quarterly profit that more than tripled from a year earlier. The acceleration in its cloud computing division anchored the beat, giving investors fresh evidence that demand from AI “hyperscalers” is translating into real revenue rather than just capital expenditure.
Chip stocks tied to that same AI build-out whipsawed. Micron Technology swung from an early 6.4% gain to a 6.5% loss before settling at a 5.9% decline — a pattern that has become routine for semiconductor names as traders debate whether valuations outran fundamentals during the spring’s AI euphoria.
Apple’s AI Supply Crunch Weighs on Outlook
Apple fell 7.4% despite beating profit expectations, punished for a current-quarter revenue forecast that missed Wall Street estimates. Executives blamed a supply crunch in components being absorbed by the broader AI boom — a signal that the scramble for chips and memory is now squeezing even the world’s most cash-rich hardware maker.
The divergence between Amazon and Apple, two of the market’s most influential names, underscores how unevenly the AI cycle is rewarding Big Tech. Cloud platforms capturing enterprise demand are outperforming, while device makers face margin pressure from the very supply chain feeding the AI race.
Oil, Yields, and a Fed Credibility Problem
Rising oil prices, driven by the war with Iran, kept inflation worries front and center. The average U.S. price for a gallon of regular gasoline reached nearly $4.11, up from $3.85 a month ago, according to AAA. Costlier crude feeds into virtually every shipped product, sustaining price pressure well beyond the pump.
The 10-year Treasury yield rose to 4.71% on Friday from 4.68% a day earlier and just 3.97% before the Iran conflict sent oil higher. Longer-dated yields had already spiked Wednesday after Fed Chairman Kevin Warsh reiterated a commitment to returning inflation to 2% but declined to explain how. The central bank held its benchmark rate steady, even with inflation well above target.
President Donald Trump, who nominated Warsh, has publicly pushed for lower rates rather than higher ones — a political backdrop that complicates any tightening path. Warsh has said he wants “unfiltered” market signals rather than echoes of Fed guidance, a stance critics read as opacity masquerading as data dependence.
“Without clarifying why action was or wasn’t taken already, it’s hard to see how statements about being committed to hitting its inflation target aren’t just a bluff,” said Brian Jacobsen, chief economic strategist at Annex Wealth Management.
Bank of America economists were blunter, writing that “the Fed is facing a growing credibility problem” and urging a rate hike at the September meeting paired with an “internally consistent narrative.”
What Happens Next
September’s Fed meeting now looms as the pivotal event for markets. If inflation data between now and then stays hot, pressure will mount on Warsh to either hike rates and risk a growth slowdown, or hold steady and risk further erosion of the central bank’s credibility. Either path carries downside for equities.
For Big Tech, the August earnings lull will give way to scrutiny of AI capital spending plans. Amazon’s cloud acceleration sets a high bar; Apple’s supply warning signals that the chip squeeze is far from over. Watch semiconductor names and the 10-year yield for early reads on where the S&P 500 heads next.
— Hiro Tanaka, markets desk, AXO News