Dow Jones, S&P 500 lead Wall Street into the red, Amazon surges on AI hopes
12:02pm: Stocks bounce
US stocks traded modestly higher in the early afternoon on Friday as investors assessed the durability of the recent technology rebound while monitoring geopolitical risks surrounding US-Iran negotiations.
The Dow Jones Industrial Average rose 0.4%, while the S&P 500 and Nasdaq Composite both gained 0.3% in early trading. The move followed a strong session for technology stocks on Thursday, although momentum eased heading into the weekend.
IG chief market analyst Chris Beauchamp wrote that “yesterday’s surge for beaten-down tech stocks has cooled a little,” with the upcoming weekend potentially contributing to a more cautious tone.
He added that dip buyers would be looking to “hold the line for today and then resume the buying on Monday.”
Beauchamp noted that geopolitical developments could influence market sentiment, highlighting uncertainty around US-Iran relations.
“Assuming, that is, that the US doesn’t go in heavy on Iran in a fresh bid to secure negotiations,” he wrote, adding that reports of increasing frustration in the White House over the lack of progress towards a deal could raise the likelihood of a significant strike to push negotiations forward.
Oil prices recovered on Friday, which Beauchamp suggested reflected some investor positioning for possible disruption. “A recovery in oil today suggests there has been some opportunistic buying in case action does take place,” he wrote.
Investors are also weighing the broader market outlook following recent volatility, with technology shares remaining a key focus as traders assess whether the sector’s rebound can continue into next week.
10:12am: In the red
US stocks started the final session of the month on the back foot, with the Dow Jones and the S&P 500 both down 0.2%, as the Nasdaq fell 0.1%.
US stocks are heading into August with investors reassessing market leadership after a volatile July that saw renewed pressure on technology shares and increased focus on earnings as a key driver for the next phase of the market.
Kathleen Brooks, research director at XTB, wrote that July has been “crucial for assessing the main drivers of asset prices” and highlighted a sharp shift in stock market leadership. In the US, the Nasdaq Composite is down about 2% this month, while the Nasdaq 100 has fallen roughly 5% amid volatility in artificial intelligence-related stocks.
The weakest-performing areas of the US market have been technology-focused sectors, with the Philadelphia Semiconductor Index down about 18% in July and the Nasdaq Telecommunications Index lower by around 19%.
However, a strong rebound in technology stocks late in the month helped prevent a deeper pullback. Brooks noted that “the major recovery in US tech stocks on Thursday stopped these indices from falling into bear market territory,” adding that without the rally, the Nasdaq 100 had been on course for a correction.
Looking ahead, Brooks expects the artificial intelligence trade to remain a key focus for investors, though she believes leadership within the theme could shift away from chipmakers and toward large technology companies that have shown they can generate returns from AI investments.
“The AI trade is back on, but the leadership may rotate away from chip stocks and towards the hyperscalers that have evidence they can monetize their AI investments,” Brooks wrote.
She pointed to Microsoft’s recent performance as a potential signal of changing market dynamics, noting that it was among the strongest performers in the Nasdaq 100 during Thursday’s rally. Brooks wrote that it had “been a long time since Microsoft has led the Nasdaq 100 higher,” suggesting large AI infrastructure and software companies that had previously lagged could regain investor attention.
Earnings season is also expected to remain a major influence on US equities through the third quarter. Brooks highlighted that S&P 500 earnings growth among companies that have reported so far has reached 37% year over year, the fastest pace since the third quarter of 2021.
While Alphabet’s strong earnings report provided a significant boost to overall earnings growth, Brooks noted that excluding Alphabet, S&P 500 earnings growth remains at a “respectable 25%.” She wrote that investors could increasingly focus on “US earnings outperformance,” which may support further gains in American equities through the summer.
From a technical perspective, Brooks noted that the Nasdaq 100 has moved higher from its 200-day moving average support level at 26,690, with the next major resistance level at the 50-day moving average of 29,590.
As the market moves into August, investors will be watching whether upcoming earnings reports can validate current AI spending levels and whether large technology companies can reclaim leadership after a period of underperformance.
8:02am: Nasdaq on a roll
The Nasdaq is poised to charge ahead again on Friday after its best day in weeks, with Microsoft leading a tech-sector recovery and delivering its biggest single-day increase in market value on record, lifting sentiment across the broader market.
Nasdaq futures point to a 1.1% gain at the open, while Dow Jones Industrial Average and S&P 500 futures are up 0.4% and 0.3% respectively. That follows Thursday’s powerful rally, with the Nasdaq jumping 2.8%, the S&P 500 rising 1.7% and the Dow adding 1.2%.
Tickmill Group market analyst Patrick Munnelly said markets were ending a bruising week with a “spectacular relief rally” in Asia, but warned the move looked more like a repair job than a full reset.
“Battered chipmakers are being aggressively bought after Wall Street’s tech recovery and strong Amazon earnings revived confidence in AI-linked demand,” Munnelly said. “Yet the month’s damage remains severe, especially in Korea.”
Asian markets surged overnight, with South Korea’s KOSPI, Taiwan’s benchmark and Japan’s Nikkei all rebounding sharply as investors returned to heavily sold semiconductor names. However, Munnelly noted that the gains followed a painful sell-off, with Korea’s market still facing one of its worst monthly declines since the 1997 Asian financial crisis.
The focus now shifts back to Wall Street earnings, with Amazon providing the strongest signal that AI investment is translating into demand. Shares jumped more than 9% after-hours following better-than-expected revenue, driven by growth in its cloud business.
Apple offered a more mixed picture, with shares falling more than 6% after services revenue disappointed and its outlook highlighted ongoing supply pressures. Despite strong iPhone sales, investors remain cautious about growth visibility.
Munnelly said the market has not abandoned the AI theme, but investors are becoming increasingly selective about which companies can turn spending into profits.