Wall Street began the third quarter with mixed results during a holiday-shortened week. The S&P 500 remained flat in the first two days while the Dow and Nasdaq moved in opposite directions. The Dow finished the week with a record close Thursday as a soft jobs report reduced chances of a Federal Reserve interest rate hike, while the Nasdaq suffered back-to-back losses driven by chip stocks sinking 6.3% Wednesday and 5.4% Thursday as measured by the PHLX Semiconductor Index. The mixed performance followed a blockbuster first half for US stocks, with the S&P 500 up 9.6%, the Nasdaq up more than 12%, and the Dow delivering its best first-half performance since 2021 with an 8.9% gain, while the small-cap Russell 2000 surged nearly 22% for its strongest start to a year since 1991.
Cybersecurity Stocks Rally on AI Vulnerability Detection Report
Cybersecurity stocks rallied this week after The Wall Street Journal reported over the weekend that Chinese AI models have become nearly as capable as leading U.S. platforms at identifying vulnerabilities in code. Investors interpreted the development as evidence that companies will need to spend more on cybersecurity as AI becomes better at uncovering software flaws. Palo Alto Networks and CrowdStrike both reached all-time highs during the week, gaining 14.5% and 10.7% respectively by week's end. The sector received additional support Wednesday after the U.S. lifted export restrictions on Anthropic's Claude Fable 5 and Mythos 5 models.
Meta Platforms Prepares Cloud Infrastructure Business Launch
Meta Platforms shares jumped more than 8% on Wednesday after news that the company is preparing to launch a cloud infrastructure business that would sell excess AI computing power and AI models to outside customers. The move addresses investor concerns about Meta's massive capital spending on servers, data centers, and AI infrastructure. The company has faced growing concerns about its reliance on advertising revenue to justify AI infrastructure investments. A cloud business would put Meta in competition with Amazon Web Services, Microsoft Azure, and Alphabet's Google Cloud, though questions remain about whether Meta will rent raw computing capacity or build a full-service cloud platform.
Portfolio Exits Nike Position and Trims Palo Alto Networks and Corning
The CNBC Investing Club portfolio exited its position in Nike after concluding the turnaround is likely to take longer than originally anticipated. The portfolio trimmed positions in Palo Alto Networks on Tuesday, locking in gains of nearly 150%, and reduced holdings in Corning as the stock extended its rally to more than 200% year to date. Proceeds from those sales were redeployed to add to both FedEx and the recently spun-off FedEx Freight, using roughly half the cash generated from the Nike sale. Goldman Sachs initiated coverage of FedEx Freight this week with a buy rating and a $186 price target.
FAQ
What caused the Nasdaq to fall during the holiday-shortened week?
The Nasdaq suffered back-to-back losses as chip stocks measured by the PHLX Semiconductor Index sank 6.3% on Wednesday and 5.4% on Thursday, contributing to the index's decline despite the Dow reaching a record close.
Why did cybersecurity stocks rally this week?
Cybersecurity stocks rallied after The Wall Street Journal reported over the weekend that Chinese AI models have become nearly as capable as leading U.S. platforms at identifying vulnerabilities in code, leading investors to expect increased corporate spending on cybersecurity as AI becomes better at uncovering software flaws.
What did Meta Platforms announce about its AI infrastructure?
Meta Platforms announced Wednesday that it is preparing to launch a cloud infrastructure business that would sell excess AI computing power and AI models to outside customers, addressing investor concerns about the company's massive capital spending on servers, data centers, and AI infrastructure.
