Here are 4 forces that drove a rough week for stocks
It’s been a tough week for stocks, as investors navigated everything from rising tensions in the Middle East to key earnings reports on health care developments. Logging in for its second straight weekly loss, the S&P 500 fell 0.6%, while the tech-heavy Nasdaq fell 2.1%. Here’s a closer look at what drove the trading action. Oil prices back in the driver’s seat Oil rose for a third week in a row on Iran war uncertainty. US benchmark West Texas Intermediate crude jumped more than 8%, while international Brent crude rose nearly 10%. Oil prices jumped on Monday after President Donald Trump warned that Iran would pay for the deaths of three US diplomats “time and again.” They gained momentum a week after Trump again threatened to blow up Iranian bridges and power plants and Secretary of State Marco Rubio said Tehran was not committed to a ceasefire deal. On Thursday, fears that the conflict could spill over into Iran, intensified after Houthi terrorists said they attacked Saudi oil tankers in the Red Sea, sending Brent crude above $100 a barrel for the first time since before the US and Iran reached a temporary ceasefire agreement last month. While oil prices retreated on Friday on hopes of a resumption of US-Iran peace talks, the week’s sharp moves underscored how political tensions can quickly reshape the market’s narrative. Growing concerns about inflation getting out of control pushed the 10-year Treasury yield to its highest level since January 2025. With the Federal Reserve meeting next week, the likelihood of an interest rate hike has increased. According to the CME FedWatch tool, markets are now pricing in about a 35% chance of a quarter-point increase in rates, up from a 13% chance last week. Wall Street raises the bar on AI spending to use artificial intelligence remained the dominant theme of earnings this week, and investors made one thing clear: They are no longer willing to reward big spending without seeing a clear path to return. Club Holding Alphabet was the clearest example after reporting on Wednesday evening better-than-expected revenue and profit and Google Cloud growth of 82% year-on-year. Shares of parent Google fell 7% on Thursday, as investors focused on Alphabet’s decision to further increase capital expenditure (capex). Management now expects to spend between $195 billion and $205 billion in capital spending this year and spending is set to increase again in 2027. As free cash flow turns negative, Wall Street is increasingly skeptical that hyperscalers can continue to pour hundreds of billions of dollars into AI infrastructure without showing significant financial returns. Alphabet was the fourth worst performer in the Club’s portfolio this week, down 7.8%. Capex levels will come into focus when our other three hyperscalers – Amazon, Meta Platforms, and Microsoft – report next week. The name of the club Intel results last Thursday night told another side of the story. The chipmaker delivered its strongest quarterly revenue growth since 2011, fueled by a 59% jump in data center revenue as enterprises continue to invest aggressively in AI infrastructure. However, we’re a little disappointed that Intel didn’t announce a major innovation customer. On Tuesday, Intel announced cybersecurity company Fortinet as its first Foundry customer. Several other companies, including Apple, have been rumored to be collaborating with Intel, but no official agreements have been announced. Intel opened Friday higher but retreated slightly, closing up about 8%. That put Intel 3% in the red for the week. The benefits presented by hybrid data center GE Vernova served as a good example of why investors need to look beyond headline numbers. Shares fell nearly 8% on Wednesday after Wall Street Holdings Club missed its earnings per share (EPS) estimate. While missing out is never a good thing, we think investors are focusing on the wrong metric. The most important number was order growth, which was up 88%, due to very strong demand across the company’s Power & Electronics businesses, which are key to implementing AI data centers. For a company like GE Vernova, orders provide a better gauge of future growth than quarterly earnings because they reflect customer demand rather than past deliveries. To us, this is exactly the kind of long-term news that investors should embrace. Shares of GE Vernova rose 4.7% on Thursday, but fell 1.6% on Friday. They ended the week down about 4.1%. Dover, meanwhile, emphasized why we think it’s time to move on. The industrial company’s shares fell nearly 8% on Thursday after it delivered a mixed quarter, with earnings slightly higher than expected but revenue falling. While the company has reasonable exposure to growing areas of the country that are attractive such as AI data centers, those businesses account for about 25% of expected 2026 revenue. The remainder of its portfolio is spread across a collection of low-growth industrial businesses, making it difficult for investors to view Dover as a pure-play beneficiary of the AI themes driving the market. We have already corrected the position twice in June, closing with double-digit gains. Dover shares rose 2.2% on Friday but ended the week down 5.6%. Healthcare enhancements While technology dominated much of the week’s attention, the Club’s two healthcare names brought reminders that some of the market’s most compelling growth stories lie beyond AI. Eli Lilly announced encouraging late-stage data for its next-generation obesity drug, the triple-acting retatrutide. Shares rose 2% on Thursday’s news. The treatment caused excitement because it showed greater weight loss than Lilly’s Zepbound and Novo Nordisk’s Wegovy. Investors initially focused on management pushing for its regulatory filing in the first quarter of 2027. We think the most important takeaway is how Lilly plans to file. Rather than using a traditional new drug approach, the company intends to submit retatrutide as a biologic, a route that typically provides stronger intellectual property protection and exempts the drug from Medicare price negotiations under the Defunding Act. In our opinion, a slightly later launch is a sensible trade-off if it extends the commercial life of what could be one of Lilly’s most important products. Lilly’s shares gained 1.4% for the week. Johnson & Johnson also delivered a major surprise after the FDA approved its Ottawa robotic surgery plan months earlier than investors expected. Shares rose 2% on the news Wednesday. The approval gives J&J a foothold in the fast-growing robotic surgery market, which has long been dominated by Intuitive Surgical, and provides an important boost to its MedTech business, which recently hit the company’s pharmaceutical division. J & J stock ended up 4.1% for the week. (See here for a full list of stocks from Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling stock in his charity portfolio. When Jim talks about a stock on CNBC TV, he waits 72 hours after issuing a trade warning before making a trade. 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