Mega-cap tech faces its AI capex reckoning

What's moving U.S. markets this week: last week's sector rotation, commodities, the themes with momentum, and the earnings calendar ahead, grounded in the same data behind our stock pages.

This Week in Markets

The week's central event is Wednesday's Federal Reserve rate decision, the first real test of Chair Kevin Warsh's inflation tolerance since he took the gavel in May. Markets are pricing a meaningful, if still minority, probability of a hike rather than the routine hold most expected a month ago, as tariff pass-through and an Iran-linked spike in oil prices push inflation further above the Fed's 2% target. That decision lands the same week as Thursday's Q2 GDP and PCE price index prints and the heaviest run of mega-cap earnings of the entire season, with Microsoft and Meta reporting Wednesday and Apple and Amazon Thursday.

This macro backdrop is inseparable from last week's sector carnage. Communication Services (-6.45%) and Consumer Discretionary (-7.31%) were the market's worst performers by a wide margin, hit as Alphabet's decision to raise 2026 capital expenditure guidance to $195-205 billion (from $180-190 billion) revived fears that AI infrastructure spending is outrunning returns, and as Tesla's post-earnings plunge on a negative free-cash-flow quarter dragged the discretionary complex lower alongside Amazon. Meanwhile Energy (+4.14%) was the standout gainer as crude oil's one-month advance approached 17%, a geopolitical risk premium tied to the Strait of Hormuz that sits awkwardly against an oversupplied physical oil market.

Put together, this week asks two questions the market has to answer at once: whether the Fed treats oil- and tariff-driven inflation as noise or a reason to tighten, and whether Microsoft, Meta, Apple, and Amazon validate the AI capex bet that just cost Alphabet and Tesla in the market, or extend the doubt. Either answer likely decides whether last week's rotation out of growth and into energy and defensives continues or reverses.

Last Week: Sector Winners & Losers

S&P 500 -1.67% · Nasdaq-100 -1.98%

Commodities

Mega-cap tech faces its AI capex reckoning

Last week's selloff in Communication Services and Consumer Discretionary was really a referendum on AI spending. Alphabet's raised 2026 capex guidance to $195-205 billion spooked investors despite otherwise solid results, and Tesla's (TSLA) 17.8% drop after a negative free-cash-flow quarter added to the view that heavy AI, robotics, and robotaxi investment is pressuring near-term profitability. Amazon (AMZN) fell alongside it even ahead of its own report. This week supplies the next data points: Microsoft (MSFT) and Meta Platforms (META) report Wednesday, followed by Apple (AAPL) and Amazon Thursday. The read-through to watch is not revenue, which is unlikely to disappoint at this group, but capex guidance for the year ahead and management commentary on when AI spending starts converting to margin. Qualcomm (QCOM), also reporting Wednesday, offers a read on AI-adjacent semiconductor demand from the supplier side rather than the hyperscaler side. If even one of Microsoft, Meta, Apple, or Amazon raises spending plans the way Alphabet did, the sector's worst week in years could extend rather than mark a bottom.

Oil's geopolitical premium is pulling energy and hard assets higher

Energy (XLE) was last week's standout, up more than 4%, on a straightforward driver: crude oil's Strait of Hormuz risk premium, built on renewed US-Iran hostilities, pushed WTI up roughly 17% over the past month even as the IEA projects one of the largest physical oil oversupplies in years. Silver (+4.3% weekly) and gold (+1.9%) rallied alongside it, a pattern more consistent with geopolitical hedging than pure growth demand, while copper's steadier gain reflects both that backdrop and firmer industrial demand. Last week's results add fuel to the trade: oilfield-services provider SLB beat estimates by 6.9%, copper producer Freeport-McMoRan (FCX) beat by 24.2%, and utility NextEra Energy (NEE) beat by 4.1%, a reminder that power-hungry data-center demand is its own tailwind independent of oil. This week, Chevron (CVX) reports Friday and will be the cleanest large-cap test of whether upstream producers are converting higher realized crude prices into cash flow, or whether hedging programs and capital discipline are capping the upside investors are pricing into the sector.

Staples and payments earnings meet a tariff-and-inflation squeeze

Consumer Staples (XLP) fell 3.03% last week without a wave of sector earnings to explain it, a sign investors are pre-positioning for margin pressure as tariffs and higher input costs show up in guidance. This week supplies actual evidence: Coca-Cola (KO) reports Tuesday, Procter & Gamble (PG) and Starbucks (SBUX) report Wednesday, and Colgate-Palmolive (CL) reports Friday. The question for each is pricing power, whether cost inflation can be passed through without denting volume, just as the Fed weighs whether that same inflation is sticky enough to justify tightening. Financials (XLF, -1.62%) sold off alongside staples last week, a less intuitive move given the sector typically benefits from a higher-for-longer rate path, suggesting the market is currently pricing rate-hike risk as a growth threat rather than a margin tailwind for lenders. Visa (V) and Mastercard (MA), reporting Tuesday and Thursday respectively, offer a cleaner read on consumer transaction volume than the banks would, since both are pure plays on spending rather than net interest margin.

The Week Ahead

Wednesday brings the week's defining event: the Fed's rate decision at 2pm ET, with Chair Kevin Warsh's press conference following at 2:30, against a backdrop of inflation running near 3.7% and no fresh Summary of Economic Projections at this meeting. Thursday follows with Q2 GDP, the PCE price index, and jobless claims at 8:30am ET, all bearing directly on how the Fed's decision gets read after the fact. Tuesday's Conference Board Consumer Confidence data lands as the FOMC meeting opens. On earnings, Tuesday brings Visa, Coca-Cola, Boeing, and UPS; Wednesday is the week's heaviest day with Microsoft, Meta Platforms, Procter & Gamble, and Qualcomm; Thursday brings Apple, Amazon, and Mastercard; Friday closes with Chevron, AbbVie, and Linde. The Bank of England and Bank of Japan also hold policy meetings this week, adding to the global rate-decision cluster.

Upcoming Earnings This Week

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