Good Afternoon. Almost a 5% correction this week in the tech-heavy Nasdaq amid AI demand fears, sector rotation, and geopolitical tensions. Volatility is the price we pay for excess returns in the stock market - I heard this a while back, but I'm not sure who said it, but I totally agree with it. AI demand is not going away in a week, but this is a dull period with the Q1 earnings season over and us waiting for the Q2 season to begin. Earnings are expected to continue to shine, which will prove this dip a buying opportunity.

Below are the key things to note this week:

GDP — Q1 2026 Third Estimate:
Real GDP revised up to 2.1% SAAR from 1.6%, but the math flatters the story — the revision came mostly from lower imports, with consumer spending revised down. Real final sales to private domestic purchasers — the cleanest demand signal — were cut 0.7 pp to just 1.7%. Government value added grew 7.5% real, contributing ~0.8 pp of the headline (federal +0.69, state/local +0.10). Information (+0.69), professional/scientific (+0.41), and durables (+0.40) carried the private side; retail trade (-0.47), wholesale (-0.35), and finance and insurance (-0.25) all detracted. PCE deflator revised up to 4.6%, core 4.4%. The composition is government plus AI-adjacent industries propping up an economy where rate-sensitive private sectors are already contracting.

PCE — May 2026:
Personal income +0.7% MoM, DPI +0.7%, nominal PCE +0.7% — a bounce off April's flat print, but BEA flagged the income gain was driven by farm proprietors' income from a second round of Supplemental Disaster Relief Program payments. Strip out that one-time transfer, and organic growth is thin. Real PCE rose just 0.3% — the price index ate the rest: +0.4% MoM and +4.1% YoY headline (highest since April 2023), +0.3% MoM and +3.4% YoY core (highest since October 2023). The $156B spending increase went mostly to financial services ($28B), health care ($22B), housing/utilities ($22B), and gasoline ($21B); food services rose by just $0.4B, and clothing by $2.9B. Saving rate edged up to 3.0%. A consumer running on transfers, staples, and energy — not real wages.

For the week:

CNN's Fear & Greed Index now stands at 25 (Extreme Fear) out of 100, down 12 points from last week. Details here

The top five trending stocks on Reddit are Micron, SPY, Wendy’s, Microsoft, and NVIDIA. Read More

Liquidity:

Here is a summary of this week’s key economic releases:

Target Rate Probabilities for July 29th FOMC Meeting:

AI Trade Hits a Wall; OpenAI Eyes 2027 IPO: The Nasdaq notched 5 straight losing sessions and fell 4.6% on the week — worst since the early-June chip rout — while the Dow hit an intraday record Thursday at 52,655 as money rotated into staples, healthcare, and industrials. The Friday catalyst: The NYT reported that OpenAI is leaning toward a 2027 IPO at a $1T+ valuation rather than going this year at a lower valuation, with bankers citing SpaceX's post-IPO slide and AI-stock volatility. Altman called any cut to the $1T target a "non-starter." Kalshi traders now price 59% odds of an OpenAI IPO announcement by March 1, 2027, vs. 10% previously in Q4 2026. Alphabet -5% Monday on Gemini lead Noam Shazeer's exit for OpenAI. Read

OpenAI, Broadcom Unveil "Jalapeño" — First Custom Inference Chip: OpenAI on Wednesday unveiled Jalapeño, its first custom-built AI accelerator — co-developed with Broadcom from initial design to tape-out in just nine months, possibly the fastest ASIC cycle in advanced semiconductor history (OpenAI used its own AI models to accelerate the design itself). Purpose-built for LLM inference, with early testing showing "performance-per-watt substantially better than state-of-the-art." Initial gigawatt-scale deployment targeted for late 2026, with Microsoft as the primary partner (reportedly committed to taking 40% of the first production run). Part of OpenAI's push to "build the full stack" and reduce its Nvidia dependence — alongside parallel deals with Nvidia ($30B), AWS ($50B for 2GW of Trainium), AMD, and Cerebras. Broadcom shares are up 10% YTD on what CEO Hock Tan called "simply insatiable" custom-silicon demand. Read

US Strikes Iran After Hormuz Drone Attack: The week-old MOU faced its first major test Thursday when the IRGC fired four one-way attack drones at ships in the Strait of Hormuz; one struck the upper deck of a Singapore-flagged cargo vessel off Oman. Trump called it a "foolish violation" on Friday; CENTCOM then struck Iranian missile, drone, and coastal radar sites later that day. Iran's Azizi framed it as "ceasefire management, not violation," reasserting Tehran's authority over the strait. Brent ended down ~$3 on the week to ~$74 as 78 tankers transited on Wednesday — the highest since the war began — and traffic continued post-incident. Read

SpaceX Fast-Tracked into Russell 1000; Nasdaq 100 on July 6: SPCX joined the Russell 1000 after Friday's close — an off-cycle fast-track — and enters the Nasdaq 100 on July 6, triggering forced passive flows from IWB, VONE, and QQQ. The indexing tailwind arrives just as SPCX dropped below its $150 IPO open price Tuesday (closed $148.36), now down ~26% from its $202 peak. Stock rallied ~1.5% Friday on the inclusion news. SpaceX separately raised $25B in a debt sale Tuesday (upsized from $20B on ~$90B of orders) — one of the largest AI-era bond issues, behind only Amazon's $54B and Alphabet's $31.5B earlier this year. Alphabet also replaced Verizon in the Dow on Friday — another reminder that index reshufflings are the only reliable bid in this tape. Read

Micron. Non-GAAP EPS $25.11 versus $20.28; revenue $41.5B, up 346% and a 16% beat. Surging AI memory demand drove an 84.6% gross margin; data-center revenue reached $25B; operating cash flow and free cash flow both set records, and HBM is sold out through 2027. Micron guided next quarter to a record $50B in revenue at an 86% margin. Shares jumped about 15%. One of the biggest quarters any chipmaker has ever printed.

FedEx. Adjusted EPS $6.31 versus $5.91; revenue $25.0B, up year over year and a beat. Domestic volume rose 3%, and yields improved across every service line. But shares fell about 6%. A cautious transition-year outlook, stranded costs from the June 1 Freight spin-off, and a new pilot contract spooked a stock sitting near record highs. A clean beat that the guidance buried.

Carnival. Adjusted EPS $0.41 versus $0.34; revenue a record $6.7B, roughly in line. Net yields hit a record for a twelfth straight quarter, adjusted net income rose over 20%, and customer deposits reached an all-time high of $9B. But Carnival cut its full-year European yield outlook due to the Middle East conflict, and its shares fell about 6%. Records, undone by the guide.

Paychex. Adjusted EPS $1.32 versus $1.31; revenue $1.61B, up 12% and about in line. The Paycor integration is complete and beat its synergy targets, full-year revenue rose 17%, and margins expanded. But fiscal 2027 revenue guidance of 5–6% growth came in below the Street, and shares slipped a couple of percent. The quarter was fine; the slowdown ahead was the story.

TD SYNNEX. Non-GAAP EPS $4.85, up 62%, versus $4.11; record revenue $19.6B, up 31%. Gross billings rose 33%, and the Hyve hyperscaler business surged 117% as AI infrastructure demand accelerated; the company is adding more than a million square feet of capacity. Shares rose about 3%. The quiet AI-infrastructure winner of the week.