Dow surges 1,100 points in worst day since April 2025 on Fed fears

U.S. stocks finished higher for the week ending Aug. 1, 2026, overcoming a hawkish Federal Reserve decision, a bond market rout and mixed earnings from Big Tech companies. The Dow Jones Industrial Average rose 1%, snapping a three-week losing streak. The S&P 500 gained 1% and the Nasdaq Composite climbed 1.6%, each halting a two-week slide.

For the month of July, performance was uneven. The Dow edged up 0.32%, its fourth straight monthly gain. The S&P 500 slipped 0.13% and the Nasdaq fell 3.2%, both logging their second consecutive monthly losses.

The Fed left interest rates unchanged on July 29, 2026, but three of the 12 voting members on its policymaking committee dissented in favor of a hike. The split reflected growing concern that inflation has remained above the 2% target, with renewed Iran tensions driving energy prices higher. During his news conference, Fed Chairman Kevin Warsh sought to reassure markets, but the bond market reacted sharply. The yield on the 10-year Treasury note surged above 4.67%, and the 30-year yield jumped past 5.2%, its highest since 2007. Stocks sank on the yield surge. The Dow plunged more than 1,100 points, or 2.2%, on July 29—its worst single-day drop since April 2025—before recovering later in the week. The 10-year yield topped 4.7% by Friday, July 31.

A forced liquidation by hedge fund Situational Awareness jolted the artificial intelligence trade. The selling exacerbated a reversal of the year's profitable "long AI hardware, short software" trade. The fund, founded by former OpenAI researcher Leopold Aschenbrenner, offloaded troubled bets on July 30, 2026. Jim Cramer called the unwind "one of the more sure signals to buy," arguing it removed indiscriminate selling pressure and could mark a turning point. He also said the fund's implosion was a cautionary tale about margin investing.

Hyperscaler earnings showed that Wall Street rewards AI spending when it comes with a clear path to profits. Microsoft Corp. generated $19 billion in quarterly free cash flow and kept its capital spending outlook disciplined. Its shares soared 21% for the week. Cramer urged investors to "stay long," calling the stock most loved. Amazon.com Inc. raised its full-year capital expenditure forecast by $20 billion, but its Amazon Web Services unit delivered its fastest revenue growth in 18 quarters. CEO Andy Jassy explained how the investments would boost returns. Amazon shares climbed 17% for the week, with Cramer praising Jassy's messaging. Meta Platforms Inc. faced a roughly 91% drop in free cash flow, higher capital spending and a softer revenue outlook. CEO Mark Zuckerberg failed to convince on AI returns, and shares fell more than 6% for the week. Cramer said his "hedge fund hat would say sell it."

Apple Inc. beat revenue and earnings expectations when it reported on July 30, 2026, but higher memory prices, supply constraints and softer guidance weighed on results. The company has raised prices on some Macs and iPads to offset costs, and investors watch whether it will do the same with the next iPhone. Apple has largely avoided the AI spending arms race, instead improving AI through partnerships with Alphabet, a capital-light strategy that has become a competitive advantage. Shares sank 7% for the week. Cramer called the quarter "fantastic" and argued the main challenge is supply, not AI.