Today was more than a buy-the-dip trade. It was a return to the AI trade. The impetus for the return was rooted in earnings results and guidance from Microsoft (MSFT 451.10, +60.56, +15.51%) and Lam Research (LRCX 297.72, +45.37, +17.98%), which triumphed over all other corporate news. Arguably, a CNBC report that hedge fund Situational Awareness was forced to sell its entire book of public investments due to steep losses in its AI investments also acted as a catalyst for the rebound, as this news was viewed by some to be a "clearing event" for an AI trade that had been looking rather wobbly leading up to today's session.

Whatever the case may have been, there is no denying that Microsoft and the semiconductor stocks carried the stock market today.

Microsoft's move was gargantuan and far-reaching, impacting the Dow Jones Industrial Average, Nasdaq 100, and S&P 500 information technology sector (+5.2%) in a favorable light and providing a welcome distraction from the disappointments out of Meta Platforms (META 539.03, -46.58, -7.95%), Qualcomm (QCOM 151.54, -4.14, -2.66%), and Norwegian Cruise Line (NCLH 18.72, -2.04, -9.81%), to name a few, and the ongoing clash between the U.S. and Iran.

The Philadelphia Semiconductor Index soared 8.2%.

Most of the morning trade was simply a tech sector show, but buying efforts began to broaden out in the afternoon trade, sending the major indices to new session highs. The added lift was fueled by resurgences for the industrials (+1.0%), financial (+0.6%), and energy (+0.6%) sectors, all of which had been in negative territory earlier in the day. The consumer discretionary sector (+1.6%) was the next best-performing sector after information technology.

Conversely, the main pockets of weakness today were seen in the communication services (-2.5%), consumer staples (-2.2%), health care (-1.7%), and real estate (-1.2%) sectors.

It helped, too, that bond yields remained calm after a tough session yesterday. The 10-yr note yield hit 4.71% overnight but settled at 4.66% with oil prices pulling back, PCE inflation decelerating in June on a year-over-year basis, and Q2 GDP increasing a weaker-than-expected 1.5%.

There was still plenty of chatter in the market, though, about inflation remaining sticky well above the Fed's 2.0% target and the Fed's inflation-fighting credibility after it refrained from raising the target range for the fed funds rate yesterday. The Bank of England did as well today, voting 6 to 3 to leave its key bank rate unchanged at 3.75%.

The Bank of Japan will issue a policy announcement overnight. It is expected to leave its key policy rate unchanged at 1.00%, so it would be a surprise if the bank announced a rate hike. There was some notable strengthening in the yen today against the dollar (USD/JPY -2.5% to 159.36) ahead of the decision, prompting speculation that there was an official intervention effort on the part of Japan's government to strengthen the currency.

The U.S. market, though, traded in its own bubble (no pun intended), relishing the strength of many of its mega-cap leaders, including Amazon (AMZN 235.50, +8.85, +3.90%), which reports its results after the close. Apple (AAPL 333.43, -4.76, -1.41%) does, too, but it sat out today's advance, having made a solid move already in recent weeks leading up to its report.

• Russell 2000: +17.1% YTD
• S&P Mid Cap 400: +13.0% YTD
• DJIA: +7.4% YTD
• S&P 500: +6.9% YTD
• Nasdaq Composite: +5.2% YTD

Reviewing today's data:

• The Advance Q2 GDP report showed real GDP increasing at an annual rate of 1.5% (Briefing.com consensus: 2.3%) on the heels of a 2.1% increase for Q1. The GDP Price Index increased by a whopping 6.3% (Briefing.com consensus: 3.7%) following a 3.6% increase in Q1.
  • While the headline GDP print is a bit disappointing, it is not as soft as it appears knowing that net exports subtracted 1.01 percentage points. The bright spot was the pickup seen in personal spending (+3.2% from +0.5%) and final sales to private domestic purchasers (+3.9% from +1.7%).
• Initial jobless claims for the week ending July 25 increased by 9,000 to 197,000 (Briefing.com consensus: 203,000). Continuing jobless claims for the week ending July 18 decreased by 7,000 to 1.782 million.
  • The key takeaway from the report is initial claims remaining below 200,000, which is an historically low level and indicative of a solid labor market where layoff activity is quite low.
• Personal income increased 0.2% month-over-month in June (Briefing.com consensus: 0.3%), personal spending jumped 0.3% (Briefing.com consensus: 0.4%), the PCE Price Index was down 0.1% (Briefing.com consensus: -0.1%), and the core-PCE Price Index rose 0.1% (Briefing.com consensus: 0.2%). On a year-over-year basis, the PCE Price Index was up 3.7% versus 4.1% in May, and the core-PCE Price Index was up 3.3% versus 3.4% in June.
  • The key takeaway from the report, taking into account Fed Chair Warsh's demonstrative statement that the Fed doesn't have a soft inflation target but a hard target of 2.0%, is that the PCE Price Index remains well above 2.0%.