Wall Street ended higher on July 31, 2026, as Amazon’s strong quarterly report bolstered investor confidence in AI-related stocks.
The trading session served as a volatile capstone to July, a month defined by swings in oil prices and skepticism over whether massive artificial intelligence investments would ever yield actual profits. For the week, the S&P 500 rose 1.05% and the Nasdaq added 1.59%.
Amazon and Microsoft Alleviate AI Spending Fears
The surge followed a quarterly report featuring the company’s biggest revenue growth in over four years and a profit that more than tripled from a year earlier, driven largely by accelerated growth in its cloud computing business.
This performance, coupled with a similar report from Microsoft on Wednesday, helped quiet doubts that tech giants were overspending on AI data centers. Microsoft rose 3% on Friday, adding to a previous surge of over 15%—its biggest one-day percentage gain since 2008—after forecasting cloud growth that exceeded expectations.
The shift in sentiment was palpable but uneven. While the PHLX chip index edged up 0.07%, it remains down more than 20% from its record high close on June 22. Individual chip stocks showed extreme instability; Micron Technology, for instance, swung from an early 6.4% jump to a 6.5% loss before finally settling with a 5.9% drop.
Apple Slumps Amid Supply Constraints
Apple provided a sharp contrast to the AI optimism, with shares tumbling 7.4%. Despite reporting a stronger-than-expected profit for the latest quarter, the company warned that supply constraints would hurt future growth.
Executives attributed the revenue growth shortfall to a supply crunch
in components, which are being consumed by the broader AI boom.
Iran Conflict and the Inflationary Pressure of Oil
Beyond tech earnings, Wall Street grappled with geopolitical instability. The war with Iran has disrupted crude flow from the Middle East, causing oil prices to spike and fueling inflation worries. Brent crude settled at $87.93 a barrel, having careened between $72 and $102 earlier in July.
These energy costs are hitting consumers directly. According to AAA, the average price for a gallon of regular gasoline in the U.S. has risen to nearly $4.11, up from $3.85 a month ago.
The inflationary pressure pushed bond yields higher. The yield on the 10-year Treasury rose to 4.71%, a significant climb from the 3.97% level seen before the conflict with Iran intensified. This trend has already pushed average long-term U.S. mortgage rates to their highest level in a year.
Federal Reserve Credibility and the September Test
The Federal Reserve is currently operating under a cloud of skepticism. While Federal Reserve chairman Kevin Warsh has promised to return inflation to the 2% target, he has declined to specify the mechanism for doing so. The Fed voted Wednesday to keep its main interest rate steady, even as inflation remains well above that 2% goal.
This hesitation has created a rift. Three Federal Reserve officials who dissented at this week’s policy meeting called for an immediate rate hike to combat inflation. Markets are currently pricing in a 65% chance of a rate hike at the September meeting, down from 82% a week ago.
Economists at Bank of America added that the Fed is facing a growing credibility problem
, suggesting the central bank must hike rates in September to deliver an internally consistent narrative
.
Global Market Divergence: U.S. Gains vs. Canada’s TSX
While U.S. indexes ended the day in the green, the Canadian market told a different story. The S&P/TSX Composite index fell 0.8%, closing at 35,226.14. The decline was driven by a 3% drop in the materials group and a 3.5% fall in the telecommunications sector.
- Telus: Shares tumbled 11.3% after the company reported a second-quarter loss and cut its annualized dividend by 55% to prioritize debt reduction.
- Gold: Prices dropped 1.3% as the U.S. dollar rebounded.
Conversely, Canada’s energy sector remained a bright spot, adding 0.6% to its monthly gain, which now exceeds 16%. This was supported by U.S. crude oil futures settling 1.3% higher at US$84.67 a barrel, as reports of tankers turning around in the Strait of Hormuz forced traders to rethink shipping flows.
Looking ahead, the market remains a tug-of-war between robust corporate earnings—with S&P 500 quarterly earnings expected to jump 48% from a year ago—and the looming threats of geopolitical war and central bank uncertainty.
