Oh Snap. All good things must come to an end -- even the Dow Jones Industrial Average's weeklong winning streak.
The blue-chip index closed 0.9% lower on Thursday, with 20 of the 30 Dow stocks down on the day.
Until today, the Dow was having a fantastic week; it notched gains for five consecutive days, setting fresh records for three of those, and closing over the 54,000 mark for the first time ever.
The market's other main indexes also had a tough day. The S&P 500 shed 0.2% while the tech-heavy Nasdaq Composite was off 0.1%, weighed down by poor performance in software stocks. Coming off earnings this week, HubSpot sank 19%, Datadog dropped 19%, and AppLovin declined 20%, while Figma dropped 15% and Duolingo fell 9.4%. AppLovin and Datadog were both among the worst-performing stocks in the S&P 500.
The upcoming jobs report weighed on investor sentiment. Economists forecast an 82,500 increase in nonfarm payrolls, after a 57,000 gain in June. The unemployment rate is expected to remain unchanged at 4.2%. Fed Chair Kevin Warsh described the labor market as solid and steady following last week's meeting of the Federal Open Market Committee.
"The labor market is more resilient than previously thought, but that resilience shifts the balance of risks toward overheating, with clear implications for the Fed's policy path," says Seema Shah, chief global strategist at Principal Asset Management.
Geopolitics aren't helping. Oil futures rose to a little over $80 a barrel as commodity traders await more details on the deal struck between Iran and Oman to reopen the Strait of Hormuz. The U.S. has paused strikes on Iran in hopes that reopening the strait will lead to lasting peace talks. But as we all know by now, negotiations could always fall apart. Dan Alamariu, chief geopolitical strategist at Alpine Macro, writes:
Both sides have reasons to eventually make a deal: Iran needs export revenue and calm at home (the regime's stability is far from assured), and Washington faces rising energy prices ahead of the November elections; our view is that both parties are close to war exhaustion. So, an agreement that at least partly reopens the strait within one to two months remains plausible, though nobody should hold that view with much confidence.
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The Hot Stock: Motorola Solutions +8.2% The Biggest Loser: Honeywell Aerospace -23.2%
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Look, Mom, I Can Hack Too!
The AI hacks keep coming.
One of Meta Platforms' AI models accessed the internet and hacked a separate service during a third-party test, the company confirmed to Barron's. The news comes on the heels of similar disclosures from OpenAI and Anthropic.
While the news sounds scary -- and more than vaguely dystopian -- it's actually a positive development for Meta, writes my colleague Adam Levine.
"On the whole it's good for Meta that it is keeping up with competitors in AI development, even when that results in accidental hacking operations," he writes. "At least it justifies to some extent its huge spending on AI infrastructure."
But AI companies need to be careful, Adam cautions. Lawmakers are already pushing for legislation that would give the government authority to shut down AI systems that could cause harm.
The hacks will likely galvanize efforts from within the cybersecurity community to defend against AI attacks. Earlier this spring, Booz Allen Hamilton gave me a demonstration of its latest AI attack simulator, which hacked into its system within minutes. Two years ago, an attack of that scale would be human driven, and could take days or even weeks to execute, CEO Horacio Rozanski told me. The sheer speed at which AI agents can work makes it hard to ward off a strike like that, he added. Cybersecurity experts say that AI is opening up the field to a whole new set of hackers.
Read more about the cybersecurity reckoning in this week's issue of Barron's Global Signals.
The Calendar
Oklo, Plains All American Pipeline, PPL, Take-Two Interactive Software, and Vistra report earnings tomorrow.
The Bureau of Labor Statistics releases the jobs report for July.
What We're Reading Today
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