Wall Street Inches Higher on AI Optimism and Earnings Momentum, but Broader Market Stumbles

The S&P 500 and Nasdaq Composite managed to notch fresh record highs—both intraday and at the close—thanks to early strength in tech and telecom giants. But while the headline indices held their ground, a closer look revealed an underlying softness, as small- and mid-cap stocks struggled and sector breadth turned broadly negative.

The morning opened on a positive note. Investors were still riding the momentum from the prior session and found fresh optimism in a new batch of earnings reports and a continued surge in AI-related spending. That was enough to propel the S&P 500 to 6,381.31 and the Nasdaq Composite to 21,113.10, both new highs. But the excitement was short-lived.

Among the early standouts was T-Mobile US, whose stock surged nearly 6% after raising its full-year outlook and delivering solid second-quarter results. The wireless carrier posted strong numbers across key operational metrics, from service revenue to postpaid subscriber additions—reassuring investors that it remains the dominant player in a competitive space.

Meanwhile, Alphabet added fuel to the rally. Shares of the tech giant climbed nearly 1% after it not only beat earnings expectations but also upped its capital spending forecast by $10 billion—to a whopping $85 billion—as it doubles down on artificial intelligence and data infrastructure. The news, coupled with President Trump’s executive orders promoting AI exports and data center buildouts, gave the technology sector an extra boost.

But even as Big Tech was marching ahead, semiconductors continued to lag. A cautious tone from Texas Instruments, despite topping earnings expectations, left chipmakers under pressure. The PHLX Semiconductor Index finished the day barely positive and remains down for the week.

The energy sector also participated in the morning advance, as rising oil prices gave the group a modest lift. But beyond these bright spots, the rest of the market quietly began to fade.

By afternoon, the consumer discretionary sector was leading the retreat, dragged down by a steep 8% drop in Tesla. The EV maker delivered results mostly in line with expectations but spooked investors with a sharp decline in deliveries and a warning from CEO Elon Musk about “a few rough quarters ahead” as federal EV tax credits begin to phase out. Chipotle didn’t help matters, tumbling over 13% after issuing a cautious sales outlook despite a modest rise in revenue.

As the session wore on, profit-taking set in, especially among smaller and mid-sized stocks that had rallied earlier in the week. The Russell 2000 dropped 1.3%, and the S&P MidCap 400 gave up 0.9%. Only about 36% of S&P 500 companies closed in the green, highlighting the narrowing breadth that’s becoming more common even as the indices reach new highs.

Even so, the mega-cap tech names continued to prop up the market. The Vanguard Mega Cap Growth ETF posted a solid 0.4% gain, helping to counterbalance the weakness elsewhere.

Our FTinvest 11 portfolio spent the day drifting sideways, showing little conviction as it hovered around the flatline for most of the session. By the close, the index dipped a modest 0.12%, finishing at 803.61.

Despite the subdued performance, the portfolio remains firmly within striking distance of its all-time high, trailing that record level by just 0.38%. In the absence of strong directional drivers, today’s mild pullback appears more like a pause than a shift in trend.