In this market‑commentary monologue, Kenny Polcari opens with a brief weather note before diving into the day’s market dynamics. He explains the Dow’s 537‑point rally driven by a rotation from high‑flying semiconductor stocks to more defensive mega‑caps such as Coca‑Cola, Sherwin‑Williams, IBM, Amgen and others, while the Nasdaq and semiconductor index (SOX) continue to fall. He links the sector shift to macro factors: a sharp drop in oil prices, rising bond prices and falling yields, and the pending Fed FOMC meeting, noting that lower oil gives the Fed “breathing room” but rates are unlikely to change today. Polcari highlights ongoing Middle‑East tensions, recent Iranian attacks, and their lingering impact on energy markets. The core thematic argument is that the true moat in the AI race is compute—not the models themselves. He defines compute as the full stack of GPUs, memory, data‑center power, networking, and related infrastructure, and argues that this physical layer cannot be easily replicated, unlike software models. This sets up the importance of upcoming earnings, especially the post‑bell releases from Microsoft and Meta, which he says will either validate the massive AI‑related capex or trigger a sell‑off. He lists a slate of other earnings (Virtiv, General Dynamics, Boston Scientific, etc.) that span AI infrastructure, defense, healthcare, fintech, and industrials, framing them as the “opening act” to the AI‑centric climax. Polcari provides a brief market outlook for the day, noting mixed futures, a potential oversubscribed IPO (Jersey Mike’s), and the S&P’s trading range. He ends with a personal plug for a complimentary portfolio review and a detailed recipe for chicken thighs agrodolce, illustrating his blend of market analysis and lifestyle content.
Chapters
Well, good morning. Yes, it's me, Kenny Polcari, and today is Wednesday, July 29th, 2026. And here are the things that you need to know. Well, let's start with the weather. Looks a little bit overcast. It's cloudy, it's windy. The, the water's getting a little bit rough. Maybe, maybe it's gonna be indicative of what we hear today from the Fed, from economic data, and maybe even from Microsoft and Meta. So we'll get right to that. So the rotation continues, right? Coke, Sherwin-Williams, IBM, Johnson Johnson, Amgen, all lead— led the Dow higher yesterday. Oil was a bit lower, bonds were higher, and gold remained unchanged. The show, well, that today begins at 2:00 PM with the Fed, and then again at 4:00 PM with Microsoft and Meta after the bell. So what is a moat? Well, I'll explain that as well. And what do we have for dinner tonight? We're gonna have the chicken thighs agrodolce style. They are delicious. Delicious. All right, so good morning, and let's just take a look at Dow's— at the Dow's 537-point rally yesterday. And you'd think investors were going all in, but not so fast, because that's not really what happened. What happened was another day of rotation. Investors and asset managers and the Momo guys continued to just shift their seats. They continued selling the high-flying semiconductor names, pushing the SOX down 4.8% and leaving it now 26% below its June peak, officially in bear market. But don't lose sight of the bigger picture, because even after all this selling, the group is still up 63% year to date. That's not a collapse, that's just investors locking in gains after an extraordinary run. And where did that money go? Well, into the companies that are economically sensitive, less expensive, and most importantly, reporting strong earnings. Think consumer staples, they were up 2% yesterday. Healthcare up 2.5%, communications up nearly 2%, basic materials up 1.8%, consumer discretionary was up 1.4%, financials added 1.3%. Coke was probably the most important earnings report of the day yesterday morning. They beat on earnings per share, they beat on revenue, they raised full-year guidance, they reported strong international demand, and best of all, their pricing remains resilient. The stock ended up 5% yesterday, adding 24 points to the Dow's 537-point gain. It also sent the positive message, by the way, about the health of the global consumer. Next up was Sherwin-Williams, right? It's another standout. Sales are up 7.5%, earnings per share of $3.70, beating expectations, strong margins, robust guidance. The stock up 8.25%. Suggesting that the commercial and residential construction and remodeling business remains healthier than maybe many had feared. Because after you build it, guess what? You gotta paint it. That move added 160 points to the Dow and was by far the clear leader for the Dow advancers. Now, other Dow members included Amgen, IBM, UnitedHealth, Boeing, Home Depot, Salesforce, and more, adding another 410 points of the index. And guess what? These are not the Mag 7 or the chip names. These are core mega-cap all-American names. At the end of the day, complementing the Dow's advance, we saw the S&P add 15 points. The Nasdaq continued to get sold, losing 55 points, putting that index right on the edge of the official correction, down 10% off its recent high. The Russell added 6 points. The transports lost 177. The equal weight gained 65 points. Closing at an all-time high while the Mag 7 added 175 points. So think about it, the Equal Weight S&P hit another record closing high. And all that means is that this really, this rally is not about a handful of mega-cap tech stocks that have dominated the headlines for years. Oh no, no, no. This should tell you something important. Investors are not rejecting stocks. They are just finding opportunities in other places. Look, we know the deal. The semis are now on pace for their worst month since 2002, down 26%. Not because AI is dead, not because demand has disappeared, but because the expectations had become enormous. Valuations were stretched and the trade was very crowded. And earnings season, well, that was just about to begin. Investors keep asking the same question over and over. Is the money, and it's hundreds of billions of dollars, being poured into AI ultimately gonna pay off to justify today's valuations? Well, we don't know yet, but today and tomorrow was certainly gonna give us a clue on what happens next. And then something else happened on the way to the forum. Oil prices continued to collapse. WTI now trading at $79.30, down from $94 just days ago, while Brent is trading at $84.40, down from $101. That caused bond prices to rise, uh, and yields to fall. The TLT and TLH up 6/10 and a half a percent respectively. 2-year yields fell 4 bps to 4.28. The 10-year fell 4 bps to, uh, 4.60, and the 30-year fell 5 bps to end the day at 5.08. The story here is that lower oil prices will give the Fed some breathing room. So I'm asking, breathing room for what? Rates aren't changing today and they weren't expected to change. So if that's supposed to mean that the September hike that the market is pricing in is now off the table, I'm not so sure. I'd say slow down, big boy, because there's still a lot of data between now and September 16th for the Fed to consider. And by the way, the whole Middle East conflict isn't over yet. And as we know, the ceasefire today means nothing about tomorrow. So while the action in the oil patch was welcome, it ain't over until the fat lady sings. And guess what? Apparently, she is not ready to sink. Why? Because last night, Iran launched another round of attacks on US bases, this time in Jordan. If that's not enough, they also sent drones to attack Saudi Arabian oil facilities. Now, none of these attacks— all of these attacks were thwarted. None of them posed an issue. But the issue now is how far apart we are from really ending this conflict. Overnight oil did trade up as high as $83.30, but at 5:30 this morning was up $2.70 or 3.3% at $82. Gold remains trapped in that $4,000, $4,200 trading range. Yesterday it ended the day basically unchanged, um, as everyone's waiting for the next catalyst, right? This morning gold is up $5 at $4,030. The FOMC meeting, uh, the decision that hits the tape at 2 PM and the press conference starts at 2:30. Fed Fund futures still give us a 30% probability of a rate hike today, which is unusual this late in the game. I'm still in the 70% camp that says we get nothing, and Kevin Walsh has promised not to promise anything that suggests any future action or paints himself into the corner. Expect the markets to listen to what he says just to see what has changed, who voted with him, who voted against. And remember, while we're still not sure whether he's a hawk or a dove, One thing is for sure, he is a reformer. So expect to hear how things are changing at the Fed. Earnings? Well, there's a lot of them. Today we're going to hear from, uh, Virtiv, General Dynamics, Boston Scientific, Humana, SoFi, Masco, Stanley Works, PPG, uh, uh, and Teva. These companies represent AI infrastructure, defense, healthcare, medical devices, fintech, housing, industrials, consumer chemicals, agriculture, and pharmaceuticals. But don't get too comfortable because all these names, all they do is set the stage. They are the opening act. The climax comes after the bell when Microsoft and Meta take center stage. They'll either justify the hundreds of billions of dollars spent on AI, or they're gonna give investors another reason to just hit the sell button. So do yourself a favor, hit the head before 3:45, and then Buckle up because the fun starts right after the bell at 4 PM. Now remember, demand for compute isn't going away, and that's why today's earnings matter so much. Microsoft and Meta and the rest of the hyperscalers are still spending extraordinary amounts of money because underinvesting is the existential risk. Remember, compute, not the models themselves, is still the moat. So you ask, the moat? What is it? What does it mean? Because everyone is saying it. So pay attention, 'cause here we go. Some people believe that the AI race is all about the best model, right? The best LLM. That's a mistake. The real race, the real competitive advantage, otherwise known as the moat, is the computing power. Because without the power to train, refine, and run the models from billions of users, The models don't matter. So what is compute? Compute is everything required to build, train, deploy, and run AI at scale. So it's NVIDIA GPUs, it's AMD's GPUs, it's ASML, the single most important company in the whole semi supply chain because they build the machines that make the most advanced chips. It's MU, it's the memory names, it's servers, data centers, electricity, HVAC, high-speed networking, storage and memory. All this is compute. Is the engine, right? So what's the model? The model is the software. So it's ChatGPT, it's Gemini, it's Claude, it's Groq. Uh, those are the models. So why is compute the moat? Because models evolve quickly. Competition shows up. Open weight models emerge. Costs come down. We've already seen that with the Chinese models like KIMI. But what can't get copied? Is the hundreds of thousands of GPUs, gigawatts of electricity, billions of dollars of data centers, years of infrastructure investment. So to put it into food terms, anyone can write the recipe, but if you don't own the kitchen with all the equipment, you can't cook the meals that are feeding billions of people. Kaish? Okay. That's why Microsoft, Amazon, Meta, Google, and Oracle keep spending hundreds of billions of dollars. They're not buying today's AI. They're building the infrastructure that will allow them to dominate tomorrow's AI. They know that if they underinvest today and a, and a competitor, again, think China, builds more compute, they may never catch up, right? In Asia, the selling continues. Taiwan down 3.8%. The KOSPI index lost 6%, while the semis lost another 9.7%. SK Hynix down 2% in the pre-market trading. European markets are lower. Surprise, it's the ongoing pressure on tech, and it's the uncertainty around the Fed and what that means for the Bank of England and the ECB, and it's the renewed fighting across the Middle East. US futures are confused. Dow down 85 points, S&P's are up 14, the NASDAQ is up 46, while the Russell is up 5 points. Jersey Mike's, J-M-K-E, is going public tomorrow. They're bringing 45 million shares to the market, and it's supposedly 10 times oversubscribed. The price range is $21 to $25. And what that says is that there is still apparently plenty of risk appetite demand, right? And by the way, this steak, cheese, peppers, onions, and mushroom sub, it is fantastic. We discussed this yesterday, uh, along with the Fed and earnings on Mornings with Maria. With Cheryl Kassolan and Mark Tepper and Liz Peek. You can find that, uh, you can find the link to that interview on my Twitter @kennypolcari. Right now, the S&P closed at 7,428, was up 15 points yesterday. On Monday, we tested trendline resistance at 7,472 and we failed, right, closing at 7,413. Yesterday we made another feeble attempt and we failed to pierce it again. This morning, futures are mixed, so I'm not sure we're going to get even near testing it. We remain in that 7,300, 7,470 trading range. Now, uh, remember, if you'd like to discuss your goals, evaluate your risk, uh, the risk in your portfolio, or simply just get a second opinion, feel free to call me at 561-931-0190. I'm always happy to, uh, discuss it with you and provide you with a complimentary portfolio review and overall risk assessment. Okay, now what do we have for dinner tonight? We're gonna have the chicken thighs agrodolce. It's like sweet and sour Sicilian-style, uh, chicken thighs. This is one of those dishes that proves that Sicilian cooking is all about the balance. It's sweet, it's sour, it's salty, it's rich. And the best part, it tastes even better the next day. So here's what you need. You need 8 bone-in, skin-on chicken thighs. You need salt, pepper, olive oil, a large sweet onion, uh, that you're going to slice up. You need 5 or 6 cloves of garlic, you're going to slice that up. You need a cup of chicken stock, half a cup of dry white wine. You know me, Pinot Grigio, Santa Margherita. You need a third of a cup of red wine vinegar, 3 tablespoons honey, and 2 tablespoons of brown sugar. You need 2 tablespoons of tomato paste, kalamata olives or black olives, whatever you want, golden raisins, capers, fresh rosemary, thyme, toasted pine nuts, and of course fresh parsley. You're going to season the thighs with salt and pepper. You're going to heat olive oil in a large Dutch oven or a heavy skillet. You're gonna place the thighs skin side down. Don't touch 'em for 7 or 8 minutes. You want 'em to get a deep, golden, crispy skin. You wanna flip 'em after that and then cook 'em for another 3 minutes. Remove 'em, set 'em aside. Now, in the same pot, you're gonna add the onions. You're gonna cook 'em until they're soft, they begin to caramelize. Now you're gonna add the garlic. You're gonna stir in the tomato paste. Deglaze it with the white wine. Let it reduce by half. Now you're gonna add the chicken stock, the vinegar, the honey, the brown sugar. You're gonna mix it all really well. Now you're going to stir in the olives, the raisins, the capers, the rosemary, and the thyme. Bring everything to a boil and then down to a simmer. Now you're going to add back the chicken skin side up, leaving it above the liquid, right? You want to cover and bake it in the oven at 350 for about 40 minutes. Uncover it after 30 minutes so that the skin— right, uncover, put it back in the oven so the skin gets crispy while the sauce reduces. You want a good balance here of sweet and sour. When you're going to get ready to serve it, you're going to sprinkle it with the toasted pine nuts and the chopped parsley and a drizzle of excellent olive oil. You're never gonna— you're never gonna be disappointed with that. And you can thank me later. Look, you can see it behind me, it hasn't gotten any clearer, uh, and the wind is picking up. So let's see what happens in the market today. Until tomorrow, take good care.
