Wall Street started the third quarter with mixed results after a strong first half for the stock market. In the first two days of the third quarter and the second half of the year, the S&P 500 was mostly flat, while the Dow and Nasdaq moved in opposite directions. The Dow ended the holiday-shortened week with a record close on Thursday as a weak jobs report reduced the likelihood of a Federal Reserve rate hike. The Nasdaq fell in quick succession, with semiconductor stocks as measured by the PHLX Semiconductor Index down 6.3% on Wednesday and 5.4% on Thursday. After a lackluster start to July, which featured a rotation of AI beneficiaries to a new group, all three stock indexes rose this week. The market is closed on Friday for Independence Day, but let’s talk fireworks. Stocks have exploded in the first six months of 2026, with the S&P 500 up 9.6% and the Nasdaq up more than 12%. The Dow Jones Industrial Average rose 8.9%, marking its best first-half performance since 2021. The small-cap Russell 2000 soared nearly 22%, its strongest start since 1991. Here we take a closer look at what moved the market this week, including a review of the four trading alerts we sent to our members. AI boosts cyber stocks This week, cybersecurity stocks solidified their status as big winners from the artificial intelligence boom. This is a major reversal from the beginning of the year, when the market feared AI disruption. The group came together after the Wall Street Journal reported over the weekend that Chinese AI models are nearly as capable as major U.S. platforms at identifying vulnerabilities in code. Rather than seeing this as a negative for the industry, investors saw it as another reason why companies need to put more money into cybersecurity. Jim has repeatedly said that as AI improves in its ability to discover software flaws, businesses will need increasingly sophisticated tools to identify, patch, and defend against those vulnerabilities before hackers can exploit them. Club stocks Palo Alto Networks and CrowdStrike led the gains, with both hitting new highs for the week. We took advantage of Palo Alto’s surge to pare back some of our positions on Tuesday, locking in nearly 150% while maintaining our long-term belief in the company. The AI theme gained further momentum on Wednesday after the US lifted export restrictions on Anthropic’s Claude Fable 5 and Mythos 5 models. Through the weekend, Palo Alto and CrowdStrike were up 14.5% and 10.7%, respectively. Meta looks to the cloud The Meta platform has given investors reason to believe its massive AI spending could eventually turn into meaningful revenue. Shares of the Facebook and Instagram parent company soared more than 8% on Wednesday on news that the company is preparing to launch a cloud infrastructure business to sell excess AI computing power and AI models to external customers. Meta is facing growing concerns about large capital investments in servers, data centers and AI infrastructure. The company has so far largely defended the spending, citing improvements in its advertising business. This was not enough for investors concerned about free cash flow and Meta’s reliance on narrow, economically sensitive revenue streams. That’s why Jim has stepped up his calls for Meta to launch a cloud business, predicting that the struggling stock price will soar in response. Both happened. Jim said the cloud business gives Meta another way to monetize the compute it’s already building and competes with Amazon Web Services, Microsoft Azure and Alphabet’s Google Cloud. Certainly questions remain. Meta still needs to prove whether it wants to rent raw computing power or build a full-service cloud platform. The latter is much more difficult and time consuming. Either way, the move showed Wall Street that Meta is listening to investors’ concerns and is looking for ways to make its AI infrastructure work better for shareholders. Portfolio Repositioning This week, we made some notable changes to the CNBC Investing Club portfolio to lock in strong stock appreciation while continuing to reallocate capital to our highest-conviction ideas. On the seller’s side, they decided that the recovery was likely to take longer than originally expected and exited their position in Nike. Although management has made progress in cleaning up inventory and improving margins, it no longer believes the recovery justifies tying up capital for several more months. We recognized the loss and chose to invest that money in companies with cleaner growth stories. We also eliminated positions that dramatically outperformed. In addition to the Palo Alto sale mentioned above, we took a similar approach to Corning as the stock continued to rise impressively by more than 200% year-to-date. While Corning remains one of our favorite AI infrastructures, our discipline is to reduce positions when they become too large or rise faster than is fundamentally justified. The proceeds from these sales allowed us to build two additional positions that we believe have attractive upside. We used about half of the cash from the Nike sale to add to both FedEx and the recently spun off FedEx Freight. We continue to believe that investors are underestimating FedEx’s parcel business. In FedEx’s parcel business, management is benefiting from growing demand in healthcare, aerospace, automotive and AI-related data center logistics. At the same time, FedEx Freight is just starting out as an independent company and the freight cycle is showing early signs of recovery, giving management greater flexibility to improve margins. Goldman Sachs reinforced its view this week, initiating coverage with a buy rating and price target of $186. (See here for a complete list of Jim Cramer Charitable Trust stocks.) As a subscriber to Jim Cramer’s CNBC Investment Club, you will receive trade alerts before Jim makes a trade. After Jim sends a trade alert, he waits 45 minutes before buying or selling stocks in his charitable trust’s portfolio. If Jim talks about a stock on CNBC TV, he will issue a trade alert and then wait 72 hours before executing the trade. The above investment club information is subject to our Terms of Use and Privacy Policy, along with our disclaimer. No fiduciary duties or obligations exist or arise from your receipt of information provided in connection with the Investment Club. No specific results or benefits are guaranteed.
