Yesterday, Utilities (XLU) looked cheap by most measures and led the way in the session that exhibited spunk early on but gave in to anxiety ahead of Alphabet’s (GOOG/L) results.

Alphabet Delivers

I'm doing fine

Up here, on Cloud Nine

Listen, one more time

I'm doing fine

Up here, on Cloud Nine

- Temptations

Financial headlines are mostly incorrect and typically lean to the side of fear-mongering and misinformation, but the headline above ‘hit the nail on the head.’ Alphabet posted strong financial results, but what they were doing with this cash was the question on everyone’s mind.

The company is a cash machine, but it's putting that cash to work and increasing capital expenditures to $195 - $205 billion.

Highlights

Tokens per minute and Gemini’s monthly active users (MAU) were great positive surprises and the 82% leap in cloud revenue was significantly above the consensus of a 63% jump.

Cloud revenue surged, and the operating margin expanded to 35.6% from 20.7%.

Sequential gains in cloud revenue might put to rest the notion that Alphabet (GOOG/L) and other hyperscalers are flushing hundreds of billions down a rabbit hole.

Management says they will increase use of third-party capacity, which is great news for neocloud names.

Today’s Session

Overshadowing what’s happening in AI, and earnings results in general, is the spike in crude. WTI smashing above $90.00 brings back all worries associated with higher crude.

Bond Yields

Bond yields are bumping up against levels that are triggering warning sirens.  The two-year sets the tone for the direction of fed funds rates.

The ten-year above 4.50% triggers yellow flags; at its current level, red flags are waving high.

30 Year

Odds are increasing for a July rate hike, but that is not going to happen; September is in play according to the bond market.  The CME FedWatch has seen a 50 bps hike spike.

Comments

I just can’t wrap my head around this thing going on where the earnings are through the roof and then the stock goes down. 🫤 Paul Montgomery on 7/23/2026 1:30:11 PM

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