Wall Street got back to its winning ways last week after navigating a hawkish Federal Reserve meeting, volatile swings in chip stocks, and a critical round of Big Tech earnings. The Dow Jones Industrial Average rose 1% for the week, snapping a three-week losing streak. The S & P 500 gained 1% last week, while the tech-heavy Nasdaq climbed 1.6%. Both avoided three down weeks in a row. For the month, however, performance was more mixed. The Dow edged up 0.32% in July, extending its monthly win streak to four. It was back-to-back monthly losses for the S & P 500, which slipped 0.13% in July, and the Nasdaq, which fell 3.2%. Here's a closer look at what drove the market in the final week of the month. Bonds send the Fed a warning While the Fed left interest rates unchanged Wednesday afternoon, three out of the 12 members on the central bank's policymaking committee voted for a hike. The opposition to holding borrowing costs steady reflected growing concern that inflation has remained above the Fed's 2% target for too long, with higher energy prices on renewed Iran war tensions adding to the pressure. During his post-July meeting news conference, Fed Chairman Kevin Warsh attempted to reassure markets that policymakers would act when necessary. The bond market that day wanted more than tough talk . The 10-year Treasury yield climbed above 4.67%, while the 30-year yield surged above 5.2% to its highest level since 2007. Stocks sank on that surge in yields, as investors questioned whether the central bank was falling behind in its inflation fight. The Dow on Wednesday plunged more than 1,100 points, or 2.2%, its worst one-day decline since April 2025. While stocks recovered and finished the week higher, the 10-year topped 4.7% on Friday. Oil was higher Friday but lower overall in a topsy-turvy week. Forced selling distorts AI trade It turns out that the recent reversal of the "long AI hardware, short software" trade, which had been working all year, was exacerbated by forced selling by Situational Awareness — a highly leveraged hedge fund founded by former OpenAI researcher Leopold Aschenbrenner. We found out Thursday that the fund had to offload its troubled bets, which ended up stabilizing the rocky AI trade. Jim Cramer on Thursday morning called the liquidation "one of the more sure signals to buy ," arguing that the unwind could mark a turning point by removing a significant source of indiscriminate selling pressure. The Nasdaq surged Thursday and Friday, though not enough to stay out of the red for the month. Jim also emphasized the implosion of Situational Awareness is a cautionary tale about the dangers of investing with borrowed money . That's why Jim has consistently cautioned investors against buying stocks on margin. Not all AI spending is created equal Hyperscaler earnings this week reinforced the idea that Wall Street isn't against AI spending. It just wants evidence that the investments will generate profits. Microsoft and Amazon showed investors what successful AI spending looks like. Microsoft kept its underlying capital spending outlook relatively disciplined while generating $19 billion in quarterly free cash flow . Amazon raised its full-year capital expenditure forecast by $20 billion, but Amazon Web Services (AWS) delivered its fastest revenue growth in 18 quarters, and CEO Andy Jassy clearly explained how those investments should translate into higher returns as new data centers come online. Investors rewarded both companies, with weekly gains of 21% for Microsoft and 17% for Amazon. Microsoft has gone from "most hated" to "most loved," Jim said during Thursday's Morning Meeting , urging investors to "stay long. Do not touch it." On Friday, he praised Jassy's messaging. Meta Platforms , however, reminded investors that spending alone isn't enough. Although the Facebook and Instagram parent continued to post strong advertising growth, investors focused on a softer revenue outlook, higher capital spending, and a roughly 91% decline in free cash flow . On the post-earnings conference call, CEO Mark Zuckerberg did little to convince investors that Meta's massive AI spending will translate into meaningful financial returns anytime soon. Shares fell hard on Thursday and ended the week down more than 6%. Jim said Thursday, "My hedge fund hat would say sell it. I really didn't like the quarter." We sat on our hands. Memory knocks an otherwise strong Apple Apple faced a different challenge when it reported its quarterly results Thursday evening. The iPhone maker beat revenue and earnings expectations , but higher memory prices, supply constraints, and softer guidance overshadowed the quarter . Apple has already raised prices on some Macs and iPads to offset those higher costs, and investors are now waiting to see whether the company will do the same with its next iPhone lineup. Unlike its hyperscaler peers, however, Apple has largely avoided the AI spending arms race. That capital-light strategy has become a competitive advantage with investors, who have rewarded Apple for improving its AI offerings through partnerships with Alphabet . Shares of Apple sank on Friday, finishing the week down more than 7%. Jim called the Apple quarter "fantastic," arguing Friday that the company's biggest challenge isn't AI but supply. "They just can't meet demand." (See here for a full list of the stocks in Jim Cramer's Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. 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