• Stocks: Don’t call it a comeback, but all three major indexes enjoyed a big bounce today as the tech trade recuperated. Earnings from Microsoft buoyed the good vibes (more on that later), while hopes are high for more good news from Amazon and Apple tonight.
• Crude: Oil sank despite fighting in the Middle East spreading to Egypt, which was targeted in a drone attack last night—the first it’s sustained since the war between the US and Iran began.
• Gold: The precious metal gained ground while the US dollar sank after inflation arrived in line with expectations.

Fast food

Morning Brew Inc, Photos: Adobe Stock

The Cyclospora outbreak kept many of us from our favorite slop bowls, taking a bite out of restaurant sales. Now, as those chains report earnings, investors are getting a clearer picture of just how much damage the food safety scare did—and how quickly customers are returning.

Yum! Brands posted mixed results today, beating earnings but missing revenue estimates. The company, which owns Taco Bell, KFC, and Pizza Hut, said the outbreak created a “meaningful near-term sales impact” after several Taco Bell locations were linked to parasite-ridden lettuce. Daily traffic at Taco Bells plunged by double digits following the news, a notable setback for the chain that has been driving much of Yum’s recent growth.

Fortunately, the slowdown appears to be easing. CEO Chris Turner said Taco Bell’s sales over the past four days have recovered roughly 50% from their lowest point after the outbreak. Overall, Taco Bell still posted 7% same-store sales growth during the quarter, followed by KFC’s 2%, while Pizza Hut slipped 1%. Shares of Yum rose 3.37% today.

Beyond Taco Bell

Yum wasn’t alone. Chipotle said that although it wasn’t directly implicated in the Cyclospora outbreak, the scare still shaved two percentage points off sales in the second half of July.

Even so, the burrito chain topped Wall Street’s expectations and raised its full-year same-store sales outlook from flat growth to low single-digit growth. The upbeat forecast was fueled by 100 new restaurant openings, 2.2% comparable-restaurant sales growth, and strong demand for menu additions like Chipotle Honey Chicken and Cilantro-Lime Sauce, which helped attract younger and lower-income diners. Shares popped 12.54%.

The comeback recipe

Looking ahead, both companies are taking very different paths to driving growth.

Yum is leaning on value. As it works to lure diners back after the outbreak, Taco Bell has rolled out a string of $1 promotions for items like Mexican Pizzas and Enchiritos (that normally cost several dollars more).

Chipotle, meanwhile, is betting on pricing power. Higher costs of beef, freight, and labor squeezed margins last quarter, prompting the company to rely on menu-price increases to offset inflation. That strategy has worked so far, but with consumers becoming increasingly price-sensitive, investors will be watching to see how much longer customers are willing to keep paying more.

Hey, at least we get some cheap ’ritos out of this whole debacle.—SY

      

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Stocks

🟢 What’s up

• Starbucks jumped 1.64% as strong same-store sales fueled an earnings beat and a higher full-year forecast.
• MarketAxess surged 29.45% after Intercontinental Exchange agreed to buy the bond-trading platform in a deal valued at more than $5 billion.
• Lam Research gained 17.98% with stronger-than-expected fiscal fourth-quarter results.
• Arm Holdings advanced 7.40% after topping quarterly earnings expectations and issuing an upbeat outlook.
• Shell rose 2.46% as elevated oil and gas prices drove its strongest quarterly profit in four years.
• Micron popped 18.36% and Sandisk surged 25.99% after Samsung warned that memory-chip demand could outstrip supply through 2028.

🔴 What’s down

• Crocs fell 7.38% as weaker-than-expected third-quarter guidance overshadowed an earnings beat and a higher full-year outlook.
• Qualcomm slipped 2.62% as investors looked past an earnings beat and focused on another quarter of declining sales.
• Carvana lost 7.36% as in-line earnings and a soft full-year outlook left investors wanting more.
• Teladoc Health sank 28.32% after lowering its full-year revenue forecast, citing weaker performance at online therapy platform BetterHelp.
• Tobacco company Altria declined 9.32% after missing earnings estimates and trimming its full-year profit outlook.
• Jersey Mike’s fell 5.70% in its NYSE debut despite completing one of the largest restaurant IPOs ever.

Stock of the day

Microsoft cashes, Meta crashes

Morning Brew Inc, Photos: Adobe Stock

Ever since Alphabet upped its 2026 capex guidance last week, investors have grown increasingly worried that hyperscalers are shelling out too much money with too little to show for it. Last night, Microsoft proved them wrong.

The Big Tech behemoth revealed a 43% year over year increase in revenue from its Azure cloud business—above estimates of 40%—and touted 30 million paid users for its AI-enabled 365 Copilot assistant, up from 20 million last quarter. That double whammy of good news propelled shares 15.51% higher today.

Then, there’s Meta Platforms. Despite touting record second-quarter revenue that beat analyst estimates, the social media giant missed on EPS—though to be fair, severance charges and legal fees cost the company a massive slice of its profits—and lowered its revenue guidance for the current quarter. Worse still, Meta’s free cash flow plummeted 91% year over year from $8.55 billion a year earlier to just over $784 billion, as it plows money into AI. Shares tumbled 7.95% today.

Microsoft spent $41 billion in capex last quarter; a 70% increase year over year—not exactly a small hike in its spending spree, but the company proved that it’s getting some bang for its buck. Meta, however, burned through billions over the last 12 months, increased its 2026 capex guidance, refused to provide a forecast for 2027, and may soon be forced to pivot to selling its compute power—because it still has nothing to show for its AI investments.

Microsoft shareholders are being rewarded for their patience. Meta shareholders are quickly running out of it.—MR

Inflation

Brittany Holloway Brown, Adobe Stock

When the economy feels hard to navigate, we return to our macro anchors—acronyms, acronyms, and more acronyms. Today, we got a slew of data points implying a mixed-bag for the economy: hings aren’t imploding, but they’re not going great, either.

First up: GDP. The US economy grew at a 1.5% annualized rate in Q2, slightly slower than the 1.8% that economists were expecting, and lower than the first quarter’s 2.1% growth. But exports increased 0.5% and imports fell 1.5%, slowing down the headline reading. If you look under the hood, most facets of the economy are still A-okay: Personal spending jumped 2.1%, higher than the 0.4% it rose in Q1.

In other news, shoppers are keeping calm and shopping on, despite rising prices: Consumer spending came in better than expected, jumping 3.2% from a year ago, up from the 0.5% it increased in Q1. But maybe consumers are feeling a little too spendy: The personal savings rate declined 2.7%, to its lowest level in four years.

Meanwhile, our old friend inflation arrived roughly in line with expectations, but still far above the Fed’s 2% inflation target: PCE fell 0.1% between May and June; the first time the metric has dropped since the pandemic. But Core PCE (the Fed’s preferred inflation gauge) jumped 0.1% in June and 3.3% since a year ago. Falling crude prices played a key role: Energy goods and services prices dropped 5.9% in June, as gas prices dropped 9.2% when tensions eased in the Middle East last month.

What lies ahead

“These data confirm what we already knew—but for the energy shock, inflation would be heading lower,” wrote Harris Financial Group Managing Partner Jamie Cox. “The Fed made the right call yesterday to stand pat on rates.”

But the central bank’s central problem of lowering inflation hasn’t been solved yet. Fighting in the Middle East is flaring up once again, promising to push oil prices (and inflation) higher, while Kevin Warsh’s coy responses at yesterday’s post-FOMC press conference means investors don’t have much insight into the Fed’s next move ahead of its meeting in September.

In other words, the market has a new favorite acronym: KWW (Keep Watching Warsh).—LB

      

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News

• The New York Mets are among the worst teams in the MLB. They’re also the first to team up with a prediction market.
• A group of banks is in talks to lend $15 billion to build Anthropic datacenters.
• Speaking of datacenters, Chinese startup DeepSeek is building a massive one in Mongolia.
• Mortgage rates have surged over the past four weeks to hit a new one-year high of 6.66% (not foreboding at all).
• The SEC slapped fraud charges on two entrepreneurs running an investment show that was promoted by X.

Calendar

Economic reports: We’ve heard from the Fed and we’ve gotten a look at the broader economy, but it’s time to hear what the people have to say, as we get the final reading of the July University of Michigan consumer sentiment report.

Earnings announcements: The biggest week of earnings this quarter ends with a bang, featuring Exxon Mobil, Chevron, AbbVie, Medtronic, Moderna, and Colgate-Palmolive, among others.

recs

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