Q2 2026 is in the books — and it was historic. The S&P 500 returned more than 14% including dividends, the best quarter since 2020. Semiconductors had their best quarter ever. More than $8 trillion was added to the market's value in three months. It was a generational run.

And on Day 1 of Q3, the market is already answering the question everyone is asking: was that the peak, or the beginning?

This morning tells you everything you need to know about where momentum is headed next.

Semis — the kings of Q2 — are pulling back hard in premarket. Lam Research is down over 4%. SNDK is down more than 6%. SOXL, the 3x semiconductor ETF, is off more than 7%. After the best quarter in their sector's history, money is rotating out.

Where is it going? Clean energy and enterprise software.

Bloom Energy (BE) is up 7.4% this morning — the biggest large-cap mover of the day. It's not a fluke. BE has surged more than 1,400% over the past 12 months, powered by a story that makes perfect sense: fuel cells that power AI data centers with consistent, reliable energy. The AI build-out doesn't just need chips — it needs electricity, and lots of it. BE is increasingly in the conversation alongside nuclear names like Oklo (up 4.7% this morning) as the infrastructure layer underneath the AI trade.

ServiceNow (NOW) is up 4.6% with 19.5 million shares traded before the open. Salesforce (CRM) is up 3.6% with 13.7 million shares. Enterprise software is getting a bid as investors look past the chip cycle toward companies with durable recurring revenue and operating leverage that doesn't require a $500 billion capex race.

The rotation theme that's been building all year — away from speculative AI bets and toward real-economy earners — is showing up on Day 1 of Q3 in real time.

Two of the most recognizable companies in the world reported news last night, and the market's reaction to each says a lot.

Nike (NKE) beat earnings estimates, but the beat was a mirage. Strip out a $986 million one-time tariff refund, and the underlying business is still struggling. Revenue slipped 1% year over year. Greater China fell 12%. Converse dropped over 30%. CEO Elliott Hill's "Win Now" turnaround plan has improved efficiency, but 18 months in, it hasn't moved the revenue needle. The CFO was blunt: "We are not expecting the environment to improve meaningfully over the next six months." The stock is down more than 35% year to date and fell again in premarket this morning. Morningstar believes the recovery comes — but in 2027, not today.

Microsoft (MSFT), meanwhile, is UP this morning after reports of another round of layoffs — as many as 5,700 roles, under 2.5% of its workforce, potentially announced as early as next week. Today marks the start of Microsoft's new fiscal year, which has historically been when it announces cuts. The market is not mourning these jobs. It's celebrating the cost discipline, especially after MSFT fell 23% in the first half of 2026, its worst half-year performance since 2000.

What these two stories have in common: the market in 2026 is punishing companies that are spending through problems and rewarding companies that are cutting through them. Efficiency is the trade. Discipline is the thesis.

ADP jobs report came in at 98,000 private sector jobs added in June — below expectations and below May's revised 122,000. That's a softer labor market signal heading into tomorrow's nonfarm payrolls number, which is the bigger one.

Nonfarm payrolls (July 2) is the main event this week. A soft number gives the Fed more reason to consider rate cuts. A strong number keeps rates higher for longer. Either way, it will move markets more than anything else happening right now.

Fed Chair Kevin Warsh is speaking today at the ECB Forum in Sintra, Portugal. Warsh has been consistently hawkish. Listen for any shift in tone given today's weak ADP print.

Oil is down 1.1% to $68.77 a barrel after Iran said it would not meet directly with US delegates in the Doha talks, complicating the peace process that had driven oil prices lower in recent weeks.

After a historic quarter, the easy money has likely been made in semiconductors — at least for now. The rotation into energy infrastructure, enterprise software, and consumer defensive names looks real and has fundamental support. AI needs power, not just chips. Enterprise software has durable revenue that doesn't require betting on a single hardware cycle.

Tomorrow's jobs report will set the tone for how aggressive the Fed can be in the second half. If labor softens and the Fed gets room to cut, this rally has more legs. If payrolls are hot, rates stay higher and the pressure on growth multiples continues.

The best quarter since 2020 is over. Q3 starts today. Stay disciplined, stay positioned, and watch the rotation.

The Morning Momentum is published every weekday before market open. Not financial advice. Always do your own research.

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