ππ» Tech Earnings Recap!
Happy Wednesday all,
The latest Fed meeting was today, where it was announced that rates would be left unchanged in January. It's not much of a surprise to many. Those looking for a rate cut soon may be left waiting for a while though, as Powell shot down the likelihood of a March rate cut.
For more info on the Fed meeting, watch the latest YouTube video!
Enjoy this weekβs Hump Days!
- Humphrey, Rickie & Tim
π Eye-Catching Headlines
β Fed to hold interest rates steady but start considering cuts (Bloomberg)
π¦ Walmart Announces 3-for-1 stock split (WSJ)
πΆ Universal Music, TikTok fail to reach new licensing agreement (Reuters)
π³ Amex climbs most in a year as profit forecast tops estimates (Bloomberg)
π¬ Amazon now charging Prime members extra for ad-free streaming (WSJ)
π’ The real-estate downturn comes for Americaβs premier office towers (WSJ)
π¨π³ Chinaβs factory activity shrinks again, weak demand hobbles economy (Reuters)
The Weekly Brief
1. Tech Earnings Update (Various)
Big tech continues to have the biggest earnings power relative to the rest of the S&P 500, so investors look eagerly at the earnings reports from the five big tech companies: Microsoft, Alphabet, Meta, Amazon, and Apple.
While Meta, Amazon, and Apple are set to publish earnings on Thursday, we provide a recap of what we know now.
Microsoft MSFT 0.00%β
Microsoft moved slightly lower despite Q2 results that outbid analyst estimates and a light quarterly revenue outlook.
Revenue was up 17.6% YoY in the quarter, and net income increased from $16.43B to $21.87B.
The Intelligent Cloud segment (consisting of Azure cloud infrastructure, SQL, GitHub, etc,.) jumped 20% in revenue.
The company also closed its acquisition of Activision Blizzard, its largest deal ever.
Microsoft announced custom cloud chips and started selling a $30/mo Copilot AI add-on to Microsoft 365
Alphabet GOOG 0.00%β
Alphabet slipped more than 6% in extended trading on Tuesday after earnings showed that the company reported ad revenue that missed estimates.
The company reported a revenue jump of 13%, its fastest quarter for revenue growth since early 2022.
However, ad revenue of $65.52B trailed estimates of $65.94B.
Despite results being generally above estimates, investors were not satisfied enough to keep the stock pushing higher.
CEO Sundar Pichai will continue to focus on investments in AI and embedding AI tools into more of Googleβs key products.
To do this, Pichai said the company has to make cuts elsewhere, meaning more layoffs are on the way.
2. Elizabeth Warren Pushes Fed to Cut βAstronomical Ratesβ to Ease Housing Pressure (CNBC)
Senator Elizabeth Warren, along with three other Democratic lawmakers, are pushing Fed Chairman Jerome Powell to lower rates at the next Fed meeting.
βThe direct effect of these astronomical rates has been a significant increase in the overall home purchasing cost to the average consumer,β the senators wrote in a letter to Powell.
The Fed acknowledged the letter and plans to respond.
This comes after the Fed indicated three rate cuts could come in 2024 as inflation cools, which has already helped lift sentiment in the economy.
Warren is referring to a housing market that has been under immense pressure due to record-high rates and a lingering supply shortage.
In January, however, mortgage demand surged, a signal that homebuyers are returning to the market.
3. JPMorgan Quants Warn of Dot-Com Style Concentration in U.S. Stocks (Bloomberg)
The dominance of the ten biggest stocks in U.S. equity markets is drawing similarities to the dot-com bubble, according to JPM quantitative strategists.
The share of the top ten stocks on the MSCI USA index has risen to 29.3%, just moderately below the historical peak share of 33.2%, which occurred in June 2000.
Analysts raise concerns over the risk of a selloff, which could pull equity markets down with them.
The strategists warn that extremely stretched valuations could indicate that the concentration is approaching its limits, requiring a de-rating.