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Winners & Losers Post Big Tech Earnings
What did we learn from big-tech earnings this week? In short, their earnings were “better than feared”. However, they were far from stellar. The ‘best of the best’ could only muster single digit growth (Google was negative). The Search giant also disappointed on expense management. Amazon offered very soft guidance – with AWS growth expected to fall to deliver only 11% growth next quarter. That’s a long way from its 40% growth a year ago. In summary, the challenges are not over for the sector – however investors are paying lofty premiums.
Big Tech on Deck
More than 25% of the total S&P 500 market capitalization rests with just 5 companies. And those 5 stocks are all in tech. This week we hear from 4 of those 5. The bar has been set extremely low – therefore it won’t be too hard for these companies to exceed expectations. But don’t expect earnings and revenues to be stellar. If anything – expect single digit growth from these names. However, the market will take that.
Banks Surge on Earnings…
JP Morgan kicked off Q1 ’23 earnings season with a record beat. The US’ largest bank by assets saw strong deposit inflows as it raised its guidance for net interest income. The question is how will regional banks report? It’s likely to be a different story. Meanwhile we had a host of important economic data this week – showing inflation is cooling (albeit very slowly) and the economy is stalling. But there was little which will stop the Fed raising rates by 25 bps May 2nd…
Pop then Drop! Green Light for Fed Hike
Investors cheered the news of a slightly lower than expected CPI print from March. However, Core Inflation exceeded expectations and actually increased. That’s important – as that’s what the Fed are focused on. Here’s the thing: with Core inflation running at 5.6% YoY – don’t expect cuts anytime soon. It’s almost 3x the Fed’s target. Yes inflation is cooling – slowly – but not where the Fed need it to be. From mine, you can lock in another 25 bps for May 2nd. Bond markets see that. Equities are yet to get the memo