Will today be one of great significance? The FOMC is expected to lower interest rates by 0.25%. Most will be paying close attention to the post-meeting statement and outlook. And then there are the earnings releases of some of the largest companies in the world. At the close GOOG, MSFT and META post results. Tomorrow AMZN and AAPL will release earnings.
The capitalization of these companies is insane. Yesterday AAPL was the third company that cracked the $4 trillion mark, behind NVDA’s $4.7 trillion value and MSFT’s $4.02 trillion.
Bloomberg writes the increase in the total market capitalization of the US market over the last three years is greater than the total market cap of Japan, all of Europe and the UK combined. That growth is higher than all of China’s equity market value. “All this is with almost no positive return from US small-cap or mid cap sectors at all, myopically centered in all but seven companies. Making money ex the Mag-7 is all but impossible.”
Close attention will be focused on the AMZN, GOOG, MSFT and MSFT’s capital spending. Bloomberg writes that this spending is set to top $400 billion for the past year, raising the bar on earnings to justify expansion of their AI capabilities.
Capex, however, is a double-edged sword for these tech shares. Dialing down spending may spook the markets that AI demand may be faltering, a particularly worrisome scenario considering private data showing a plateau in adoption of AI across US businesses according to Blomberg.
Increased spending, meanwhile, may heighten earnings expectations as investors seek payoff from the massive investment in the technology.
Bloomberg reports that more than half of respondents from a recent poll stated that AI spending was not justified by returns.
And then there is China. Expectations are high that tomorrow’s meeting between the US and China will be productive.
Last night the foreign markets were mixed. London was up 0.62%, Paris down 0.05% and Frankfurt down 0.15%. China was up 0.70%, Japan up 2.17% and Hang Seng down 0.33%.
Dow and NASDAQ futures are flat and up 0.5% as NVDA is almost a $5 trillion company, an unfathomable number. China reinforced optimism about AI. The 10-year is off 7/32 to yield 4.0%.
