DHUnplugged #689: AI Market Euphoria

Big Week - AND HOW!

Big Caps BIG - Small Caps Small

AAPL declined 3.4% on the week while AMZN jumped 8.0% and META gained 20.5%.

Shakeup at Morgan Stanley

Banking Sector Fears (NYCB)

The latest Closest to The Pin.

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Warm Up
-  Big Week - AND HOW!
- Big Caps BIG - Small Caps Small (Regional Bank woes)
--- AAPL declined 3.4% on the week while AMZN jumped 8.0% and META gained 20.5%.
- Shakeup at Morgan Stanley
- Banking Sector Fears (NYCB)
- AI induced euphoria - is that a thing? Market intoxicated on it.


Market Update
- Powell was Hawkish - Markets Didn't Care (past Wednesday)
- HUGE Employment Surprise - Market Didn't Care (after 10 minutes)
- META/Facebook Earning - Yes Markets cared - all day Friday
- Undercurrent of something happening (Region  Bank breakdown - NYCB)
- China comes out strong with market supportive measures  - market rallies 5%


Employment Report
- Much hotter than anticipated
- Treasury Yields and the USD spiked
- Unemployment rate at 3.7% (expected to tick up to 3.8%
- Briefing.com: This report is not likely to persuade the FOMC to cut rates as soon, or as much, as the market had hoped. As a result, the fed funds futures market repriced the probability of a 25-basis points rate cut at the March FOMC meeting to 20.5% (from 38.0% yesterday and 47.6% one week ago) while the probability of a 25-basis points rate cut at the May FOMC meeting has been reduced to 74% (from 93.8% yesterday), according to the CME FedWatch Tool.
- markets were a bit flushed on the initial report but tossed it aside and preferred to focus on META earnings

Rate Cut Odd for MARCH
- As a result of the Fed meeting and employment report, the fed funds futures market repriced the probability of a 25-basis points rate cut at the March FOMC meeting to 20.5% (from 38.0% yesterday and 47.6% one week ago) while the probability of a 25-basis points rate cut at the May FOMC meeting has been reduced to 74% (from 93.8% yesterday),

SO REACHING
- Chicago Fed President Austan Goolsbee said Friday that while the January job report was impressive on the surface, underlying details were not as strong.
- “The headline number was almost breathtaking,” Goolsbee said in an interview on the “PBS NewsHour” program.
- “If you peel back the onion a little bit, it’s not as strong as that headline number advertises … but it’s still very strong,” he said.
- In particular, he noted that hours worked fell 0.2% last month despite the jump in net new jobs.

Amazon - Blowout
- Earnings per share: $1.00 vs. 80 cents expected by LSEG
- Revenue: $170 billion vs. $166.2 billion expected
- Amazon Web Services: $24.2 billion vs. $24.2 billion, according to StreetAccount
- Advertising: $14.7 billion vs. $14.2 billion, according to StreetAccount
- Amazon said first-quarter sales will be between $138 billion and $143.5 billion, representing growth of 8% to 13%. Analysts were expecting revenue of $142.1 billion, according to analysts.

META - BLOW-OOOUUUUTTTT
- Meta Platforms beats by $0.51, beats on revs; guides Q1 revs above consensus;
- FY24 total expense guidance unchanged at $94-$99 bln,
- CapEx guidance of $30-$37 bln, up $2.0 bln at high end;
- They stopped spending on META.
- Initiates quarterly dividend of $0.50/share, also announces $50 bln increase to share repurchase program.
- Stock up 21%

Apple Earnings
- headline: Apple beats by $0.08, beats on revs; iPhones and services beat; China revenue declines 13.1% 
- Magic words: CEO Tim Cook thinks there is a huge opportunity to for Apple on AI, but he does not want to get ahead of things.
- Apple reports Q1 iPhone revenue of $69.