The Fed saves the market

Tickergeek market update:

Today’s big headlines:

• The Fed saves the market

• Micron crushes expectations

• Britain Reports lower than expected CPI

• Intel on the verge of securing giant $8B grant

• Google fined by French competition watchdog

The Fed saves the market📈

What’s happening? On Wednesday afternoon, the Federal Reserve, led by Chairman Jerome Powell, delivered news that buoyed the stock market. The central bank announced its intention to maintain its current policy of three quarter-point rate cuts in 2024. However, a surprise revelation that caught the market off guard was the Fed’s revised plan to cut rates only three times in 2025, a reduction from their previous projection of four rate cuts.

Powell stated, “The policy rate is likely at its peak for this tightening cycle. We are prepared to maintain the current policy rate for longer, if necessary.”

Why is this positive? It was not a foregone conclusion that the Fed would keep rates steady at this week’s meeting, primarily due to inflation proving more persistent than anticipated. Economic projections indicated the personal consumption expenditures price index, excluding food and energy, rising at a 2.6% rate by year’s end, compared to the 2.4% rate projected in December.

Quantitative tightening continues: In addition, the Fed announced its intention to continue quantitative tightening, maintaining the current rate of reduction in their balance sheet holdings by $95 billion per month.

Market reaction: The market responded favorably to this news, with both the S&P 500 and the Nasdaq experiencing an uptick, signaling a warm reception to the Fed’s announcements. Cryptocurrencies also saw a similar reaction, despite significant downturns in recent days. Furthermore, traders increased the likelihood of the first rate cut occurring in June of this year.

Micron crushes expectations💿

What’s happening? On Wednesday evening, Micron Technology (MU) released its fiscal second-quarter earnings results, exceeding analyst expectations in a remarkable display, largely due to increased demand for AI. This led to a surge in Micron’s shares, which traded up over 16% in after-hours trading.

Do they compete with Nvidia? Unlike AMD or Nvidia, Micron does not directly compete in the production of chips. Instead, as one of the world’s leading producers of memory chips, Micron is well-positioned to benefit from the burgeoning demand for generative AI applications.

How good were the earnings? The memory chip maker reported:

• Revenue reached $5.82 billion, a 58% YoY increase, surpassing their projected $5.3 billion.

• An unexpected EPS of $0.42, compared to their projected loss of $0.28 per share.

• Forward guidance for Q3 revenue was set at $6.6 billion vs $5.98 billion expected

• Forward EPS for Q3 was projected in the range of of $0.38-$0.52

CEO Sanjay Mehrotra stated, “We believe Micron is one of the biggest beneficiaries in the semiconductor industry of the multiyear opportunity enabled by AI.”

For investors, the message is clear: an allocation towards semiconductors could yield handsome rewards.

Britain Reports lower than expected CPI⏬

What’s happened? On Wednesday morning, the United Kingdom released its Consumer Price Index (CPI) inflation figures for February, indicating a faster-than-expected decline in inflation.

What were the figures? The headline CPI inflation was reported at 3.4% year-over-year, slightly lower than economists’ forecast of 3.5%, and a decrease from 4% in January. However, the Consumer Prices Index including owner occupiers’ housing costs (CPIH) came in at 3.8%, down from 4.2% in January. This suggests that homeowners continue to bear the brunt of inflationary pressures.

Which figures stood out? According to the Office for National Statistics (ONS), the most significant downward contributions to the headline CPI and CPIH figures came from food, restaurants, and cafes. In contrast, the largest upward contributions were noted in housing, household services, and motor fuels.

market reaction? In response to these figures, the FTSE 100 remained mostly flat for the day, with a slight rally of 0.033%.

Intel on the verge of securing giant $8B grant🏅

What’s happening? On Wednesday morning, the White House announced that Intel is set to receive $8.5 billion in direct funding from the federal government, facilitated through the CHIPS Act. In addition to this, Intel will benefit from an extra $11 billion in funding, sourced from loans tied to legislation enacted in 2022 under the current administration.

Market reaction: Despite this significant financial boost, Intel’s shares (INTC) have experienced a turbulent journey. The stock opened the day with a promising 2% increase, but has since dipped into negative territory. Year-to-date, Intel’s performance has been lackluster, with the stock currently down by over 11%. The question remains whether these government grants will be the catalyst to reverse Intel’s fortunes.

Google fined by French competition watchdog👁️

What happened? Alphabet (GOOGL) has been hit with a €250 million fine by a French competition watchdog for violating an intellectual property agreement. The penalty was imposed on the grounds that Google failed to negotiate ‘in good faith’ with publishers over the use of their content.

Details of the story: In the European Union, a specific copyright law known as “neighbouring rights” has been established to safeguard publishing companies. This legislation compels firms like Google to compensate publishers for utilising their content. The entire incident has arisen as a direct consequence of the company training their AI large language model, “Google Bard”, using data from these publishers’ content.

While this fine may seem insignificant for Alphabet, it marks yet another financial penalty for US tech giants from the EU, signalling a clear intent to hold these corporations accountable.

This could potentially be the first in a series of fines related to AI model training with proprietary data. In the long run, major information aggregators such as Reddit and Medium could stand to benefit.

Additional market-moving events🌎

• Saudi Arabia wants in on the AI action: Saudi Arabia have recently announced their intentions to invest in AI, through setting up a $40B fund specifically for this purpose.

• Boeing’s complicated acquisition Saga: Boeing (BA) are currently looking into avenues through which Spirit Airlines (SAVE) could possibly reduce its ties to Airbus, a key competitor of Boeing’s, as Boeing is considering acquiring Spirit. This acquisition is further complicated by the fact that Spirit are a prominent supplier to Airbus.

• Samsung rallies thanks to Nvidia: Shares of Samsing have rocketed higher by over 5% on news that the AI behemoth Nvidia (NVDA), may look to secure next-generation memory chips from Samsung. CEO Jensen Huang hinted at this in their recent GTC conference.

• Nothing good lasts forever: Costco’s famous, long-standing $1.50 hot dog combo is now officially going to become a member-only benefit. This is in an effort to bolster the benefits of the membership.

Notable earnings this week💵

• Accenture (ACN) will report Thursday, in pre-market hours. Analysts estimate $15.83B in revenue (+0.10% YoY) and $2.66 in earnings per share (-1.12% YoY).

• Nike (NKE) will report Thursday after hours. Analysts estimate $12.28B in revenue (-0.89% YoY) and $0.74 in earnings per share (-6.33% YoY).

• FedEx (FDX) will report Thursday after hours. Analysts estimate $22.05B in revenue (-0.54% YoY) and $3.53 in earnings per share (+3.52% YoY).

• Lululemon Athletica (LULU) will report Thursday after hours. Analysts estimate $3.19B in revenue (+15.08% YoY) and $5.00 in earnings per share (+13.64% YoY).

• FactSet Research Systems (FDS) will report Thursday, in pre-market hours. Analysts estimate $546.75M in revenue (+6.15% YoY) and $3.88 in earnings per share (+2.11% YoY).

Our selections performance👾

Last week Monday, we released our “two superperformers” stock picks which we believe will provide significant outperformance compared to the S&P 500.

Here’s how the two stocks have performed since then:

• Evolution AB: 1,360.40 SEK (📈+3.70%)

• Hims & Hers Health: $15.66 (📈+13.89%)

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