What to know today

  • The FOMC decides on Wednesday. 
  • Amazon reports tomorrow. 
  • BHP gets serious about copper.
markets

Words Have Consequences

That’s especially true for Jerome Powell’s.

It could not have been a better Friday before a Fed week.

Stocks surged on strong earnings reports from Alphabet $GOOGL and Microsoft $MSFT, with management of both Big Tech bellwethers noting healthy returns on early investments in artificial intelligence projects and underscoring the fundamental drivers behind this leg higher for equity indexes. 

Price action on Friday closed the best week of 2024 so far, even as a Personal Consumption Expenditures Price Index print for March all but guaranteed a “higher for longer” federal funds rate target range.

At the same time, “braced” is probably a fair way to describe the posture as investors, traders, and speculators prepare for the April 30-May 1 Federal Open Market Committee meeting.

People know there will be no rate cut this week or in June and maybe not even in September.

We just need to hear the words Federal Reserve Chair Jerome Powell will use to describe things during his press conference on Wednesday. 

Federal Reserve estimates of the long-range federal funds target range are trending higher.

The Bureau of Economic Analysis reported on Friday that the PCE price index increased 0.3 percent last month at both the headline and the core (excluding food and energy) levels.

The year-over-year print was 2.7 percent at the headline level, 2.8 percent at the core level.

What’s happening here is that “economic resilience” is making it harder for the central bank to cut interest rates. And that is broadly positive, for sure.

Confounding for forecasters is when higher borrowing costs will curtail demand. A still-healthy labor market, with rising wages and productivity, is creating a positive feedback loop in a consumption-driven economy.

Within that PCE report for March we learned as well that Inflation-adjusted consumer spending grew by 0.5 percent for the second straight month, equaling the strongest growth on that metric early 2023.

Back in December, Powell merely spoke of a more dovish immediate future given then-recent progress on inflation.

Recent data suggest he may have to be more hawkish on Wednesday.

I’ll be curious to see if he has anything to say about exogenous things like geopolitics or the impact of Fed policy in a global context. Those are major variables.

The domestic song sorta remains the same, though. And that’s pretty good.

deep dive

Halfway Magnificent

Alphabet and Microsoft showed good numbers.

It’s only a slight exaggeration to say that Alphabet’s $GOOGL first-quarter earnings release was so positive it made up for Meta Platforms’ $META faceplant.

GOOGL surged more than 10 percent on Friday after management reported results for the three months ended March 31 after the market closed on Thursday.

META, which disappointed investors by boosting its AI spend and was down nearly 20 percent after reporting results on Wednesday, rose 0.43 percent on Friday.

Microsoft $MSFT followed through on Thursday evening’s promise with its own 1.82 percent rally on Friday, supported as well by solid AI investment and return.

And Tesla $TSLA seems to have regained the confidence of its base of believers with what appears to be a renewed commitment from Elon Musk to producing a lower-cost EV.

Amazon.com $AMZN will report first-quarter earnings after the stock market closes on Tuesday, April 30.

We’ll hear from Amazon.com $AMZN tomorrow after the market closes. The consensus forecast is for a 12 percent increase at the top line to $142.6 billion, according to FactSet. Earnings per share should rise 170 percent to $0.84.

The major item to track is growth for the Amazon Web Services cloud computing segment. Analysts want to see 15 percent year-over-year revenue growth to $24.6 billion.

That would mark a second straight quarter of accelerating growth for the segment after a fallow period for enterprise IT spending.

META got dinged for boosting its AI capex budget last week. It’ll be fun to track how people respond to AMZN’s AI budget plans.

Apple $AAPL will be the sixth of The Seven to report on Thursday. Nvidia $NVDA will report on May 22.

Those seven stocks have driven the market of late, but there are other companies out there with stories to tell and earnings to report, including Big Pharma and biotech names Amgen $AMGN, Eli Lilly $LLY, GSK $GSK, Merck $MRK, Novo Nordisk $NVO, and Pfizer $PFE.

We’ll also hear from ecommerce players eBay $EBAY, Paypal $PYPL, and Etsy $ETSY.

And old-school Dow Jones Industrials like Coca-Cola $KO, McDonald's $MCD, and 3M $MMM will report this week too.

deep dive |
April 29, 2024

Halfway Magnificent

METALS & MINING

Copper Is Having a Major Moment

The world’s biggest miner is making a move.

This is a big deal.

BHP Group $BHP, the biggest miner in the world, confirmed that it made a $39 billion offer to acquire Anglo American Plc $AAL.L last week.

AAL management said BHP’s initial offer is “highly unattractive” and “opportunistic” and fails to properly value its prospects. Reuters reported that.

AAL probably has a point. BHP wants to consolidate its global copper position, and AAL owns two mines in Peru and Chile adjacent to existing BHP operations.

Copper has surged past $10,000 per ton on rising demand and constricted existing supply.

BHP’s bid and AAL’s rejection are likely to trigger competing bids from miners such as Glencore Plc $GLEN and Rio Tinto $RIO.

BHP’s bid was made under London Stock Exchange rules, which give it until May 22 to formalize its bid. Should BHP acquire AAL, it would become the biggest copper producer in the world, with approximately 10 percent of existing output.

The squeeze is coming from the demand side: According to Bloomberg, production from existing mines will decline sharply over the next decade, and miners will need to spend more than $150 billion through 2032 to keep up with forecast needs.

We’re living in a material world.

At least for the foreseeable future.

past issues

read more from our daily investor newsletter