What to know today

  • Apple reports after the close.
  • AWS is huge. 
  • This is absurd.
markets

A Look Inside Apple’s Core

Are the seeds and stems still there?

Is it already so easy to lose sight of Apple $AAPL?

Sure, Microsoft $MSFT overtook it at the top, but it’s still the second-largest company in the world by market capitalization.

And, despite the fact that Goldman Sachs $GS declared Nvidia $NVDA the new “most important stock on planet Earth” in February, it remains one of the very few globally iconic brands.

It’s been a tough six months for AAPL, though, the share price falling from an all-time closing high of $197.96 on December 13, 2023, to $169.30 at the end of Wednesday’s normal-hours trading session.

That’s 14.47 percent. And, though he’d never let on, it’s gotta have at least a little bit of Tim Cook’s attention.

Given his track record, we won’t hear much from Cook during AAPL’s fiscal second-quarter conference call, set to start at 5:00 p.m. ET.

He’s more of a “pay attention” rather than a “seek attention” sort of CEO. Perhaps that’s to AAPL’s short-term detriment, the absence of an entertainment factor to drive marginal price action.

Safe to say Cook is watching and listening to Alphabet $GOOGL and Amazon.com $AMZN and Meta Platforms $META and Microsoft $MSFT. And Samsung. And Huawei.

And he’s demonstrated his ability to navigate AAPL through complex issues, including tough decisions on core issues of technology and product as well as on critical matters of strategy in a global marketplace.

Apple’s $AAPL’s products are everywhere, but the stock is struggling in 2024.

As Mish Schneider said at the top of her Weekly Market Outlook, “It is extremely choppy out there.”

That was before Jerome Powell’s press conference on Wednesday drove a strange intraday roundtrip amid a series of big earnings reports.

The photo above is not from Wednesday’s press conference, but it is indicative of AAPL’s place in the world right now: everywhere except “up and to the right.”

It’s losing ground in the market cap race, and it’s just “there.”

Meanwhile, the upstart NVDA won’t close the book on this season’s reporting from The Magnificent Seven until May 22. As Mish notes in her Weekly Market Outlook, NVDA is “the best barometer for the semiconductor world.”

I’ll suggest that’s an important distinction. NVDA, as Goldman’s analysts rightly trumpet, has generally led the market higher this year. 

And I’ll add that we shouldn’t lose sight of the fact that AAPL has been leading the market higher for many years. Its products are ubiquitous. Its style is timeless.

That doesn’t mean its tech doesn’t have to keep up, that inertia is good enough, that gravity won’t act on it.

So we’ll get another glimpse at AAPL’s core this afternoon, and in the real world that means iPhone sales, China, and catching up on artificial intelligence.

There’s a growing services segment too, though, and the C-suite knows how to run efficient operations.

The numbers will be big, and they’ll be impressive, and the guidance, as ever, is super-critical.

deep dive

So Much Perspective

AI is already driving major growth for AMZN.

Let’s take a closer look at Amazon.com $AMZN and its Amazon Web Services cloud computing segment, courtesy of Charlie Bilello, the chief market strategist at Creative Planning.

As Charlie notes, during the 12 months ended March 31, 2024, AWS generated revenue of $94.4 billion. That’s more than the total revenue generated by 466 companies in the S&P 500.

AMZN’s total profit tripled during the first quarter, as AWS revenue grew 17 percent to $25 billion – an annual run-rate of $100 billion.

Revenue from Amazon.com’s $AMZN AWS segment for the trailing 12 months exceeded total revenue for 466 of the S&P 500 components.

Total revenue of $143.3 billion beat a consensus forecast of $142.5 billion, and earnings per share of $0.98 beat a consensus forecast of $0.83. Operating income was up more than 200 percent to $15.3 billion.

AWS accounted for 62 percent of AMZN’s operating profit during the quarter. And management’s aggressive AI efforts continue to pay off, driving an acceleration in growth for the segment following several quarters of retrenching.

The same day CEO Andy Jassy spoke on the company’s first-quarter conference call about the  “really unbelievable growth opportunities” AMZN announced the availability of Amazon Q Business, a generative AI assistant for business data and software development.

deep dive |
May 2, 2024

So Much Perspective

MONETARY POLICY

The Confidence Test

We’re still data-dependent.

Chair Jerome Powell said on Wednesday that he and his colleagues do not yet have full confidence that inflation is trending toward the Federal Reserve’s long-term policy target of 2 percent and that it’s taking longer than they thought it would for that to happen.

He said that recent data undermined the confidence they had felt, but he also said that policymakers can afford to be patient given the health of the economy.

He said that current policy is sufficient to meet whatever challenges may evolve in the current environment, noting that he’s seeing neither “stag” nor “flation” in recent data.

He said, “I don’t know how long it will take,” when asked when the Fed will cut again. He said it’s unlikely a rate hike will be the next move when asked about that.

He said nothing new as reporters tried to get him to make some headlines.

And this is absurd, a sign investors, traders, and speculators have indeed gone crazy with the Fed-watching:

The S&P 500 surged and sagged during Fed Chair Jerome Powell’s post-Federal Open Market Committee meeting on May 1, 2024.

Overreactions, as former US Treasury economist Mark Dow said on X on Wednesday morning, make it harder to run monetary policy when they happen all the time.

In addition to identifying it as “choppy” well before 2:30 p.m. ET on Wednesday, Mish Schneider said in her Weekly Market Outlook that this is “a stock picker’s market.”

That sounds like another way of saying “overreactions create opportunities.” Assuming we’re through the Powell Presser Pop of May 1, 2024, let’s talk about the bigger picture and how to think about positioning.

Noting the importance of NVDA and the sector generally, Mish denotes the VanEck Semiconductor ETF $SMH as a key indicator of whether this market will head higher from here.

Mish also singles out the iShares Transportation Average ETF $IYT as a key indicator of whether this market wants to correct more from here.

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