Wall Street Breakfast: Big Tech – Part 2

Last week saw the first round of results from the Big Tech giants, with accelerating growth at Google (GOOG, GOOGL), Meta’s (META) focus on artificial intelligence, and worries about capex at Microsoft (MSFT). Up next are the quarterly numbers from Apple (AAPL) and Amazon (AMZN), which will arrive after today’s closing bell. Investors and economists alike will be eyeing the figures of the two companies that have a global workforce in the millions, consumer and business revenues in the billions, and market caps that keep going further into the trillions.

Apple: The stock is already up 54% this year and the firm’s view on many of its business verticals will provide a broader economic picture. Services results, like the cloud, App Store, Apple Music, Apple Pay, etc. will be closely monitored, as will levels of iPhone shipments and price hikes of Pro models. Also listen to the conference call for mentions of artificial intelligence, the new VR headset, status in overseas markets like India, and the potential impact of an escalating semiconductor war between the U.S. and China.

Amazon: The e-commerce behemoth has similarly had a big rebound YTD, with shares soaring nearly 50% over the course of 2023. Amazon is coming off its Prime Day in July, which was the single largest sales day in its history, while its pushes into pharmacy and grocery will likely be discussed. However, the most important metrics will likely be the outlook for Amazon Web Services, the company’s cloud computing platform, as well as whether strength in streaming and advertising will be offset by slowing consumer and enterprise spending.

SA commentary:AMZN shares are attractively valued for continued accumulation, though one can never know what the market will do as earnings approach,” writes SA analyst Wealth Insights. Meanwhile, Business Quant sees Amazon poised for a Q2 beat and Jamie Galvin says growth and margins are among the 3 Key Items To Watch in the results. With regards to Apple (AAPL), Tradevestor also gives a preview of the iPhone giant that explores valuation, technical strength and recent revisions. (12 comments)

The market reaction to Fitch’s downgrade of U.S. debt reflects puzzlement over its timing, but indicates confidence that government securities and the dollar will remain safe havens. “We expect that after the initial negative reaction in markets, investors will largely disregard this move,” said 22V Research’s Kim Wallace, as there is no threat to the dollar reserve currency status and no roadblock to servicing debt. That could explain why the market isn’t taking the downgrade as badly as it did when S&P cut its U.S. rating in 2011. Treasury Secretary Janet Yellen called the downgrade “arbitrary,” while JPMorgan (JPM) CEO Jamie Dimon said it was “ridiculous.” (13 comments)

Billionaire investor Bill Ackman is betting against 30-year U.S. Treasuries, calling it a hedge on the impact of higher long-term rates on stocks as well as a “high probability” standalone bet. “There are many times in history where the bond market reprices the long end of the curve in a matter of weeks, and this seems like one of those times,” he projected. Ackman also noted that if long-term inflation is 3% instead of 2%, the 30-year Treasury yield (US30Y) could reach 5.5% soon. Ackman is not alone, as hedge funds have been shorting Treasuries en masse, while the Treasury just increased the size of longer-term debt sales to address mounting borrowing needs. (12 comments)

In a new milestone, the Apple Card’s (AAPL) high-yield savings account offered by Goldman Sachs (GS) has reached more than $10B in deposits. The savings account offers Apple Card users an APY of 4.15%, and since the launch in April, 97% of Savings customers chose to have their Daily Cash automatically deposited into their account. Goldman won the Apple Card account in 2019, when it sought to build itself into a consumer finance powerhouse, but has since scaled back its consumer business amid mounting losses. While Goldman seems committed to Apple Card for now, the bank has reportedly started talks with American Express (AXP) to offload the credit card deal. (11 comments)

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