Market Outlook: Tech Giants Take Center Stage
As investors digest the latest earnings reports from megacap tech companies, US stock futures are poised for a comeback. Contracts on the tech-heavy Nasdaq 100 rose 0.5%, while S&P 500 futures moved up 0.3%. Dow Jones Industrial Average futures were little changed, following a losing day on Wall Street.
Earnings Season: The “Magnificent Seven” Take the Spotlight
The first wave of results from the “Magnificent Seven” companies, which have driven broader stock market gains, has investors parsing earnings reports. Microsoft, Meta, and Tesla reported late Wednesday, with Tesla shares popping despite an earnings miss. Meta’s quarterly earnings beat lifted shares in pre-market, while Microsoft stock slid after its cloud revenue fell short.
Apple’s Turn: Will iPhone Sales Disappoint?
Next up is Apple, whose stock has been hit by multiple downgrades. Investors will scrutinize its quarterly report after the bell for signs its iPhone sales are doing better than feared. Chipmaker Intel, Comcast, Mastercard, and Visa are also set to report.
Economic Data: GDP Growth Slows
The Bureau of Economic Analysis’s advance estimate of fourth quarter US gross domestic product (GDP) showed the economy grew at an annualized pace of 2.3%, below the 2.6% growth expected by economists surveyed by Bloomberg. The reading came in lower than the 3.1% growth seen in the third quarter.
Investors Weigh AI Investments
Markets are keeping faith with Big Tech following results from Microsoft, Meta, and Tesla. Eyes are on their rationale for massive AI investments after DeepSeek’s cheaper AI model rattled assumptions about the likelihood of a payoff.
Tesla’s AI Ambitions
Tesla’s quarter wasn’t great, with margins missing estimates and sales coming in light. However, investors are buying into its vow to return to growth in 2025. RBC analyst Tom Narayan notes that Tesla will have a paid unsupervised full-self driving service in Austin this June, with plans to launch in Europe and China this year.
Levi’s Struggles with Department Store Closures
Levi’s was having a relatively good earnings call, with organic sales for the Levi’s brand up 8.2%. However, its 2025 EPS guidance of $1.20 to $1.25 was below consensus. The blame is going to foreign exchange fluctuations, but department store closures are also a structural problem.
Goldman Sachs Sees Rate Cuts in 2025
Despite the Fed standing pat on rates, Goldman Sachs chief economist Jan Hatzius expects the FOMC to deliver two more 25bp cuts in June and December this year and one more in 2026.
Nvidia’s Tough Week
Nvidia isn’t having a good week, with the stock down 13% on fears of the Trump administration further cracking down on chip flow. However, individual investors are buying the dip, with new data showing they bought $562.2 million of Nvidia shares on Monday’s rout.
Meta’s AI Focus
Meta remains an advertising-led business, and its new AI is being applied to sucking in more ad dollars. Mark Zuckerberg noted that the improvements to the business will come from taking AI methods and applying them to advertising and recommendations.
Microsoft’s AI Services Surge
Microsoft’s AI services sales surged 157%, supporting the years-long narrative on the stock. However, Azure growth was underwhelming, and may not reaccelerate in the back half of the year. The company also expects to be AI capacity-constrained in Q3, which could signal a slowing in the AI story in the back half of the year.
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