The first week of Big Tech earnings looked promising — until Thursday hit.
After SpaceX (SPCX), Meta (META), and Tesla (TSLA) opened their books without signaling ballooning spending next year, the reality that longer-term projects would, in fact, require the big bucks scared investors into a sharp reevaluation, sending the S&P 500 down nearly 2%.
That was enough to send the 10-year Treasury (^TNX) down under the 5% mark despite oil prices shooting up to levels not seen since May.
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At close: October 23 at 4:38:21 PM EDT
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Big Tech’s story continues this week, with Alphabet (GOOG) and Microsoft (MSFT) both reporting on Wednesday and Amazon (AMZN) following on Thursday. These hyperscalers will provide their entries into the evolving AI story, giving checks on return on investment, spending plans, and how both businesses and consumers are using the new technology.
On the economic calendar, all eyes will be on the Federal Reserve’s interest rate decision on Wednesday at 2 p.m. While the consensus strongly favors the central bank holding interest rates steady, implications for what Fed Chairman Kevin Warsh says nearly on the eve of an election will make this a live one.
A pre-election Fed decision favors a hold
Welcome back to Fed decision week.
Coming off the Federal Reserve’s September meeting, where the FOMC issued its first rate hike in three years, Fed Chairman Kevin Warsh and co. are facing the same stressors: Inflation is running over target, the war in Iran is heating back up, and the AI-driven competition for capital has only increased.
And yet, markets are pricing in a hold. After a sharp upswing in US Treasury prices on Thursday that saw the yield on the 10-year note (^TNX) drop back below 5% for the first time in weeks, traders have heavily repositioned their bets toward a hold, pricing in 90% odds the Fed keeps rates unchanged on Wednesday.
“After hiking in September, skipping October has the benefit of observing more data before the next move,” Rabobank senior US strategist Philip Marey wrote to clients. To his point, several members of the FOMC have said exactly that in recent public comments: The market is okay, and the Fed has time to take a wait-and-see approach ahead of December’s meeting — at which the market is pricing in a 77% shot of a hike.
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What will be interesting about October, Marey says, is the voting split inside the FOMC. While several Fed officials have called for a cautious approach, others like Minneapolis Fed president Neel Kashari and Cleveland Fed’s president Beth Hammack have been forceful in recent calls for a hike, making the argument that inflation must be addressed quickly.
