After a meaningful pullback this week, we’re ending on a high note. We went through a period of caution where the outperformer was consumer staples and dividend stocks, driven by a sell-off in software and Mega Tech as the inroads of much cheaper AI software solutions started showing up, and the spending rate for data centers went much higher over already eye-popping numbers. Interestingly, the has hit an intraday all-time high, with a group of stocks where only and are the only Mega Techs. Leading today is the , up 2.2%, and leading YTD up 6%.
Last night we got Amazon (AMZN) earnings, which reported a small miss on the bottom and a beat on the top, but like Alphabet (GOOG), greatly increased their forecast spend rate for AI, and like Alphabet, the shares pulled back materially, down as much as 8.1% at the open. The spend rate for AI overall continues to increase, while the timing of return on these investments remains murky for most investors. The ramifications of AI, however, continue to show up with the sell-off in traditional software companies and the rise in hardware makers, along with the smaller companies with innovative AI solutions. Probably the biggest impact so far is rising layoffs, where it appears smarter software is already replacing jobs.
On the economic front we got that showed lower and modestly improved sentiment. Interest rates are on the rise again, after the major pullback yesterday. The US 2-year is up 2bps to 3.51% but 8bps down from the high earlier in the week. The 10-year is up 1bps to 4.22%, down 6bps on the week. Odds for a cut before Warsh gets installed as the chairman in May pulled back modestly, but a cut at his first open market committee improved.
is higher today, back to $4,968 while silver is flat at $76.17. Both had pulled back materially overnight, gold $291 lower, silver $12 lower, as the volatility remains high. is flat. Energy prices are modestly higher. Crypto is bouncing off the lows for the year where Bitcoin hit $60.2K overnight, now $69K, still down 25.6% in a month. New legislation in crypto continues to be postponed.
As the trading day marches on stocks continue to hold on to early gains, with the only sectors in the red being communication services, due to softness in Meta (META) and Alphabet (GOOG), and consumer discretionary due to the Amazon (AMZN) pullback. Semiconductors are strong on the heels of the increased AI spending, up 4%, including NVIDIA (NVDA) up 6.2%. While the NASDAQ has had 4 bad weeks in a row, The Dow and Russell 2000, and even-weighted S&P, are still showing strength. The trend remains positive.
