Let's get to the big story breakdown in the aftermath of the divided July Fed meeting.
Wall Street trying to claw back on losses from yesterday.
The central bank reiterating its commitment to deliver price stability while attributing higher prices to ongoing supply shocks as well as energy costs.
Now the Fed also noting that the economy is still expanding at a solid pace and job gains are keeping up with the workforce even as geopolitical tensions in the Middle East drive elevated uncertainty.
Well joining me this morning to weigh in as Michael.
Ranking senior market strategist here at the New York Stock Exchange.
Michael, good morning.
Thank you so much for joining me.
Good morning.
Thanks for having me.
There's a ton for investors to digest today, and I'm looking forward to digesting a Jersey Mike sub later this morning as we celebrate their IPO.
Absolutely, as you mentioned, Jersey's Mike Subbs is set to go public here at the New York Stock Exchange this morning, but so much to digest, Mike, earnings, Kevin Warsh's statement, the Fed division, as well as what's happening.
Across all asset classes.
So what's the key takeaway from the Fed?
Yes, look, there's a lot of moving parts, kind of in terms of what are moving kind of markets currently, right?
So yesterday, kind of as pretty widely expected, right, the Federal Reserve left rates unchanged.
There was a little bit of a question heading into this meeting for the first time really since kind of 2022 in terms of what the Fed might actually do.
There were 3 dissents, kind of a significant portion of the voting members dissented.
During a hike, and then as we got into kind of uh of Fed Chair Warsh's press conference, right, he sort of suggested, you know, he started off by kind of suggesting that the tightening in financial conditions that have that has happened interme between kind of the last their last rate decision had been doing some of the Fed's work for them, right, and we started to see kind of, you know, markets react somewhat positively to that initially, right? you had.
Markets moving higher, the front end of the yield curve moving lower, but then as he kind of got pushed in terms of kind of what their inflation framework was and kind of what their reaction function would be and why they weren't moving at this time, you know, kind of markets really kind of started to hone in on some of that uncertainty, and we saw the long end of the yield curve start to move pretty significantly higher.
The 30 year yield traded over 5.2%, the highest.
Level year to date and the highest level going back to 2007.
Yes, the bond market is an area that we continue to monitor this morning, but I do want to get your take on what we saw in terms of earnings because the AI trade in terms of hyperscaler is something that we're paying attention to.
Yes, so on the heels of Alphabet last week we did get Microsoft as well as Meta and also some other names as well.
But what do you make of what's happening in tech?
Yes, so there's a lot going on in tech.
And actually, you know, kind of this morning there's a lot of headlines around kind of that tech trade beyond just the earnings right as situational, which is a, you know, hedge fund that has been kind of very heavily invested in this AI trade.
There are questions and some concerns around them trying to raise capital potentially being kind of forced into some liquidation.
So that's a very big story kind of playing out in real time this morning um in terms of earnings, right, um, last night we got the Microsoft numbers.
Keep in mind, you know, sentiment around Microsoft has been pretty negative for some time, but over the numbers were pretty strong across the board. the Azure, their cloud business showed kind of revenue year over year growth of about 45% on a constant currency basis ahead of street estimates.
You know, their Capex guidance was kind of largely kind of kept in line, but they did sort of like suggest an increase.
Maybe in out years, but they did sort of suggest that they had some flexibility around that spending, and their CFO also highlighted that they were going to be free cash flow positive throughout this 2027 year.
So stocks trading up pretty sharply this morning.
Right now Meta is kind of the other side of that coin.
Meta EPS was X items was actually probably a little bit better, but the headline looks like a mess.
Their guidance on a revenue basis also was disappointed.
They raised the lower end of their CE guidance, but I think, you know, one of the things that has been in the press was that Meta might actually start to lease out of some of their excess compute capacity.
Mark Zuckerberg very much pushed back against that.
Saying that he really wanted to focus on kind of the long term here as opposed to kind of the short term monetization, right, so you have once again concerns around kind of their free cash flow coming in.
There's there are a ton of other kind of tech earnings as well, you know, largely I would say kind of pretty positive.
You're seeing a little bit of a mixed response, but I think investors are now really.
Starting to wonder some of the recent tech weakness that we've seen is how much of that is purely just positioning related right and kind of this of this hedge fund kind of also may have kind of played a part in some of that and Michael, you bring up a lot of important points given the fact that we've been getting so many headlines as well as partnership announcements.
Regarding big tech as well as what we're seeing in the semiconductor space, but while I have you here, I do want to get your perspective on geopolitics, oil, as well as inflation.
So where do we go from here?
Yes, I mean that's the big question, right?
Markets have still continued to kind of take everything that's happening in stride.
We've clearly seen a re-escalation.
Um, you know, kind of with, with both sides exchanging fire and there doesn't seem to be kind of like a clean off-ramp right in terms of, of where we are, you know, I think the bigger, you know, kind of the concern is that, you know, we've pulled a lot of levers, as this, you know, kind of, you know, during kind of the.
June, April, May, June, July kind of time frame in terms of kind of drawing down SPRs, you saw kind of China kind of reducing some of their imports.
You pulled a lot of those levers.
So if you kind of this continues to extend and you start to see oil prices move significantly higher, that you don't, there's not as much of a buffer as we had kind of the last time around, right?
So you know that is clearly a concern that.
You have to keep in the back of your mind.
We haven't really seen markets kind of really kind of price off of that to date.
Yes, and of course when it comes to the oil story there are questions about how it will affect growth for Americans heading into the second half of this year.
But finally, before I let you go, I know you're watching yields for US Treasuries, but what are you watching in terms of technical levels for the S&P 500?
It's very interesting.
So you know, last week we broke, we closed on Friday below the 50 day moving average for the second consecutive Friday.
A couple of times this week we've retested that level or kind of gotten close to it and have yet to been able to clear it.
You know, yesterday, another case in point, before we had a very significant reversal.
This morning we're kind of recouping about a third of that late day sell-off that we had and we're Kind of trading right around where we were before the Fed meeting started right now keep in mind there were a lot of headlines kind of coming out in that final hour of trade.
So you know we're going to kind of, you know, kind of keep watching that 50 day, that's around 7470 in the S&P 500, which is up about 1%.5% from where we are right now.
So we have some room, um, you know, to kind of trade within yesterday's range, uh, and then you know.
You know, yesterday's low, kind of around 7300, right?
We're looking for some initial support, 720 to 7250, kind of June lows, 100 day moving average.
If things were to really get kind of dynamic to the downside, the 200 day moving average is around 7000.
Well, a lot to keep in mind, so I appreciate your perspective and hopefully today you'll be able to enjoy a Jersey Mike.
Mike, thank you so much.
I hope so.
Thank you.
Have a good one.
