Breakfast News: Powell Prepares To Pause
December 19, 2024
| S&P 500 5,872 (-2.95%) |
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| Nasdaq 19,383 (-3.56%) |
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| Dow 42,327 (-2.58%) |
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| Bitcoin $101,333 (-5.03%) |
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Source: Image created by JesterAI.
1. Fed Forecasts Rattle Markets
The S&P 500 lost almost 3% in value in the largest movement on a Federal Reserve decision day since September 2001, as Chair Jerome Powell issued more cautious guidance about future rate cuts.
- “We moved quickly to get here but moving forward we are moving slower”: The 0.25% rate cut was already expected by investors, but Powell flagged further reductions in the base rate would be more gradual. This was noted in the ‘dot plots’ for 2025, which now forecast just two more cuts.
- Seigel calls market drop “healthy”: Wharton Business School professor Jeremy Siegel commented the Fed meeting provided a reality check to investors, but that the move is natural given the runaway performance in the stock market over the past few months. Dips provide Foolish investors with buying opportunities.
2. Apple Mulls iPhone Strategy
A plan by Apple (AAPL 0.20%) to launch an iPhone hardware subscription service has been reportedly halted, as the business continues to plot the future growth strategy behind the product.
- Creating stickier customers: The iPhone still accounts for around 50% of annual sales, but a monthly subscription fee to get access to new phones and other perks was seen as a way to help lock users into the Apple ecosystem. Bloomberg reports this idea has been shelved for now.
- Stronger LLM ties: Apple is investing heavily in large language models (LLMs), with fresh news of a collaboration with Nvidia (NVDA -0.02%), namely a new approach that helps to speed up LLM learning and inference. This provides another piece to the AI race, which leads us to…
3. Chip Orders Show AI Chessboard
The arms race to dominate AI continues, with analysts estimating Microsoft (MSFT 0.52%) has bought more than twice the number of flagship chips from Nvidia than rivals in 2024.
- The means to power systems: With an estimated order size of 485k Hopper chips this year, it dwarfs competitors such as Alphabet (GOOG -0.67%), Amazon (AMZN 0.01%), and Tesla’s (TSLA 0.15%) xAI, all of which have ordered fewer than 200k. Microsoft will hope this helps to provide an edge in building next-generation systems.
- Rapid valuation increases: OpenAI, which has received $13 billion in funding from Microsoft, is facing competition from Perplexity. The AI-driven search engine just completed a funding round that tripled its valuation to $9 billion.
4. Next Up: Earnings Burst
Thursday sees a flurry of late earnings season reporting, including Nike (NKE -1.11%), which will release Q2 earnings after the closing bell.
- Not just an AI story: Ahead of market open, Hidden Gems recommendation Accenture (ACN 0.38%) will report. Aside from GenAI progress, investors will be watching for consulting demand, given that last quarter saw the first consulting revenue growth in six quarters.
- Driving us home before Christmas: Rule Breakers rec FactSet (FDS -0.48%), plus Stock Advisor recommendations FedEx (FDX -0.04%) and CarMax (KMX 3.55%), release earnings today. For the latter, investors will be looking for progress from last quarter on how new store openings are performing.
5. Foolish Fun
Nike has admitted strategic missteps, and is looking to recapture its market share and reputation. Which public company do you believe needs to follow suit with new leadership, and why? Debate with family and friends, or become a member to hear what your fellow Fools are saying.
