July 30th Pre-Market Brief

Good Morning

Nice bounce this morning after yesterday's beating. Microsoft is up big on cloud growth and pulling the chip names along with it. GDP growth came in at 1.5% for the second quarter against the 1.8% economists expected, and inflation cooled to 3.3% excluding food and energy.

Apple and Amazon report after the close.

Let's dig in...

Today's Big Picture

1. The GDP Miss Wasn't A Slowdown

Growth came in at 1.5% against the 1.8 expected, and core inflation eased to 3.3. But the miss came from lower federal spending and thinner inventories, while consumer spending accelerated and underlying private demand ran near 4. Strip out the government and the private economy is speeding up, not slowing. That's why the 30-year sits at a 19-year high while the 2-year falls: traders think the Fed will have to move, and doubt Warsh will.

2. Microsoft Won By Spending More

Azure grew at its fastest pace in four years and crossed $100 billion in annual revenue, while Meta's free cash flow nearly vanished at $784 million. But Microsoft didn't win on restraint. Quarterly capital spending hit $41 billion and its finance chief guided it higher for next year, and the company stretched the assumed lifespan of its data centers from 15 years to 25. The bar isn't spending less. It's revenue landing in the same quarter as the bill.

3. June's Cheap Gas Isn't Coming Back

The U.S. hit dozens of Revolutionary Guard targets overnight, Tehran promised retaliation today, and Brent is lower on the day. Headlines have stopped moving crude, so watch the pump instead: June's inflation reading cooled mostly because gasoline fell during a lull in the fighting. That lull ended Wednesday and gas is back above $4.10 a gallon. The cool print traders just got was borrowed from a ceasefire that no longer exists.

Market Overview

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Stock Spotlight (pre-market)

Bristol Myers Squibb $BMY ( ▼ 0.79% )  

Up after beating on profit and revenue and raising its full ,year sales forecast by more than $2 billion, with new drugs replacing old ones faster than expected. Analysts waiting on the big blood thinner trial results later this year now have to decide whether to buy in before the data lands.

MarketAxess $MKTX ( ▲ 29.85% )  

Halted on a $167 a share cash buyout from NYSE parent Intercontinental Exchange, about a third above yesterday's close. Everyone holding a rival bond trading platform wakes up asking who gets bought next.

Starbucks $SBUX ( ▲ 3.12% )  

Up after raising its full year sales and profit outlook, with store traffic growing again. Anyone still betting against the turnaround needs that traffic to stall, and this quarter says it isn't.

Qualcomm $QCOM ( ▼ 4.42% )  

Down after guiding profit below estimates and warning its Apple business will shrink faster than expected. It's red while every other chip stock is green, so holders can't blame the sector, they have to decide about the company.

Fortinet $FTNT ( ▲ 2.16% )  

Up after raising its full year revenue forecast on a wave of new customer deals. Every security rival reporting after it now has to clear a higher bar or explain why the spending went elsewhere.

Norwegian Cruise Line $NCLH ( ▼ 8.43% )  

Is down after cutting its full year earnings forecast. P&G's finance chief called the consumer "muted, but stable" this week, and this is the muted half, so every travel name now gets asked whether bookings are soft everywhere or just here.

What to Watch

Upcoming IPO’s?
MarketBeat did an excellent job on this free IPO guide on IPO’s happening this year.

Amazon And Apple (After The Close)
Amazon is in a box: analysts carry $200 billion of capital spending for the year and free cash flow was already negative last quarter. Raise the spending and investors worry, go deeper into the hole and they worry, so the only clean exit is faster cloud growth. Apple is a margin question with memory chip prices climbing, and the stock just touched five trillion, so there's no room for a miss.

OPEC+ Meets Sunday
The group is expected to add 188,000 barrels a day for September, finishing the unwind of its voluntary cuts. New supply arriving under a war floor makes oil genuinely two-sided next week. Friday afternoon positioning ahead of weekend headline risk is its own trade.

- John

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