Bulls, Bitcoin, & Beyond

Market Moves Yesterday

S&P 500 @ 5,634.58 ( ⬆️ 0.026%)

Nasdaq Composite @ 17,628.06 ( ⬆️ 0.20%)

Bitcoin @ $59,759.70 ( ⬆️ 0.34%)

Hey Scoopers,

Happy Wednesday! Are you ready to tackle the midweek mania?

👉 Microsoft continues to invest in AI

👉 Utility stocks are on the move

👉 Retail spending remains strong

So, let’s go 🚀

Market Wrap

Equity futures are up slightly at the time of writing as Wall Street anticipates a long-awaited rate cut from the Federal Reserve, following an aggressive multiyear hiking campaign to offset inflation.

The Fed is expected to deliver its latest policy decision at 2 p.m. ET and might lower rates by at least 25 basis points. However, according to the FedWatch tool, there is a 65% chance of a 50 basis point cut.

Rate cuts generally act as a tailwind for corporate earnings growth and should usher in a reprieve following a prolonged period of high borrowing costs and sticky inflation.

The cutting cycle may yield additional gains for an already strong market, with the S&P 500 up 18% year-to-date. In the last 50 years, the index has rallied by 6.4%, 9.8%, and 15.6% in the three, six, and 12 months following an initial cut.

Trending Stocks 🔥

SolarEdge Technologies - The stock gained 2.6% even though Jeffries downgraded the solar company to “underperform” from “hold” due to rising domestic competition and high inventory levels. 

Accenture - Shares fell close to 5% after Bloomberg stated that the IT services giant might delay the bulk of its promotions to June from December.

Hewlett Packard Enterprise - The hardware stock jumped 5.6% after Bank of America upgraded the stock from “neutral” to “buy”.

Microsoft Partners With BlackRock in AI Push

Microsoft and BlackRock are part of a group of companies collaborating to invest $100 billion to develop data centers for artificial intelligence and the energy infrastructure to power them.

The companies are part of the GAIIP of Global AI Infrastructure Investment Partnership, which includes Global Infrastructure Partners, an entity that BlackRock will soon acquire, and MGX, a UAE-based tech investor.

Earlier this year, BlackRock announced plans to acquire GIP for $3 billion in cash and 12 million of BlackRock stock. The deal is expected to close within the next month.

“We are committed to ensuring AI helps advance innovation and drives growth across every sector of the economy,” said Microsoft CEO Satya Nadella, in a statement. He said the initiative brings “together financial and industry leaders to build the infrastructure of the future and power it in a sustainable way.”

The group will raise $30 billion of initial capital with a future goal of increasing the investment to $100 billion.

Tech companies have been investing heavily in building data centers powered by Nvidia’s graphics processing units (GPUs) that can run generative AI models such as ChatGPT.

These GPUs are energy-intensive, and rising demand has created a bottleneck in establishing new facilities.

Microsoft’s investment is in addition to the capital expenditures needed to support infrastructure expansion for its Azure public cloud, which supplies OpenAI and other AI customers.

In the June quarter, Microsoft’s capital spending totaled $19 billion, including assets acquired under finance leases.

Moreover, Microsoft announced it would raise its quarterly dividend by 10.7% to $0.83 per share and approved a $60 billion share buyback program. In the last decade, on average, Microsoft has increased dividends by more than 11% annually.

Investors Are Bullish on Utility Stocks

According to Bank of America’s global fund manager survey, investors are the most overweight on utility stocks since December 2008.

According to a survey of global institutional fund managers (read: mutual funds and hedge funds), capital rotated out of cyclical sectors and into defensive sectors such as utilities in September.

These fund managers have also been the most underweight in energy stocks since December 2020, as crude oil futures have sold off steeply this month.

The S&P 500 utility sector has rallied 24% in 2024 and is up 3% this month. Utilities are riding on tailwinds due to expectations that energy demand will surge due to AI, manufacturing, and the electrification of the economy.

The energy sector, on the other hand, has gained about 3% this year and is down more than 5% this month.

Retail Sales Remain Strong in August

Retail sales were stronger than expected in August as consumers showed resilience despite fears of an economic pullback.

The Commerce Department’s initial estimate for all sales showed an increase of 0.1% on the month, down sharply from the upwardly revised gain of 2.3% in July but better than the Dow Jones forecast for a decline of 0.2%.

Here are some key numbers:

• Excluding autos, sales increased 0.1%, slightly lower than the 0.2% consensus estimate. The retail sales numbers are adjusted for seasonal factors but not inflation.

• Spending rose 1.7% for miscellaneous stores and 1.4% for online retailers.

• With oil prices falling, gas stations saw a 1.2% decline in receipts while sales at clothing and furniture stores fell 0.7% each.

Headlines You Can't Miss!

Weekly mortgage demand surges 14%

What can you expect from the Fed today

Tupperware files for bankruptcy

Alaska-Hawaiian airline merger clears DoT review  

AI-focused Bitcoin miners are outpacing rivals

Chart of The Day

The Fed is poised to cut rates for the first time since early 2020. So, what happens next? Well, it largely depends on whether the U.S. enters a recession.

If the economy avoids a recession, the S&P 500 rallies by over 10% in the 12 months following a rate cut. However, if a recession hits, it declines by 15%.

Meme of the Day

Don’t follow us on social yet? Follow us on Twitter and LinkedIn now.

DISCLAIMER: None of this is financial advice. The newsletter is strictly educational and is not investment advice or a solicitation to buy or sell assets or make financial decisions. Please be careful and do your own research.