Here's a summary of the news and facts discussed in the Yahoo Finance Morning Brief:
**Overall Market Sentiment:**
* Futures are not doing much this morning.
* Stocks fell yesterday after the Fed press conference.
**The Federal Reserve (Fed) and Jerome Powell's Press Conference:**
* **Bond Yields:** Higher this morning, with the 30-year bond yield at a 19-year high.
* **Powell's Communication:**
* Julie Hyman noted Powell (mistakenly referred to as Kevin Warsh initially) spoke "tough," repeatedly emphasizing "price stability," and needs to back it up.
* She also pointed out his message about the market taking cues from data, not the Fed, is unlikely to be followed, as markets will always extrapolate Fed actions from data. It felt like a "flub."
* Barbara Duran agreed, noting commentators' disappointment. Powell gave no indication of the Fed's thinking despite not wanting to forecast.
* The pre-meeting market bet on a rate hike was unusual at 30-35% (compared to a usual 95%), reflecting uncertainty.
* Inflation is "stuck," and while the previous month's PC number was "okay," there's no clear path to the 2% target.
* Oil pricing (due to the Iranian situation) might be transient.
* People were disappointed there wasn't a clearer sense of future rate actions.
* Duran suggested it might be an "overreaction" to a "new Fed" (referring to his communication style) who has task forces studying productivity and inflation data.
* Julie found it concerning that Powell "watches the markets" but doesn't want the markets to watch him.
* Duran thinks Powell's message was "murky," and the market wants more guidance. She expects other Fed speakers to provide clarity, or Powell may adjust his style.
* **GDP Data:** Second-quarter GDP came in at 1.5%, worse than the earlier read and economists' estimates.
* **Implications of Higher Rates:**
* Even without Fed hikes, interest rates are rising, with the market "doing the work."
* This has big implications for hyperscalers' increasing debt for data center builds, as market demands higher yields, leading to more pricey debt.
* Microsoft's "financial engineering" (changing leases to reduce reported CapEx) was mentioned as an example of companies trying to manage this.
* **Future Outlook (Barb Duran):** Higher rates anticipate higher inflation, potentially leading to Fed rate hikes. The Iranian war, despite false starts, doesn't look to wind down soon and could become a market factor. Higher yields are not good for debt holders.
* **Tech Debt:** While there are concerns about tech companies taking on debt, many have huge free cash flow, and demand (e.g., for high bandwidth memory chips, autonomous driving, robotics) is "insatiable," indicating future monetization despite temporary CapEx increases.
**Meta Earnings:**
* **Financials:**
* Free cash flow was the lowest since 2022, around $784 million.
* CapEx forecast for this year was raised on the lower end, but no 2027 CapEx forecast was provided.
* **Stock Performance:** Poised for its 11th straight down session, the longest losing streak ever for Meta.
* **Analyst Impressions (Dan Howley):**
* The earnings call felt flat, lacking substance.
* Management (Zuckerberg and CFO Susan Lee) was unclear about data center strategy (renting, leasing, or own use). Zuckerberg's statement about using it if needed or renting for revenue was vague.
* Meta lacks a diversified business like Google, Microsoft, or Amazon to monetize data center capacity externally, relying heavily on advertising.
* They are leaning into enterprise (API sales, enterprise packages), but the long-term sense for Meta (beyond models) is unclear, feeling "metaversy."
* **Analyst Impressions (Barbara Duran):**
* Believes the stock could be a buying opportunity if it continues to sell off, noting its strong underlying business.
* User growth is strong: 3.7 billion daily active users, 2 billion on Instagram alone, increasing engagement, and strong advertising dollars.
* Meta has a history of strong execution (except for the metaverse). The stock previously dropped below $100 during heavy metaverse spending, which was a "huge buying opportunity."
* New revenue streams like subscriptions and enterprise packages are in the pipeline.
* **Zuckerberg's Glasses Claim:** Julie questioned Zuckerberg's statement that "our glasses remain one of the fastest growing consumer electronics products of all time."
* **Glasses Discussion:** Dan noted that while Meta is a leader in smart glasses, they won't power the business, and there's privacy backlash. Barb suggested they could be developing an ecosystem, like Apple, to diversify from 98% ad revenue. Julie reminisced about past failed ecosystem attempts (Facebook phone, metaverse).
**Microsoft Earnings:**
* **Market Reaction:** "Much happier story," stock up 9% pre-market.
* **Key Metrics:**
* Microsoft 365 Co-pilot: 30 million paid users, up 10 million quarter-over-quarter.
* Azure revenue: Topped $100 billion annually for the first time.
* Remaining Performance Obligations (RPO): Beat expectations, coming in at $668 billion (vs. $647.6 billion expected), indicating continued long-term interest.
* **Analyst Impressions (Dan Howley):**
* The "Co-pilot payoff" is now evident.
* Microsoft has been "judicious" with spending, moderating data center CapEx.
* While often capacity-constrained, they are managing it well, having stood up their 31st data center (out of 88 total).
* The market prefers "capacity constrained" (showing demand) over "too much capacity" (like Meta).
* **Analyst Impressions (Barbara Duran):**
* The key driver for the stock surge is the Azure story: 43% growth this quarter (vs. 39% last, 41% whisper) with forward guidance of 45%.
* This reinforces strong cloud demand.
* Microsoft had lagged, still down year-to-date, making the risk-reward attractive.
* Relief that Microsoft wasn't increasing CapEx, as they "got the memo" about market reactions to CapEx increases (referencing Alphabet last week).
* **CapEx:** Microsoft is not spending as much this year ($175 billion, still a lot, but moderated). This is partly due to extending the life of their equipment (data centers and offices) by another 10 years.
**Chips Sector:**
* **Overall:** Indications for a sector rebound, despite mixed catalysts.
* **Samsung:**
* Predicts chip shortage to continue through 2028.
* Gave a positive outlook.
* Net profit was up 1,300%.
* Operating profit was up 19 times.
* Stock fluctuated in Korean trading but ended little changed.
* **Qualcomm:**
* Gave a weak profit forecast.
* Stock is not participating in the rebound.
* **Dan Howley's Insights:** Qualcomm is a "one-off" due to diversifying away from Apple (Apple making its own modems, potentially zero Qualcomm reliance by end of year). The smartphone market is a "drag." Qualcomm is investing heavily in AI (accelerators, CPUs, memory for data centers), but this also creates a paradox where memory and storage shift to AI, hurting smartphone sales and, indirectly, Windows PC sales for Microsoft. Qualcomm is transitioning, with automotive and data center revenue expected to increase by 2029, but it's "stinging" for now.
* **Lam Research (LRCX):** Also mentioned as a chip maker.