Daily Updates: Powell Contemplates Temporary Halt
| || --- || S&P 5005,872 (-2.95%) || Nasdaq19,383 (-3.56%) || Dow42,327 (-2.58%) || Bitcoin$101,333 (-5.03%) |
1. Fed Decision Spooks Markets
The S&P 500 plummeted by nearly 3% during the largest move following a Federal Reserve decision since September 2001, as Chairman Jerome Powell introduced more cautious guidance regarding future rate cuts.
- "We've gotten here fast, but going forward, we'll be going slower": The anticipated 0.25% rate cut was already anticipated by market participants, but Powell hinted at a slower pace of additional rate reductions moving forward. This change was reflected in the 'dot plots' for 2025, which now suggest only two additional cuts are on the horizon.
- Siegel deems market drop "appropriate": Wharton Business School professor Jeremy Siegel observed that the Fed meeting provided a dose of reality to investors, but that the downturn is normal considering the impressive gains in the stock market over the past couple of months. Dips provide shrewd investors with opportunities to purchase.
2. Apple Clings to iPhone Strategy
A scheme by Apple (AAPL -2.62%) to offer an iPhone hardware subscription service has reportedly been put on hold, as the corporation contemplates the growth strategy for its flagship product.
S&P 5005,872 (-2.95%)
- Encouraging customer loyalty: The iPhone still accounts for approximately half of annual sales, but a monthly subscription fee to access new devices and other benefits was viewed as a method to assist in maintaining user loyalty within the Apple ecosystem. Bloomberg reports that this idea has been temporarily abandoned.
- Strengthened ties with Nvidia: Apple is pouring resources into large language models (LLMs), with fresh reports of a partnership with Nvidia (NVDA 2.99%), focusing on a new approach that speeds up LLM learning and inference. This development serves as another component in the competitive AI race, which leads us to...
3. Chip Demand Reflects AI Competition
Nasdaq19,383 (-3.56%)
The competition to lead in AI continues, with analysts estimating that Microsoft (MSFT -0.69%) has purchased over twice as many flagship chips from Nvidia as its rivals in 2024.
- The fuel for advanced systems: With an estimated order size of 485k Hopper chips this year, it far surpasses competitors such as Alphabet (GOOG 0.10%), Amazon (AMZN 0.38%), and Tesla's (TSLA -6.08%) xAI, all of which have placed orders for fewer than 200k chips. Microsoft hopes that this penetration will provide an advantage in constructing next-generation systems.
- Swelling valuations: OpenAI, backed by $13 billion in funding from Microsoft, is facing competition from Perplexity. The AI-driven search engine recently completed a funding round that tripled its valuation to $9 billion.
Dow42,327 (-2.58%)
4. Up Next: Earnings Deluge
Thursday brings a barrage of late earnings season reports, with Nike (NKE -2.64%) scheduled to unveil Q2 earnings after the closing bell.
Bitcoin$101,333 (-5.03%)
- Not solely an AI story: Before the market opens, classified recommendation Accenture (ACN -0.84%) will report earnings. Beyond GenAI advances, investors will be keen on consulting demand, given that last quarter saw the first increase in consulting revenue in six quarters.
- Hitting the road for the holidays:Rule Breakers recommendation FactSet (FDS -0.79%), together with Stock Advisor picks FedEx (FDX -2.51%) and CarMax (KMX -0.66%), will release earnings today. For CarMax, investors will be monitoring progress in new store rollouts from last quarter.
5. Silliness Corner
Nike acknowledges slip-ups in its strategy, and is working on reclaiming its market share and reputation. Which public company do you assume needs to adopt new leadership and why? Engage in a discussion with your family and friends, or sign up to learn what your fellow Fools are thinking.
- Despite the market's Dow Jones Industrial Average (Dow) decline, individuals like Wharton Business School professor Jeremy Siegel see this as an opportunity for shrewd investors to purchase stocks at lower prices.
- As Apple considers alternative growth strategies for the iPhone, the corporation is reportedly putting its hardware subscription plan on hold. The company is instead focusing on collaborating with tech giants, such as Nvidia, to enhance their AI capabilities.
