Broker Check

Mosaic Asset Partners - A Heavy Week of Tech Earnings Dominated the Headlines

April 26, 2024

My, what a difference a week makes! Big Tech earnings, an FTC vote to ban non-compete clauses, a disappointing GDP report for the first quarter, and ongoing legal battles were more than enough to keep things active and unruly again. While the week may have started off slow, we had more than enough to digest along the way. Bear with me as this week’s update will be slightly longer than usual! The earnings that came through from many of the large tech companies were interesting. All last year we heard about the Magnificent 7 (Microsoft, Apple, Nvidia, Alphabet, Amazon, Meta and Tesla), which is the group of companies that largely led the gains in the market throughout 2023. Again, many of these companies started the year strongly but some cracks in the foundations of a few of these perceived “darlings” have begun to show up. This isn’t necessarily surprising given the run they have had, but it is something to watch as many companies are figuring out their next moves in this AI crazy environment. I listed a few of the meaningful 1st quarter earnings commentaries below for some perspective on why the markets were moving around so much this week.

TSLA – Missed on revenue and sales pretty big but Musk commented that a low-cost EV would be on the market by the end of the year or early in 2025.

MSFT – Strong cloud growth, more integration of their AI bot named co-pilot 360 inside of their Microsoft 360 suite of products.

META – Reported better than expected earnings but Zuckerberg focused his comments heavily on AI and the Metaverse, which comes with a heavy price tag and investors didn’t like that news.

GOOGL – Strong revenue and sales, announced a dividend, which was very big news and a stock repurchase program.

INTC – Slightly better numbers but emphasized their desire to go after Nvidia and their AI chip sales. Ramping up spending in that area.

I generally don’t get into the “weeds” in these updates, but I think these past few weeks of highs and lows warranted a little more insight into what has been going on. I think this clearly shows the state of where things are and where they are evolving.

Switching gears slightly, first quarter GDP was released on Thursday and came in at a rate of 1.6%. Economists surveyed by Dow Jones had been looking for an increase of 2.4% following a 3.4% gain in the fourth quarter of 2023 and 4.9% in the previous period. There was some bad news on the inflation front as well. The personal consumption expenditures price index (PCE), a key inflation variable for the Federal Reserve, rose at a 3.4% annualized pace for the quarter, its biggest gain in a year and up from 1.8% in the fourth quarter. Excluding food and energy, core PCE prices rose at a 3.7% rate, both well above the Fed’s 2% target. Central bank officials tend to focus on core inflation as a stronger indicator of long-term trends. I have said this before, but will reiterate, the Fed’s 2% target rate for inflation remains elusive. I’m just not sure if we are going to see those levels any time soon if at all in the near future. At some point a pivot of some type might be in order and possibly more realistic in the long run. The when-and-if scenario of any Fed rate cuts coming still seems like a head scratcher at this point.

Another interesting piece of news came out this week from the FTC.  The Federal Trade Commission voted to enact a nationwide ban against noncompete agreements. Noncompete agreements are provisions of employee contracts that companies use to prevent employees from going to work for competing companies. The FTC estimates that 30 million American workers, or roughly 18%, are currently subject to a noncompete. Like any significant change of this magnitude, there are pros and cons. It is also likely that lawsuits will emerge to challenge this ruling. In any event, this illustrates the changing mindset and landscape of today’s workforce. While loyalty is something that has long been forgotten, the ability to simply “move on” may become even easier in the future. Interesting times for sure.

Finally, Steven and I had the good fortune of getting on the road together to see a few clients this past week. We always enjoy and appreciate the opportunity to see our clients in person. Something that Zoom and phone calls simply can’t replace. Steven also had his first experience at what is quickly becoming a cult favorite. Can you guess where we visited?

Have a nice weekend!

https://www.cnbc.com/2024/04/22/big-tech-keeps-prioritizing-ai-as-earnings-approach.html?__source=iosappshare%7Ccom.apple.UIKit.activity.Mail

https://www.cnbc.com/2024/04/23/ftc-votes-to-ban-noncompete-clauses-that-bar-employees-from-working-for-competitors-.html?__source=iosappshare%7Ccom.apple.UIKit.activity.Mail

https://www.cnbc.com/2024/04/25/gdp-q1-2024-increased-at-a-1point6percent-rate.html?__source=iosappshare%7Ccom.apple.UIKit.activity.Mail

https://www.cnbc.com/2024/04/25/alphabet-set-to-report-first-quarter-results-after-market-close.html

https://www.cnbc.com/2024/04/24/meta-loses-200-billion-in-value-zuckerberg-focuses-on-ai-metaverse.html

Christopher E. Wasson, CFP®

President

Mosaic Asset Partners, LLC

1122 Kenilworth Drive, Suite 310

Towson, MD  21204

410.821.0089         fax 410.821.5993

MosaicAssetPartners.com  

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Mosaic Asset Partners, LLC is not affiliated with Kestra IS or Kestra AS.  Investor Disclosures: https://www.kestrafinancial.com/disclosures

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra IS or Kestra AS. The material is for informational purposes only. It represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. It is not guaranteed by Kestra IS or Kestra AS for accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.