Macro Events & News
This week, the Federal Reserve reduced its benchmark interest rate by 0.25 percentage points to a range of 4.25% to 4.5%, marking its third consecutive rate cut this year. Despite this reduction, the Fed signaled a slower pace of rate cuts in 2025, indicating that borrowing costs may remain relatively high for an extended period. This announcement triggered a significant mid-week panic with the Dow dropping 2.6%, the S&P 500 declining 3%, and the NASDAQ leading the losses with a 3.5% dip, reflecting widespread concern over the Fed’s hawkish tone despite the rate cut.
On Friday, the Personal Consumption Expenditures (PCE) price index, the Federal Reserve’s preferred measure of inflation, came in at 0.1% for November, down from 0.2% in October, signaling a cooler inflation environment. On an annual basis, the PCE price index rose 2.4%, a slight increase from October’s 2.3%. Excluding food and energy, the core PCE price index also grew 0.1%, following a 0.3% increase in October, maintaining a 2.8% annual gain. This inflation data, coupled with strong Michigan consumer sentiment readings, provided a glimmer of optimism and helped offset some of the heavy losses incurred earlier in the week.
The 10-Year Treasury yield increased to 4.5%, reflecting market adjustments to the Fed’s policy signals. While the VIX, closed at 18.36 after spiking as high as 24.09 mid week, indicating growing investor unease.
For the week, the major indexes ended up lower: the DOW down 2.3%, the S&P 500 down 2%, and the NASDAQ down 2%.
Watchlist News
Accenture (NYSE:ACN) 1.9% ▲
Accenture reported strong Q1 results and raised its guidance on Thursday. Revenue came in at $17.7 billion, exceeding expectations of $17.1 billion, while earnings per share (EPS) were $3.59, surpassing the forecast of $3.42. Guidance was revised upward by 1%, reflecting optimism for future growth. New bookings totaled $18.7 billion, including $1.2 billion attributed to AI-related services. Following these results, many analysts raised their price targets for the name.
Accenture delivered strong results, with the AI-related new bookings standing out as particularly encouraging. AI remains a significant investment focus for many companies, which are increasingly turning to external experts like Accenture to develop strategies and to mitigate risks. This revenue stream is poised for substantial growth as demand for AI expertise continues to expand. Beyond the bookings, Accenture’s internal AI initiatives, powered by its massive data collection capabilities, present additional growth opportunities. Despite these strong fundamentals and a positive market reaction, the stock was caught up in the broader market downturn, resulting in only a modest 1.9% gain for the week. This suggests significant upside potential as market conditions stabilize.
august bear notes
Micron (NASDAQ:MU) 14.5% ▼
Micron reported disappointing earnings on Wednesday, delivering $1.79 per share on sales of $8.71 billion, narrowly beating the expected $1.76 per share on $8.71 billion in revenue. However, the disappointment stemmed from very weak guidance for the current quarter. Revenue is projected at $7.9 billion, significantly below the $8.94 billion expected, while EPS is forecasted at $1.43, falling short of the anticipated $1.91. The weak outlook triggered an immediate sell-off, with the stock plunging 13%.
Micron’s earnings miss for the prior quarter was somewhat surprising given the strength of AI-related data center sales. On the earnings call, management clarified that while AI demand remained robust, the consumer segment under-performed due to high customer inventories and the lack of a PC refresh cycle, a recurring theme across the industry. Encouragingly, Micron noted that customers are now consuming more inventory than they are ordering, suggesting the supply-demand imbalance may improve by spring 2025. Despite the strong AI-related demand, evidenced by 40% sequential growth and a remarkable 400% year-over-year increase, the stock may remain under pressure until broader market conditions stabilize and consumer demand rebounds.
august bear notes
Microsoft appeared to be on track to challenge its all-time high of $468 early in the week but was derailed on Wednesday as the broader market sold off following the Federal Reserve’s cautious signals about the pace of future rate cuts. The company received several midweek price target upgrades from UBS and Stifel, reflecting analyst confidence in its strong fundamentals and growth prospects. However, even with the market rebounding on Friday after better-than-expected PCE inflation data, Microsoft struggled to regain its earlier momentum and closed the week down approximately 2%.
Despite the pullback, the upgrades from UBS and Stifel highlight sustained confidence in Microsoft’s long-term growth potential, particularly in cloud services, AI, and productivity tools, which remain core drivers of its business. With other Mag 7 companies surpassing their prior highs, Microsoft’s performance and results, which are on par with or better than its peers, suggest it is likely only a matter of time before the stock follows suit. The company’s strong fundamentals and consistent execution position it well to reclaim its upward momentum as market conditions stabilize.
august bear notes
NVIDIA demonstrated resilience this week, managing to end in positive territory despite the broader market volatility driven by the Fed rate decision and subsequent sell-off. The stock initially rallied leading up to the Fed’s announcement but surrendered those gains amid the mid-week downturn. However, by Friday, NVIDIA had recovered and reclaimed its weekly highs, reflecting strong underlying momentum.
There were no major breaking news developments for NVIDIA this week, indicating that its performance was largely driven by overall market sentiment and sustained investor confidence in the company. Positive commentary from Accenture and Micron during their earnings calls about outsized AI demand and growth likely reinforced confidence in NVIDIA’s market leadership and long-term prospects. Investors may also be positioning to rotate back into this proven name following recent profit-taking and a shift of capital into more speculative plays.
august bear notes
