A Tale of Two Cities
Dimonmuskville vs Markomicrochip Township
A Tale of Two Cities
If the stock market action confused you this week, you were not alone. Thursday morning pre-market we were sitting at our desk and saw an 8-K from Microsoft come across our screen. It reminded me of the prior week when $SNAP did the same and, at first, I figured it was Snap-on ($SNA) or Snap One Holdings ($SNPO) and why would we get an update this way. After all, it has been a long time since companies pre-announced earnings. Most companies do what $WMT and $TGT did this quarter and just lay an egg and report it the usual earnings date. Microsoft issued a warning “specifically” to update the move in currencies that affects their revenue and earnings (being international) in this case by 3c in EPS for the quarter. Why issue such a modest update now? The stock tanked and recovered Thursday as most tried to dismiss it as solely an issue of a currency update. Yet, at a conference that same day, the company had a product manager describe the update as both currency specific, but “we are not immune” from the macro such as supply chain issues (the consumer/gaming side going to miss?). The good thing is the market rallied huge Thursday despite $MSFT with the $QQQ up 2.7%. This must mean that all the bad news is priced in, right?
That’s the bull case right now. Peak bad, peak inflation, peak Fed, peak bearishness. As one fintwit account we follow tried to explain on Thursday, “Look around. If everyone is saying the same thing as you it’s probably priced in”. Hmmm. Thursday also featured #2 at the Fed Lael Brainard intentionally back tracking on what Fed Governor Bostic said the prior week about a potential September pause in rate hikes. She said essentially 50 bps is even on the table for September, forget a pause. Yet, as our friend above said, the market ripped Thursday despite Microsoft and Brainard. So, the bear case must be priced in fully, correct? Not so fast. Friday took back the entire move. $TSLA CEO Musk said he has a “super bad” feeling about the economy and is laying off 10% of salaried emps (super bad reference to the movie which shows McLovin birthday on June 3rd). Then, $AAPL app store for May was reported to have decelerated to only 4% growth versus an expectations of an acceleration (weakness being predominantly in the US). Never mind that information was out on Thursday afternoon and completely ignored. As always, lets try and figure this out together and what is next for the markets. It truly is a Tale of Two Cities.