To The Moon

Reality Check for Wall Street

After a strong fall rally built on AI optimism, trade détente, and Fed rate-cut hopes, markets stumbled as investors reassessed just how “Goldilocks” the economy really is.

The $S&P 500(.SPX)$ dropped 1%, the Dow Jones Industrial Average slipped 0.2% (–110 points), and the $NASDAQ(.IXIC)$ fell 1.6%, a sharp reversal from recent record runs.

Yesterday’s hawkish tone from Fed Chair Jerome Powell continued to weigh on sentiment, overshadowing signs of progress on a U.S. – China trade pact. Markets had already priced in calmer trade relations; what they hadn’t expected was the Fed’s firmer stance on inflation.

• Hot Stock: C.H. Robinson Worldwide +19.7%

• Biggest Loser: Chipotle Mexican Grill –18.2%

• Best Sector: Real Estate +0.6%

• Worst Sector: Consumer Discretionary –2.3%

Big Tech’s AI Momentum Meets Profit Pressure

Earnings from Meta Platforms, Microsoft, and Alphabet showed continued AI investment enthusiasm, but with a sting in the tail:

• $Meta Platforms, Inc.(META)$ shares plunged 11% after its operating margin fell to 40%, suggesting heavy spending on AI infrastructure.

• Microsoft slid after noting that AI demand was “significantly ahead of capacity,” raising concerns about bottlenecks and cost pressures.

• $Alphabet(GOOGL)$ held steadier, but the broader Roundhill Magnificent Seven ETF fell 3.1%, as investors questioned whether Big Tech’s AI-fueled run can sustain its pace.

Big Tech Strikes Back, After Hours

Late in the day, $Apple(AAPL)$ and $Amazon.com(AMZN)$ offered some relief. Both stocks rose in after-hours trading after stronger-than-expected earnings:

Apple Amazon

• Apple beat forecasts with $1.85 per share in profit, driven by 13% growth in Mac sales and a 15% jump in Services revenue. While iPhone sales came in slightly below estimates, the stock quickly recovered.

• Amazon posted $1.95 per share in earnings, topping expectations and showing continued strength in AWS cloud revenue ($33B vs. $32.5B expected). CEO Andy Jassy highlighted robust AI and infrastructure demand, guiding next-quarter revenue between $206B–$213B.

The duo’s upbeat results could serve as a welcome catalyst for markets searching for stability after a rocky week…

Looking Ahead

Friday brings a fresh batch of corporate earnings from Chevron, Exxon Mobil, AbbVie, Linde, and Colgate-Palmolive, offering a read on energy demand and consumer resilience.

The Takeaway

Markets are learning that “just right” rarely lasts long. AI enthusiasm and trade optimism remain powerful forces, but they now collide with a less dovish Fed, stretched valuations, and uneven profit margins.

Goldilocks isn’t gone, just wobbling a bit. Investors should brace for more volatility as the search for balance between growth, inflation, and policy continues…

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This summary is for informational purposes only and does not constitute financial advice. Investors should conduct their own research before making investment decisions.