Apple’s new CEO said he will continue the company’s tradition of secrecy—and Wall Street loved it
Good morning. On Fortune’s radar today:
- Apple’s loud, public secrecy.
- Markets: Up, up, and away!
- Yikes: Capex has been negative for six straight quarters.
- The Fed considers the “h” word.
- Don’t expect Congress to end the war.
- The price of fried eggs in Tehran.
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THE MARKETS
A new record high in the U.S.
- S&P 500 futures were flat prior to the open in New York. The index rose 1.02% yesterday to hit a new record high at 7,209.
- In Europe, the Stoxx 600 was up 1.21% in early trading, but the U.K.’s FTSE 100 was down 0.66% before lunch.
- Asia: Japan’s Nikkei 225 was up 0.38%. Markets in South Korea, India, and China were closed today.
- Brent crude was at $111 per barrel this morning.
- Bitcoin was at $77.3K.
ONE BIG THING
Apple’s new CEO said nothing—and Wall Street loved it
It was Tim Cook’s 89th earnings call last night. Apple stock was up 2.8% in overnight trading after ending up 0.44% at the close of yesterday’s daytime session as investors digested yet another beat on quarterly revenue ($111.2 billion), and the company raised its guidance for future sales. CEO Cook also introduced his replacement, John Ternus, who will succeed him in September.
As is tradition, Ternus overtly insisted on saying nothing about Apple’s new product pipeline. Fortune’s Alexei Oreskovic noted that this is the time-honored way that Cook and Apple have maintained a mystique around their business: By insisting on secrecy—loudly and publicly.
Ternus said: “We have an incredible roadmap ahead. And while you are not going to get me to talk about the details of that roadmap, suffice it to say, this is the most exciting time in my 25-year career at Apple Inc. to be building products and services.” Full transcript here.
- Meanwhile at Facebook: Meta’s threat to quit New Mexico ‘is showing the world how little it cares about child safety,’ AG says - Catherina Gioino
THE CAPEX PROBLEM
The economy seems fine — until you look under the hood
U.S. Q1 GDP growth came in at 2% annually, and initial jobless claims fell sharply to 189,000 (the expectation was 212,000). So why is Mohamed El-Erian worrying about a recession possibly being mere weeks away?
Because corporate spending has been negative for six straight quarters, according to ING’s James Knightley. Capex overall is growing, but pretty much only because of spending on AI data centers, as this chart shows. Software and computing investment rose 24% year-on-year, ING says. Absent AI, U.S. capex is shrinking:
$1 trillion on the horizon. But AI capex won’t be shrinking anytime soon. Tech hyperscalers Alphabet, Amazon, Meta, and Microsoft are planning $800 billion in data center capex this year (up 67%), according to Bank of America’s Vivek Arya. It could reach $1 trillion (up 25%) in 2027.
- Big Tech will spend billions on AI this year. No one knows where the buildout ends - Sharon Goldman
The Fed considers the “h” word
Although U.S. Fed chair Jay Powell left interest rates at the 3.5% level on Wednesday, his remarks were the most hawkish-sounding in months. Wall Street is adjusting its predictions for the Fed’s rate-setting schedule and, as usual, their guesses are all over the place. Some even think the Fed may be forced to hike rates.
Here is a sampling of opinions in order of hikey-ness:
- Macquarie’s David Doyle and Chinara Azizova: “The next Fed rate change will be a hike (in 1H27) with broadening evidence of labor market improvement a key reason.”
- Bank of America’s Yuri Seliger: “Following the marginally hawkish [Fed meeting], and more importantly, oil prices reaching new highs, markets are now pricing in about 10bps of Fed hikes over the next 12 months.”
- Goldman Sachs’ David Mericle: “We see the risks around our Fed forecast as tilted toward a longer pause, though we remain very skeptical of rate hikes.”
- PIMCO’s Tiffany Wilding: “Our view remains that the next move will be a rate cut, but the timing is far from clear.”
- Natixis’s Christopher Hodge and Selin Aker: “We believe cuts will be forthcoming in September and December.”
Bond vigilantes sighted
Ed Yardeni of Yardeni Research is starting to worry about bond vigilantes—investors who dislike inflation and who will dump government debt if they see it, making the cost of borrowing higher.
- “The bond market is starting to signal concerns that the energy shock might cause a more persistent, rather than transitory, inflation problem. The 10-year Treasury bond yield is up from 3.95% on Feb. 27 (a day before the war started) to 4.25% this evening. ... The Bond Vigilantes are starting to mutter: ‘No more Mr. Nice Guys,’” he said in a note on Thursday.
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