AI Earnings Disappoint Markets As US Economy/GDP Grew At Surprising Rate – $SPY $QQQ $DIA $VIX

Published Jul 25, 2024
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By John F. Heerdink, Jr.

The U.S. economy grew at a surprising 2.8% annualized rate in the second quarter of 2024, surpassing economists’ expectations and adding a twist to the ongoing narrative of tech companies grappling with AI investments and market volatility.

Tech Giants’ Earnings Fumble

In a plot twist worthy of a Silicon Valley sitcom, tech giants Alphabet and Tesla stumbled on the earnings stage, leaving investors scratching their heads and questioning the ROI of their AI extravaganza. The dynamic duo’s unimpressive financial performance sent shockwaves through Wall Street, causing investors to wonder if Big Tech’s AI-fueled valuations were more hot air than solid circuitry. This comedic turn of events left the tech sector looking less like the Avengers and more like a bunch of clumsy robots tripping over their own algorithms. Meanwhile, Ford decided to join the party of disappointment, with its shares taking a nosedive faster than a skydiver without a parachute, tumbling over 13% in pre-market trading after missing its quarterly profit target.

Global Markets’ Dramatic Reaction

The financial drama unfolding on Wall Street sent ripples across the globe, turning international markets into a veritable soap opera. Europe’s Stoxx 600 benchmark took a dramatic dive, plunging over 1% as if auditioning for a high-stakes cliff-diving competition. Not to be outdone, Japan’s Nikkei 225 decided to steal the spotlight with a jaw-dropping 3%-plus loss at the close, partially fueled by an unexpected plot twist involving a sudden yen gain. This performance was so intense it pushed the Tokyo benchmark into a technical correction, leaving traders wondering if they’d accidentally stumbled onto the set of a financial thriller rather than their usual trading floor.

Surprising US GDP Growth

Defying expectations, the U.S. economy showcased its resilience with a robust 2.8% annualized growth rate in the second quarter of 2024, significantly outpacing the 2.1% increase anticipated by economists polled by Dow Jones.[1] This unexpected economic vigor adds a layer of complexity to the ongoing narrative of tech sector struggles and market volatility. The impressive GDP figure stands in stark contrast to earlier concerns about the economy’s robustness, which were fueled by high-profile earnings misses and worries about consumer spending in the face of elevated borrowing costs.[2] This economic plot twist serves as a reminder that even amidst tech sector drama and market uncertainty, the broader economic picture can still hold surprises.

Federal Reserve’s Rate Cut Game

Amid market turbulence and surprising economic growth, traders are betting on the Federal Reserve to play “How Low Can You Go?” with interest rates. The financial crystal ball gazers are now pricing in more aggressive cuts:

* A reduction of about 30 basis points by September
* Almost 70 basis points over 2024
* Increased odds for an earlier-than-expected rate cut in July

These predictions suggest the Fed might be preparing to limbo under its previous rate projections, potentially in response to the mixed signals from tech earnings and robust GDP growth. The upcoming Personal Consumption Expenditure Price Index update will provide another piece to this economic puzzle, potentially influencing the Fed’s rate cut choreography.