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๐ Monster Earnings

Fellow Investor,
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All the best,
Kevin Matras
EVP, Zacks.com

โ๏ธ GM Munchers! I watched hockey last night with my wife. I called it quality time. She said watching me bite my nails and yell at the TV for almost 3 years isnโt her idea of quality time. Weโll agree to disagree.
On todayโs menu:
๐ฆ Powell's Last Press Conference & Oil Above $110
๐ค Meta Made $26 Billion In 3 Months. It Wasnโt Enough.
๐ Ford, Visa & Starbucks Crush
๐ Google Just Had The Best Quarter In Years
โณ๏ธ LIV Golf League Losses Its Saudi Funding
Yesterdayโs numbers:
S&P 500 | 7,135 | -0.04% |
Nasdaq | 24,673 | +0.03% |
Dow Jones | 48,861 | -0.57% |
Bitcoin | $75,791 | -0.69% |
BREAKING NEWS
๐ฆ Powell's Last Press Conference & Oil Above $110.
Two things dominated the market yesterday before a single earnings report dropped.
Yesterday was the highly anticipated Fed meeting and they decided to do nothing and keep rates exactly where they are at 3.50% to 3.75%. Nobody was surprised. What everybody was watching was Jerome Powell, the man who has been running the Fed since 2018. His time as chair ends on May 15, and yesterday was almost certainly his last press conference in charge.
Powell kept it simple. Inflation is still too high. The job market is holding up. The war is making everything more complicated. He is not cutting rates until he sees more progress on all three.
Here is the other news that mattered yesterday:
๐ข๏ธ Brent crude topped $112 a barrel with no clear end to the war in sight. The Strait of Hormuz, the narrow waterway that carries 20% of the world's oil, remains effectively closed. Every day it stays closed, oil gets more expensive and inflation gets stickier.
๐๏ธ Powell confirmed he will stay on at the Fed as a regular board member after May 15, even after Kevin Warsh takes over as chair. That is actually important. Having Powell in the room gives the Fed some backbone if Trump starts pushing Warsh to cut rates aggressively.
โ ๏ธ The World Bank warned this week that energy prices are expected to surge 24% this year because of the war. They called it the biggest energy price shock since Russia invaded Ukraine in 2022.
The Munch Take: Powell spent eight years steering the economy through a pandemic, the fastest rate hike cycle in history, and now a war in the Middle East. Whatever you think of his decisions, the man showed up every single day. Warsh takes the wheel on May 15. Trump will immediately want rate cuts. Powell staying in the room as a governor is the best insurance policy the Fed has right now. My wife asked who Jerome Powell was. I said he was the most important person in the American economy for the last eight years. She said he looks tired. She is not wrong.

๐ค Meta Made $26 Billion In 3 Months. It Wasnโt Enough.

This is exactly how Wall Street works and it never stops being infuriating.
$META posted revenue of $56.3 billion, crushing estimates. Net income hit $26.77 billion, up 61% from last year. EPS of $10.44 demolished expectations. By every measure that matters, a monster quarter. Then Zuckerberg opened his mouth about how much money he plans to spend.
Here is why the stock dropped 7% after hours despite the beat:
๐ธ Meta told investors it plans to spend between $125 billion and $145 billion this year on AI and data centers. That is $10 billion more than it said it would spend just three months ago. Wall Street does not like it when the bill keeps getting bigger.
๐ฅ The number of people using Meta's apps every day came in at 3.56 billion, missing the 3.62 billion Wall Street expected. Meta blamed internet shutdowns in Iran and WhatsApp being blocked in Russia. The war is now showing up directly in the user numbers.
๐ Meta said it expects to make between $58 billion and $61 billion next quarter. That came in just below what analysts were hoping for. Not a disaster. But not the number the stock needed after a 25% run into earnings.
The market has been patient with Zuckerberg's AI spending for two years. That patience is getting thinner every time the bill goes up.
The Munch Take: Meta made more money than almost any company in history and the stock went down because Zuckerberg keeps spending more. The one question everyone is asking right now is simple. When does all this AI spending actually start paying off? Either way, if you saw my wifeโs daily screen time, that alone would make you want to buy the stock.
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MARKET OVERVIEW
๐ฟ Tasty Movers & Shakers
๐ $F Ford ripped over 7% after posting Q1 earnings that came in 247% above what Wall Street expected. Not a typo. Two hundred and forty-seven percent. Someone at Ford is having a very good week.
๐ณ $V Visa popped 8.26% after crushing analyst estimates on the back of strong consumer spending. People say the consumer is tapped out. The consumer disagrees and keeps swiping anyway.
โ๏ธ $SBUX Starbucks climbed 8.45% after posting a second straight quarter of traffic growth and raising its full-year outlook. The turnaround under Brian Niccol is real. Overpriced coffee has never been more back.
๐ฎ $YUM Yum Brands gained 2.16% after beating earnings expectations. The hero of the quarter was Taco Bell, which posted strong same-store sales. I guess a lot of people needed a tasty laxative in Q1.
๐ธ $PSA Bill Ackman launched his $5 billion stock-picking fund on the NYSE yesterday. It dropped 18.34% on its first day. Billion-dollar debut. Brutal opening. Wall Street does not care who you are on day one.
๐ง $LULU Lululemon fell 2.97% after founder Chip Wilson sent a letter to shareholders urging them to back his board candidates. When the founder is publicly fighting the company he started, nothing good usually follows.
๐ฅ $BF.B Brown-Forman, the company behind Jack Daniels, dropped 10.31% after confirming that merger talks with Pernod Ricard have officially collapsed. The deal is dead. The whiskey is fine. The stock is not.
STOCK OF THE DAY
๐ Google Just Had The Best Quarter In Years. The Stock Ripped After Hours.
While $META was getting punished for spending too much, $GOOGL walked in and reminded everyone why it is one of the greatest businesses ever built.
Alphabet posted revenue of $109.9 billion, smashing the $107 billion Wall Street expected. Earnings per share came in at $5.11, nearly double the $2.63 forecast. The stock jumped 6% after hours immediately.
Here is what drove the monster quarter:
โ๏ธ Google Cloud revenue grew 63% from a year ago. For the first time ever, AI tools became the number one growth driver inside Google Cloud. The AI bet is paying off in real money now.
๐ Google Search held strong despite fears that AI chatbots would steal its users. People are still Googling everything. Advertisers are still paying for it. The core business is untouchable for now.
๐ฐ Net income came in at $62.57 billion, up 81% from last year. Alphabet also announced a $70 billion stock buyback program. The company is printing money and handing it back to shareholders.
The one number that raised eyebrows: capital spending jumped to $35.7 billion in the quarter alone, more than double what it spent a year ago. Google is spending enormous amounts on AI infrastructure. Unlike Meta tonight, the returns are already showing up.
The Munch Take: If you put your entire portfolio into $GOOGL last April and did absolutely nothing, you would be up 155% right now. Absolute insanity. I have no further comments.
๐ Pre-Market Fuel
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