Stock markets were down last week, but the Dow was down less than the S&P and the Nasdaq. That’s because we had another mini rotation out of growth (tech) and into value (not tech). As investors become more concerned that artificial intelligence is going to suck up all the oxygen in the room (i.e. money, water, electricity, land, and jobs), they have been buying less and even selling AI-company shares. AI hyperscalers, as they are known, include Alphabet (parent of Google), Meta (parent of Facebook), Microsoft, and Oracle. They are putting so much money into AI projects that it is hurting their free cash flows.
One big example of that is IBM, which suffered a one-day loss of 25% on Tuesday after it issued an earnings warning due to big companies deferring or cancelling their purchases of mainframe computers. Earlier this year we saw subscription-software firms fall as investors began to think that we would all be writing our own software in the future with AI. (I’m perfectly fine to check AI’s “facts” when I’m doing a search, but no way I’m going to use AI to write my own software to balance my checkbook – thank you Quicken. But, hey, that’s just me, and if I had a personal tech department I might feel very differently.)
In other stock news, SpaceX, which debuted at $135 per share, is now trading around $124. The company lost $4.9 billion last year and yet is trading at almost 97 times sales. It can’t trade on a multiple of earnings because it has no net earnings.
But at the same time, banks are doing really well. Some of that is probably due to the recent SpaceX IPO, since 23 major banks had a hand in the issuance of the stock. So, despite Americans’ worries about groceries and health care and war, etc., banks’ profits are surging. It’s almost always nice to be the middleman, especially with credit cards charging 23% in many cases. We used to have legislation that prohibited usury (the charging of excessive interest), but it was revoked by Congress. If you want to give your representatives a piece of your mind, check out the website 80trillionspeaks.com. All you have to do is enter your zip code and then you can compose a message to go to all of your elected reps.
And what about bonds, you ask. Well, yields are down slightly as prices moved an itty-bit higher, due to a Consumer Price Index report released last week that showed inflation had slowed to 3.5% in June, year-over-year. You may remember that gas prices fell in June while we were in a cease-fire with Iran. Those prices are now rising again, and we may see a very different CPI for July when we get it. Brent crude (the international oil standard) rose in price by about 16% last week to more than $90 per barrel.
The United Arab Emirates (UAE) has boosted its crude oil output by 80% since quitting OPEC on May 1st. That’s good news for everyone who uses oil and gas. And other mid-East countries are busy building pipelines so that they are not subject to the vicissitudes of shipping through the Strait of Hormuz.
Remember those tariffs that were invalidated in the courts? Companies are now receiving their tariff repayments, which they are going to refund to customers ASAP. Just kidding. Most companies say that they are going to use the tariff money to offset ongoing inflation. Hopefully that will lead to companies NOT raising prices in the near future. Stay tuned.
I’m guessing you were not the lucky person who discovered a nearly complete T- rex skeleton in his backyard. The almost 38-foot-long skeleton recently sold for more than $51.1 million. Wow. I just have rocks in my backyard. Some plants. Squirrels.
For the week ending on July 17th, the Standard & Poor’s 500 finished at 7,457, the Nasdaq Composite at 25,520, and the Dow Jones Industrials at 52,146. The yield on the ten-year Treasury Note closed at 4.541%. U.S.) WTI) crude cost $82.50 per barrel, N.Y. gold cost $4,023.20 per ounce, and one Euro was worth $1.14.
Elizabeth E. Cook
Partner, Diastole Wealth Management
News and information presented here were gathered from sources believed, but not guaranteed, to be reliable, including (but not limited to) Yahoo Finance, Barron’s, the Wall Street Journal, Bloomberg, USA Today, CNBC, Axios, Fortune, CNN, The Bureau of Labor Statistics, AP, ABC, NPR, Fast Company, and the New York Times. If you have questions, please call Diastole at 203.458.5220, or email me, Liz Cook, at ecook@dwinvest.com. Thank you for reading. Pop quiz: Could I possibly have used more parentheses in this Comment?
Somehow missed the invitation to Taylor Swift’s wedding in your SPAM folder? Not to worry. Artist Justin Gignac picked up the trash from the street outside the Madison Square Garden wedding venue, packed it into little plastic cubes, and is now selling it to the public. Or WAS selling it to the public. His issue of 50 cubes for $25 dollars each sold out in 24 hours. He is now producing 39 more cubes from the same event. I’m guessing that cleaning out all of the stretch limos might have resulted in a better quality of trash, but apparently that wasn’t an option.