The power of the AI trade...
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Accenture reported earnings this morning and cut its full-year revenue forecast. Its quarterly bookings fell 2% and the stock crashed 18%. Accenture is the largest IT services company in the world, so when it reports weak demand, every other company in the sector falls with it. Cognizant fell nearly -8%. Wipro fell nearly -8%. Capgemini fell -8.4% to its lowest price in a year. IBM fell -4%. EPAM dropped to near a 52-week low. Two things are driving the selloff. Companies are spending less on IT consulting as the economy slows, and the market now believes AI is starting to do the work these companies used to charge billions for. Both pressures hit the same business model at the same time. This is a direct problem for India. Indian IT has been one of the only sectors holding up the Nifty. TCS, Infosys, HCLTech, and Wipro have been carrying the index. These companies run on the same model as Accenture and earn most of their revenue from US and European clients. Accenture's results are treated as a preview of what is coming for TCS and Infosys. Their US-listed shares already fell 3 to 5% tonight. No surprise Indian markets are getting hit... Source: Bull Theory
The ARK Innovation ETF, $ARKK, recorded ~$7 billion in inflows in June, the largest in nearly a year, with the surge coinciding precisely with the day of the SpaceX IPO. Over the first 3 trading sessions following its IPO, retail investors purchased a net $369.8 million of SpaceX, $SPCX, according to Vanda Research. By comparison, retail investors purchased just $88.2 million of Nvidia, $NVDA, over the same time. SpaceX's 3-day retail purchases roughly matched the COMBINED total of Nvidia, Alphabet, Amazon, Microsoft, Meta, the S&P 500 ETF, $SPY, and the Nasdaq 100 ETF, $QQQ. The retail mania is unlike anything seen before. Source: Global Markets Investor, Bloomberg
Kevin Warsh chairs his first FOMC meeting today. The historical data goes back nearly a century across 12 Fed chairs. The average drawdown in the first three months of a new Fed chair is -12%. The worst was Alan Greenspan at -33%. The best was Ben Bernanke at -2%. Jerome Powell's first 90 days saw a -7% drawdown. Janet Yellen's saw -4%. Not one single new Fed chair has avoided a drawdown in their first three months. Warsh's 90-day clock starts today. Source: Bull Theory