💰 5 Fact Friday: Is The Worst Over For Stocks?

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Hey Money Maniacs,

Welcome back! Let’s get into this week’s biggest stories in the world of money.

Today’s issue covers:

1. April Breaks the Green Streak 📉

2. PCE Heats Up, Fed Stays Put ✋

3. Boeing Issues $10B of Debt 💵

4. Savings Rates Dry Up 👀

5. Big Tech Earnings Rundown: Part 2 💸

1. April Breaks the Green Streak 📉 

Talk about a chilly spring! April left investors shivering, marking the worst month for stocks since the not-so-sweet memories of September 2022. 🥶

• The DJIA plummeted 5%, snapping a five-month winning streak.

• The S&P 500 and Nasdaq weren’t far behind, dropping 4.2% and 4.4% respectively.

• Bitcoin lost its footing too (-13%), with a red finish for the first time in seven months.

• The only comfort could be found in gold and utilities—the one sector that ended April in the green.

• Bond yields? They moved up, continuing to lure investors away from the volatility in stocks and crypto. 🏃‍♂️💨

Why all the negativity?

The markets came into the month far too optimistic. And if Billy McFarland taught us anything, it's that high expectations often end up being all smoke and no Fyre.

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2. PCE Heats Up, Fed Stays Put ✋

Just what we needed, another kick in the shin.

The Personal Consumption Expenditures (PCE) price index ticked up to 2.7% annually. This reading surpassed both February's 2.5% reading and economists' forecasts of 2.6%. On the monthly measure, headline PCE prices rose by 0.3%.

Core PCE, which strips out the volatile food and energy sectors, held firm at 2.8%—right on target with prior estimates but still above the Federal Reserve's comfort zone of 2%.

As a result, the Fed's decision to hold rates steady at Wednesday's meeting came as no surprise.

As a reminder, the latest "dot plot" grid reveals that FOMC members still overwhelmingly anticipate a rate cut sometime this year. In fact, none forecast further rate hikes.

However, Chair Jerome Powell did note that "gaining the confidence that inflation is heading to our 2% target is taking longer than expected."

So, in summary, April taught us:

• Inflation is still hot

• GDP is slowing

• Geopolitics remain tense

• The Fed is playing it patient with rate cuts

That’s a tough mix. Expect the markets to remain choppy until at least one of these factors stabilizes.

3. Boeing Issues $10B of Debt 💵

Ever since the door flew off an Alaska Airlines flight, the jokes have been relentless:

• "If it's Boeing, I'm not going"

• "When one door closes, another door opens—Boeing"

But Boeing's operational challenges are no laughing matter.

This week, despite the turbulence, Boeing finalized a $10 billion bond offering. The move is strategic (and necessary) but carries risks that are worth understanding as a savvy investor.

Here’s the deal: U.S. government bonds are virtually risk-free. Why? Because the debt is denominated in U.S. dollars, which they alone have the freedom to print.

Corporations don’t have the same luxury.

As a result, corporate bonds like Boeing’s carry a real risk of default. To incentivize investors to take this extra risk, they offer higher returns.

How much higher? That depends on their credit rating.

Credit rating agencies like Moody’s, S&P, and Fitch play a crucial role for investors here. They help gauge the risk level of investing in a corporation's bonds. (Much like Equifax, Experian, and TransUnion do for mortgage lenders.)

After this issuance and a downgrade by Moody’s, Boeing now sits just above "junk" (speculative) status. Any further financial setbacks could plunge them into a position where it’s much more challenging and expensive to issue debt.

Yet, investors applauded the deal, sending the stock up 7% since the announcement.

The interest payments will eat into future profits, reducing returns in the short term. However, shareholders prefer this strategy over the alternative—issuing more equity.

This cash injection gives Boeing the runway to address operational and financial issues, but only until Q1 2026.

What do you think?

4. Savings Rates Dry Up 👀

If your piggy bank is feeling a bit lighter lately, you're not alone.

According to Bureau of Economic Analysis data, spending growth continues to outpace personal income growth. In other words, Americans are still on a revenge tour after the pandemic.

Due to this dynamic, the personal savings rate fell to 3.2% in March, notching its lowest level since October 2022.

Keep in mind that in the U.S., consumer spending drives nearly 70% of GDP. And less in savings accounts means less money for splurging.

With wallets (potentially) tightening, corporations and, by extension, your stock portfolio could be in for some headwinds. Companies like McDonalds, Coca-Cola, Amazon, and Starbucks are already warning of a cash-strapped consumer.

Perhaps that’s why consumer confidence dropped for the third straight month too. According to the Conference Board survey, folks are concerned about "future business conditions, labor market conditions, and income expectations."

So, what's the move? To start, cozy up to that budget spreadsheet, trim the fat, and aim to save at least 10% of your income. If this “soft landing” gets bumpy, you'll be glad to have a financial safety net in place.

5. Big Tech Earnings Rundown: Part 2 💸

Let’s continue our journey through Big Tech's earnings season. Today, we're diving into the latest from Apple, Amazon, and more.

Apple's Buyback Bonanza

Apple's iPhone sales, which make up half of its revenue, dropped 10% in the quarter. Overall revenue slipped 4%. But don’t cry for Cupertino yet—their high-margin services business continued to expand, cushioning the blow from the hardware slowdown.

The big reveal was the company’s $110 billion share buyback plan—the biggest in U.S. history.

Optimists view this as a tax-efficient way to return cash to shareholders. (Buybacks are taxed at a capital gains rate, whereas dividends are often subject to ordinary income tax.)

Pessimists see this as a signal that the company is short on innovative ideas to invest in.

So far, the bulls are in charge. The stock ripped in after hours and should open materially higher this morning.

Amazon's Ad Strength

Amazon delivered a strong performance with earnings of $0.98 per share, smashing expectations by 18%. Sales nudged up to $143.3 billion, just edging past the $142.5 billion forecast.

The real star of the show? Amazon's ad business, which ballooned by 24% thanks to new ads in Prime Video.

But it’s not all roses. AWS's 17% growth looked modest compared to the cloud boom at Microsoft and Alphabet. Plus, the Street was hoping for another dividend initiation.

But it seems Bezos’s crew is playing it cool. Who knows? Maybe they’re saving up for something special (cough TikTok cough).

Super Micro's Mixed Bag

Super Micro Computer, the new kid on the S&P 500 block, stumbled with a 10% drop after tripling sales but still missing high expectations. Supply chain snags are biting hard, proving that soaring 700% in a year sets a sky-high bar.

AMD's AI Ambitions

AMD met expectations but didn’t dazzle, especially when compared to market leader Nvidia. Investors were hoping for a rosier outlook on AI chip demand, eyeing more aggressive moves into this rapidly expanding sector.

Looking outside of the tech world, Berkshire Hathaway is set to drop earnings at 8 a.m. Eastern on Saturday morning.

In classic Buffett fashion, the company will report outside of market hours to avoid undue stock volatility. This is also why Berkshire doesn’t do stock splits and the share price of BRK.A is currently over $600,000.

That’s all for today! For more insights, follow me on Instagram, Twitter, and at TheMoneyManiac.com.

Also, I’d love to hear your feedback. So please reply with comments – I read everything.

Until next time,
Daniel

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.