Macro Versus Micro
A battle is playing out between earnings excitement and macro pressure. Stocks are pulling back after strong gains on Tuesday. The cause is the macro side: the 11th straight day of US strikes on Iran, plus Secretary of State Marco Rubio saying Iran is not serious about talks. Crude oil, which was below $70, now sits above $87 a barrel, and traded as high as $88. That is halting the rally.
Big geopolitical headlines and 11 nights of strikes do not always show up in overall market performance. There are likely negotiations going on behind the scenes, but based on Rubio's comments, they are not going well.
Other macro pressures pile on. The 10-year Treasury yield is problematic above 4.6%, currently 4.646%, getting close to 4.65% and high for overall interest rates. The dollar is back above 100, elevated but still below 101; it is not helping stocks but is not a major problem. Crude oil, yields, and the dollar together weigh on the market, set against excitement about second-quarter earnings.
The Earnings After the Bell
Peak earnings begin after the close, with Alphabet and Tesla, plus IBM, Texas Instruments, ServiceNow, and Southwest.
For Alphabet, a massive company touching nearly every key US business area, the things to watch are: search revenue and whether growth is 17% or higher; cloud growth, which has been enormous, and whether Google Cloud can keep the pace; YouTube ad revenue, key because ads are how Google makes money; an update on Gemini, which has dropped off lately and needs to show how it is competing; and backlogs across the business. The number that will either fuel the market higher or cause problems is CapEx. The trading community is bracing for these CapEx figures. Alphabet will report them, and so will Tesla.
For Tesla, we already know deliveries came in at 480,100 cars, and energy storage was better than expected. The stock is more than a hundred dollars off its highs. What is needed are updates on the businesses fueling its future: full self-driving, robotics, and robo-taxi.
The CapEx Theme
Chip names TSMC, ASML, and others reported strong headline figures and guidance, with growth accelerating at TSMC, but that was not enough to offset raised CapEx concerns. Those concerns have been the hyperscalers' headache for most of the year.
CapEx has been the theme for the last two quarters and is why the hyperscalers and Mag 7 names are down off their recent highs. The question is what these companies can do about it. They can talk about more responsible CapEx spending, ease the pickup in spending, or show numbers proving the spending will pay off. If they cannot change the narrative, the market will keep reacting and overreacting to CapEx figures. CapEx forecasts will be one focal point of earnings, alongside headline revenue and bottom-line numbers.
Super Micro
Super Micro gave a mixed preliminary fourth-quarter update: softer sales, stronger margins, and a decent backlog. The stock has pulled back almost 13% this year, after once being the original AI volatility play. The AI server maker reported a record order backlog exceeding $60 billion, which energized the stock and had it up big. It also raised its gross margin guidance to 15% to 17%. The company has had past issues with daily business execution, and it remains a very volatile trader, but the backlog news has traders more excited.
AMD and Anthropic
AMD is signaling a major AI server deal with Anthropic tied to its next-generation MI450 chips. Per a Wall Street Journal report, AMD signed an investment deal with Anthropic for AI servers, investing up to $5 billion in Anthropic. The agreement includes tens of billions of dollars worth of AI servers. Under the terms, Anthropic will buy up to 2 gigawatts of AMD's latest-generation MI450 chips, starting in the first half of 2027.
The deal changes the conversation around AMD's ability to compete more directly in AI against its closely linked rival Nvidia, a hard task given the difficulty of carving out market share. AMD has had a nice year so far, but it is down pre-market, possibly moving with the overall market rather than on the news. AI deals are arriving daily; earlier this week there was news on AMD and Microsoft.
AT&T
Away from tech, AT&T rose on strong subscriber growth, better free cash flow, and a step up in its buyback program. Earnings per share came in at 65 cents, beating the 59-cent estimate. Revenue fell slightly short of street forecasts by $240 million. The company recorded about 432,000 postpaid phone additions in wireless and broadband. Planned share repurchases are approximately $10 billion for 2026, a good number, and it reiterated all full-year guidance. Solid numbers overall, if not exciting.
The telecom and broader communications space has held up well but delivered unexciting moves this year. AT&T has pulled back about 10.4%.
