Finimize - 🤩 Big Tech is unstoppable

What’s going on here?

Big Tech reported earnings that suggest the rip-roaring stocks are more than capable of holding stateside markets up for a while longer.

What does this mean?

Philosophers, poets, and daydreamers have long believed in the theory, "The candle that burns twice as bright, burns half as long". Well, US tech stocks seem determined to prove them wrong. Amazon made more revenue than expected last quarter from a record-breaking holiday shopping season, and its advertising and cloud businesses topped off the results nicely. Microsoft’s cloud division picked up its pace too, while Alphabet’s made its first-ever annual profit. Meta fared even better, boasting advertising revenue that grew at double the rate of Alphabet’s and announcing its first dividend. Relentless demand for AI chips meant Nvidia breezed past expectations as well, and while Apple reported falling sales in China, its services segment – think the App Store and Apple Music – made up for that with record-breaking revenue.

Why should I care?

Zooming in: The only way is up.

Add Tesla to those six Big Tech stocks, and you have the coveted "Magnificent Seven". They lived up to their braggadocious moniker last year, increasing sales by 15% from the year before, profit margins by 5 percentage points, and earnings by 58%. The rest of the S&P 500 index, meanwhile, only managed 3% for sales, barely a move for margins, and a 2% drop in earnings – hardly worthy of a statement of grandeur before its name.

For markets: The Magnificent Six.

The Magnificent Seven are outnumbered seven-to-493 in the S&P 500. Yet, with the tech stocks’ sheer size meaning they make up nearly 30% of the index’s weight, they were responsible for almost two-thirds of the S&P 500’s increase last year. And with all of them, bar Tesla, wrangling expectation-beating results for the quarter behind us, the tech-driven rally shows no sign of slowing down.

What’s going on here?

House prices around the world started to warm up a little, potentially putting a stop to the worst property downturn in a decade.

What does this mean?

Homes across 37 high-income, developed economies were an average of 2.1% more expensive in the third quarter of last year than the one before. (These numbers come through with a lag.) The emphasis is on average, though. British, Canadian, and Australian prices were on the up, spurred on by the combination of strict building regulations and a ton of folk moving into the countries. Plus, houses in the US picked up by more than 5% from January to November last year. But in countries where renting is most common, like Germany, Denmark, and Sweden, prices are expected to stay on the slide. That said, only a third of the 37 countries are in that position, a major improvement from the half reported earlier in the year.

Why should I care?

Zooming out: Property markets can make or break an economy.

House prices not only influence the spending habits of homeowners, but they put banks at risk of losing money if increasingly hard-up borrowers fall behind on their loans. So far, the limited number of houses on the market has been forcing buyers to bid against each other, stopping prices from slipping out of grasp. But if central banks do start cutting rates later this year, more hopeful homeowners could take out mortgages and offer the market a more sustainable rescue plan.

The bigger picture: China’s been locked out.

China’s property market is looking more fragile than ever. Moody’s stripped eleven Chinese property developers of their credit rating altogether on Friday, after the companies defaulted on their existing debts. They’re essentially now blocked from borrowing money from international markets, which will make it a lot harder for them to stay afloat – and even harder to please increasingly irritated investors.