US EQUITY OPEN: Tech lags on reports that Meta plans to build cloud business to sell excess AI compute

OPEN: Stocks open in the red as tech names underperform following reports that Meta (META +7.4%) is building a cloud business to sell excess AI compute. The move has weighed on peers over competition concerns (AMZN -0.4%, ORCL -0.7%); meanwhile, memory names also see pressure as excess compute may mean the market is less tight than previously thought. Sectors are more mixed, with Communications, Financials, and Real Estate gaining, while Tech, Industrials, and Staples lag. Consumer Discretionary sees slight gains despite Nike (NKE +2.6%) initially dropping 10% in response to demand pressure and ongoing weakness in Greater China.

In FX, attention has been on Sintra, in which we've seen remarks from Fed Chair Warsh, ECB President Lagarde, BoE Governor Bailey, and BoC Governor Macklem. The dollar has given back some strength in recent trade. Warsh has continued to stress that prices are too high, the Fed wants to deliver price stability, but stopped short of giving forward guidance. He did acknowledge how expectations of inflation over the first four weeks have come down. GBP was hit on Bailey noting that the soft UK economy was the reason to hold rates. 

US 2yr yields are tracking the move lower in oil prices; meanwhile, the belly and long-end yields have unwound a large portion of earlier upside. Oil prices are modestly lower as markets await talks today in Doha, with no escalation occurring as of yet. Very modest downticks were seen in response to Reuters reports that OPEC+ is likely to raise oil output quotas for August by 188k BPD at the Sunday meeting. Precious metals are rallying with spot gold +USD 85/oz at 4,091 as the Dollar declines.

This morning, US data included ADP missing expectations at 98k (exp. 118k), Revelio printing 258.5k (prev. 123k), Challenger job cuts easing to 45.85k (prev. 97k), S&P Global Mfg PMI being easing to the 53.9 (exp. 55.7), and ISM Mfg PMI dropping to 53.3 (exp. 55.8) with the prices component dropping to 73.0 (exp. 77.7, prev. 82.1); little reaction was seen on the data.

STOCK SPECIFICS

• Meta (META) is planning a cloud infrastructure business to sell excess to AI compute and models, creating direct competition with AWS, Microsoft Azure and Google Cloud, Bloomberg reports, citing sources.
• Nike (NKE): Cautious demand comms., pressure on consumers, guidance & ongoing weakness in China outweighed stronger-than-expected. results.
• Shutterstock (SSTK): Getty Images (GETY) said it would terminate its planned merger following a UK CMA ruling.
• Constellation Brands (STZ): Solid results, resilient beer sales, reaffirmed profit guidance outweighed a rev. declined linked to wine & spirits divestitures.
• Caterpillar (CAT): Investor Michael Burry said he is shorting CAT for the first time.
• Bloom Energy (BE): Co. & Brookfield expanded their AI infrastructure power partnership to $25bln from $5bln.
• Microsoft (MSFT): Plans to announce fresh job cuts & exp. to be less than 2.5% of its workforce.
• General Mills (GIS): EPS & rev. topped.
• Kroger (KR): Announces agreement to acquire Giant Eagle w/ deal valued at $1.65bln.
• Salesforce (CRM): Upgraded at Guggenheim to 'Buy' from 'Neutral'.