Here are five things you need to know this morning
Google, AMD results land with a thud: U.S. equities are under pressure this morning after numbers from search giant Google and chip maker AMD both showed higher revenue but troubling outlooks after the bell on Tuesday. Google parent Alphabet raked in just over US$81 billion in the quarter, but revealed growth in its cloud business is slowing. That’s a clear sign the artificial intelligence (AI) boom may be running out of gas. That theme was reinforced at AMD where the company lowered its outlook for its data server business, a red flag that its push into AI has also lost momentum. Shares in both companies were down sharply premarket and dragging the tech-laden Nasdaq down with them. Given how big a sway tech stocks have in the market — 40 per cent of the S&P 500 for the Magnificent Sevel alone – expect that to be a recurring theme. “I’m a little concerned about the AI hype,” said Ryan Lewenza, portfolio manager at Turner Investments, Raymond James, on BNN Bloomberg’s The Street this morning. “AI didn’t deliver on the earnings and revenues and that could create issues down the road,” he said. “This is going to be a bumpy ride this year so strap in.”
How can Canada stimulate investment? Poloz weighs in: The uncertain outlook for Canada’s economy makes it more important than ever for policy makers to figure out a way to incentivize business investment in Canada, instead of all that capital flowing to the U.S. by default. That’s according to Stephen Poloz, who in an interview with BNN Bloomberg this morning, said this looming trade war comes at a time when the Canadian economy is not in a position of strength. Record high immigration inflows masked an economy that was in a “pretty weak spot for pretty well two years now,” the former Bank of Canada head and current special advisor to Osler said. Faced with uncertainty, businesses are going to do what they often do and put investment plans on the shelf. The challenge for policymakers is to get businesses to spend and invest in Canada instead of the U.S., where Trump is incentivizing them. “Where does the next dollar go? Go south, that’s our problem,” he said. While the government has floated stimulus spending to help consumers and businesses impacted by U.S. tariffs, Poloz says that won’t fix the underlying problem. “If you give somebody a fish because they’re in tough spot tomorrow you need to give them another one,” he said. “But if you give them a fishing rod, tomorrow they’re taken care of.” Poloz said the challenge for policy makers is to make Canadian companies “feel more confident and be more inclined to keep their money in Canada. Do we have that business-friendly environment we aspire to? “No,” he said.
Speaking of things rushing toward the border: The pace of change in the barely two-week-old Trump administration is making investors’ heads spin, so imagine what it’s doing for businesses trying to plan ahead. Bloomberg reports this morning that the tariff threat is causing chaos for U.S. manufacturers, who now find themselves rushing to ship things ahead of March 1. A North Carolina based maker of concrete equipment spent the weekend rushing to get its US$350,000 machines on to trucks and headed to Canada ahead of Tuesday’s tariff deadline. “Our dealer in Ontario… asked me to ship them as quickly as we could to try to beat the tariffs,” said Stephen Bullock, president of Salisbury-based Power Curbers. “It’s a race to the border.”
All that glitters: We’ll be keeping an eye on gold today, as bullion has hit an all time high for five days in a row and is currently changing hands on the spot market at a record US$2,877 an ounce. Given the volatility, it’s not hard to understand the rationale for the ongoing gold rush, but it is somewhat surprising to see it pick up the pace and take aim at the $3,000 level. It’s not just the futures contract that’s moving up either, as there is a run on physical bullion. Bloomberg reports this morning that lease rates for gold in storage in London have risen to 4.7 per cent. That implies holders of gold bars are making money by lending out their metal to other buyers on a short-term basis. The lineup to withdraw bullion from the Bank of England is now several weeks. “One thing that central banks won’t tolerate is a disorderly gold market,” said Rhona O’Connell, head of market analysis at StoneX Group.
Disney earnings beat: We will be watching shares in Disney today as the media giant posted quarterly results before the bell today, numbers that showed profit and revenues blow past expectations. Adjusted EPS came in at US$1.76, up from $1.22 last year and $1.42 expectations. Revenue totaled $24.69 billion, up by almost five per cent from last year and slightly better than the $24.57 billion analysts were looking for. The shares were up more than four per cent premarket.
