Indices on Wall Street mounted a charge to new all-time highs after the US Federal Reserve unveiled a bumper 50 basis point cut to interest rates on Wednesday (18 September).
After an initially mixed response, US investors reacted enthusiasm as they were reassured this wasn't a panicked move on the part of the Fed, which was cutting rates for the first time in this cycle.
In corporate news, Nike (NKE:NYSE) parted ways with CEO John Donahoe, as former senior executive Elliott Hill came out of retirement to replace him, while payments outfit PayPal (PYPL:NASDAQ) made progress as it agreed a checkout partnership with Amazon (AMZN:NASDAQ) on the latter's Prime shopping platform.
Heading in the opposite direction was tobacco firm Philip Morris (PMI:NYSE), which shockingly sold UK inhaler firm Vectura for $198 million just three years after acquiring it for $1.45 billion amid a backlash over its ownership of a health-related business.
MICROSOFT/BLACKROCK
You could hardly get a stronger endorsement than one from Microsoft (MSFT:NASDAQ) and BlackRock (BLK:NYSE), the world’s largest fund manager.
As AI (artificial intelligence) and cloud computing boom, the need for fit-for-purpose datacentres has never been greater, and demand will only go up. It’s an issue that Microsoft and BlackRock believe they can together find solutions, launching a joint fund, catchily named the ‘Global AI Infrastructure Investment Partnership’ which seeks to pull in $30 billion in private equity capital.
That could be just the start, coupled with debt financing, the total funding might hit $100 billion, an enormous stash of fresh cash to design and build next-generation datacentres, while also funding various energy projects in the US to meet the soaring power requirements.
Recent research showed the datacentre power needs of Microsoft, Alphabet (GOOG:NASDAQ) and Meta Platforms (META:NASDAQ) combined was larger than entire nations, like Nigeria and Ireland.
Middle Eastern funding partners are anticipated while chip champ Nvidia (NVDA:NASDAQ) will bring its expertise to the party. Something very significant could be happening here.
GENERAL MILLS
General Mills (GIS:NYSE) shares gapped down after the cereals and snacks maker served up (18 September) a year-on-year drop in first quarter sales and profits as higher costs and lower prices ate into margins.
The company behind Cheerios and Lucky Charms, as well as the Blue Buffalo pet food, also issued soggy guidance, although the shares finished the week 1.5% to the good at $74.4 after the Fed rate cut boosted markets.
Total revenue softened 1% to $4.8 billion in Q1, slightly better than expected, although net income of $579.9 million came in shy of Wall Street estimates.
General Mills maintained its muted full year 2025 outlook for organic sales to range between up 1% and flat, and adjusted EPS (earnings per share) within a range of up or down by 1%, but the food multinational also cautioned that consumers across core markets face an ‘uncertain macroeconomic backdrop’.
This outlook excludes the impact of the proposed sale of its North American yoghurt business to French dairy conglomerates Lactalis and Sodiaal for a combined $2.1 billion.
FEDEX
US markets may be hitting all-time highs but economic bellwether FedEx (FDX:NYSE) does not seem to share the optimism. After missing Wall Street expectations and cutting full year guidance, the logistics firm plunged over the past week (19 Sep), the shares down by as much as 13%.
Rival United Parcel Service (UPS:NYSE) was dragged down by the news with its shares sinking 2.4%.
First quarter numbers were ugly, adjusted EPS of $3.60 was well shy of consensus estimates of $4.77, while revenue of $21.6 billion also fell short of the $21.9 Wall Street was expecting. Things don’t look like getting better any time soon either, with FedEx cutting fiscal 2025 EPS guidance by a dollar at the top-end of the range to between $20 and $21.
The Memphis-based operator blamed the earnings miss on customers continuing to trade down to cheaper delivery options, which may suggest that more streamlined operators are eating its lunch.
CEO Raj Subramaniam said industrial demand was softer than expected and referenced the Fed’s 50 basis points cut in interest rates as a clear sign of the ‘weakness of the current environment’.
