The S&P 500 touched the 7,000 milestone yesterday morning before retreating to close flat, a fitting metaphor for a market digesting massive earnings divergence and a Fed that offered little new information. Meta crushed expectations and announced $115 billion to $135 billion in AI capex, sending shares up 8% after hours. Microsoft beat but fell 6% on slowing Azure growth. Tesla topped estimates and laid out aggressive timelines for Optimus and robotaxis. The Fed held rates as expected with two dissents, and Chair Powell offered institutional minimalism on political questions. Today brings Apple's quarter, gold above $5,500, and the market's next attempt at 7,000.

S&P 500 ($SPY ( ▲ 0.5% )) futures up 0.1%, Nasdaq ($QQQ ( ▲ 0.75% )) futures gaining 0.2%, and Dow ($DIA ( ▲ 0.23% )) futures adding 27 points as markets digest last night's earnings deluge.

Gold surpassed $5,500 in overnight trading, up nearly 3%, as the dollar continues sliding. The yellow metal's surge reflects the ongoing debasement trade as investors seek protection from purchasing power erosion.

Meta ($META ( ▲ 0.62% )) up 8% premarket after crushing estimates and issuing Q1 guidance $4 billion above consensus. Microsoft ($MSFT ( ▲ 0.69% )) down 6% on Azure deceleration and soft margin guidance. Tesla up 3% on earnings beat and Optimus production timeline clarity.

Meta delivered exactly what I called for yesterday. Q4 EPS of $8.88 beat the $8.23 estimate by 8%, revenue of $59.9 billion topped expectations with 24% year-over-year growth, and Q1 guidance of $53.5 billion to $56.5 billion crushed the $51.41 billion consensus by $4 billion at the midpoint.

The headline is the capex commitment: $115 billion to $135 billion in 2026, up from $72 billion in 2025, a 60%+ increase. Meta is building gigawatt scale data centers across the U.S., including a rural Louisiana facility Trump said would cost $50 billion, large enough to cover a significant part of Manhattan.

While shareholders have often balked at massive spending sprees, Meta has shown more than once that as long as the core business is performing, investors are encouraged by increased AI spending. The ad platform remains the cash engine funding these AI bets, with automation and personalization driving growth.

Zuckerberg said 2026 will be a major year for AI, with investments geared toward building "personal super intelligence." CFO Susan Li noted the company continues to be "capacity constrained," needing more computing power for both the ad business and advanced model development.

Reality Labs is cutting roughly 10% of staff, about 1,500 employees, as Meta redirects resources from metaverse products to wearables. The unit has accumulated over $70 billion in losses since 2021. This pragmatism around resource allocation is exactly what I predicted yesterday morning.

Microsoft beat Q2 estimates with adjusted EPS of $4.14 versus $3.97 expected and revenue of $81.27 billion versus $80.27 billion forecast. Cloud revenue topped $50 billion for the first time. But shares fell 6% as Azure growth decelerated to 39% from 40% in Q1.

The $9.97 billion in other income came from OpenAI's restructuring where its for profit arm became a public benefit corporation. That's a one time windfall from restructuring, not operational strength. Remaining Performance Obligations hit $625 billion, with 45% from OpenAI's $250 billion commitment, creating concentration risk.

Microsoft continues facing AI capacity constraints with customer demand outpacing supply, which artificially caps revenue. That's why capex surged to $37.5 billion in Q2 from $22.6 billion in Q1. The AI business is big, but infrastructure spending is bigger, and investors are worried about the payoff timeline.

CEO Satya Nadella said they're "only at the beginning phases of AI diffusion," but the market wanted faster Azure acceleration to justify the spending explosion.

Tesla posted adjusted EPS of $0.50 versus $0.45 expected with gross margin of 20.1% beating the 17.1% forecast by 4 percentage points. But the Tesla story is far more about hopes and dreams than money.

This was the company's first annual revenue decline ever, down 3% to $94.8 billion, with deliveries falling 8% for the second straight year. Auto segment revenue dropped 11% year-over-year in Q4. The core EV business is struggling amid fierce competition and brand damage from Musk's political activities.

But investors got what they wanted: timelines. Optimus V3 unveils this quarter with production starting before year end and planned capacity of 1 million robots annually. Robotaxi rollout is headed to Dallas, Houston, Phoenix, Miami, Orlando, Tampa, and Las Vegas in H1 2026. Cybercab production starts H1 2026 alongside Tesla Semi.

Tesla also announced a $2 billion investment in xAI, Musk's AI venture. The company is betting its future on robotaxis and Optimus robots, neither generating meaningful revenue yet. Execution risk is massive, but that's always been the Tesla trade.

The Fed held rates at 3.5% to 3.75% as expected, with two governors dissenting in favor of a quarter point cut. The policy statement upgraded the economic assessment to "solid," citing robust GDP and a stabilizing labor market.

Chair Powell noted that risks to both the labor market and inflation seem to have declined. So while both sides of the mandate may still somewhat be in tension, the pressure on both sides has abated. He said tariff impact will plateau by midyear and a rate hike "isn't anybody's base case."

On political matters, Powell chose restraint. Asked about appearing at the Lisa Cook Supreme Court hearing, he called it "perhaps the most important legal case in the Fed's 113 year history" and noted it was "precedented" given former Chair Volcker attended a similar case in the 1980s.

"We haven't lost it," Powell said of Fed independence. "I don't believe we will."

His lack of engagement on political matters is surely deliberate, reflecting institutional minimalism: say as little as possible on politics and deny reporters the chance to generate headlines.

From a market perspective, this reinforces the base case. The Fed is not tightening. It is not rushing to ease. Policy is on hold while the economy grows, employment stabilizes, and inflation cools gradually. That is not a bearish outcome. It is a backdrop that favors earnings, selectivity, and patience.

Apple becomes the fourth Magnificent Seven member to report, with CEO Tim Cook having previously said the company expected its first quarter to be "the best ever for the company and the best ever for the iPhone."

Street consensus calls for EPS of $2.68 on revenue of $138.4 billion, up from $2.40 and $124.3 billion a year ago. iPhone revenue is expected at $78.3 billion, up 13% year-over-year. Services revenue should exceed $30 billion with roughly 14% growth. China is expected to rebound nearly 18% after a weak 2025.

A key watch is the AI strategy. Apple confirmed it will use Google's Gemini models and cloud infrastructure to support its roadmap, including an upgraded, more personalized Siri later this year. Two Siri updates are planned, one delivering WWDC 2024 features and a second introducing a chatbot style interface competing with ChatGPT.

The bigger debate is less about Q1 delivery and more about margins as AI driven component inflation builds. The global memory shortage from data center buildouts is driving DRAM and NAND prices sharply higher. Morgan Stanley estimates Apple may ultimately raise iPhone prices by around $100 on the iPhone 18 lineup to offset sustained cost inflation.

Gold surpassing $5,500 continues the debasement trade that's defined 2026. The metal is up over 20% year to date after surging 65% in 2025. The combination of a sliding dollar, geopolitical uncertainty, and concerns about government debt trajectories continues driving safe haven demand.

Dollar weakness loosens financial conditions without Fed action, boosting exporters, inflating overseas earnings, and driving capital into gold. As long as Washington appears comfortable with dollar decline, this dynamic supports both precious metals and multinational earnings.

Beyond Apple, today brings Visa, Mastercard, Caterpillar, SAP, Blackstone, Honeywell, Lockheed Martin, Comcast, Sherwin-Williams, Deutsche Bank, and Royal Caribbean. These reports will provide reads on consumer spending, industrial demand, defense, and travel, rounding out the picture of economic health beyond tech.

Visa and Mastercard offer the clearest window into consumer behavior. Caterpillar provides industrial and construction demand signals. Lockheed Martin speaks to defense spending trajectories. The breadth of this calendar helps contextualize whether the economy is as solid as the Fed's statement suggested.

Last night's earnings crystallized the divergence within Big Tech. Meta proved that massive AI spending gets rewarded when the core business performs, with 24% revenue growth providing cover for $115 billion to $135 billion in capex. Microsoft showed that Azure deceleration raises questions about whether spending translates to returns. Tesla demonstrated that timelines and vision can overshadow fundamental deterioration in the core business.

The Fed statement was largely as expected, and markets tend to move on surprises. I'm looking to earnings and economic data to drive the next leg higher, but expect midterm election volatility in 2026 as I've written about throughout the year.

The S&P 500's touch of 7,000 yesterday shows the milestone is within reach. But reaching it sustainably requires continued earnings delivery, and Apple tonight will be the next major test. The quarter is expected to be strong on iPhone and Services with a China rebound. The bigger question is how credible and competitive Apple's evolving AI strategy looks into 2026 and beyond.

As always, feel free to reach out with questions about positioning.

Dan Sheehan

[email protected]

This newsletter is for informational purposes only and should not be considered as investment advice. Please consult with your financial advisor about your specific situation.