🚀 Inflation hits 3.2% in March

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Market Overview
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Year To Date Performances:

1. Economic reports released Thursday morning paint a picture of a "split-screen" economy, characterized by sticky inflation and slowing growth. The Core PCE Price Index, the Federal Reserve’s preferred inflation gauge, climbed to 3.2% annually in March, its highest level since late 2023. Meanwhile, first-quarter GDP grew at a 2% annualized rate, an improvement over the previous quarter but below the 2.2% estimate, underscoring a cooling economy even as the labour market remains historically tight.

2. The market delivered a split verdict on Big Tech’s AI ambitions yesterday, as Alphabet shares climbed 5% while Meta plunged 10%. Despite both companies signaling a massive increase in capital expenditure (capex) to build out AI infrastructure, investors clearly favored Alphabet’s ability to monetize that spend through its cloud business, whereas Meta’s lack of an enterprise cloud platform raised concerns about the timeline for returns on investment. The scale of capital being deployed into data centers and specialized silicon has reached unprecedented levels, with the four largest players now forecasting a combined spend of nearly $735 billion for the year. Alphabet’s stock surge was fueled by a dominant performance in Google Cloud, which saw revenue jump 63% compared to last year. CEO Sundar Pichai noted that AI is "lighting up every part of the business," and unlike previous years where capex was viewed purely as a cost, it is now being seen as the raw material for a booming enterprise AI business. By revising its capex upward by roughly $5 billion, Alphabet is signalling confidence that it can convert that hardware into billable cloud services for third-party developers.

3. The U.S. Department of the Treasury has announced that Series I Savings Bonds will pay a composite interest rate of 4.26% from May 1 through October 31, 2026. This is a notable increase from the 4.03% yield offered during the previous six-month cycle. The adjustment comes as the Iran-Israel-U.S. conflict continues to drive up energy costs, pushing the Consumer Price Index higher and triggering the bond's inflation-linked component.

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