Market mayhem? Powell's last stand, Big Tech earnings in focus

A massive week on Wall Street has traders at the edge of their seats. Jerome Powell takes center stage at what will likely be his last post-policy decision press conference as Fed Chair. If that wasn't enough, earnings from Big Tech names like Apple, Alphabet, Microsoft, and Amazon are out. Trader Talk Host Kenny Polcari looks to make sense of it all with Interactive Brokers Chief Strategist Steve Sosnick and Yahoo Finance Executive Editor Brian Sozzi.

Welcome back. It's me, Kenny Pulcari, and this is Trader Talk at Yahoo Finance. And today, we're gonna be talking to Steve Sosnik, who's the chief market strategist at Interactive Brokers, along with Brian Sozi, who's the executive editor here at Yahoo Finance. And it's gonna be an exciting discussion because it is big tech week. There's a lot happening this week. We've got, we've got 5 of the major companies reporting this week. On Wednesday night, we've got Meta, Amazon, Microsoft, andAnd, uh, Google and on on Thursday we've got Apple. And so let's get right to it. Steve, first of all, thank you for joining us. It's a pleasure. And Brian, this, there's a shift for us. It's usually me in that seat and you in this seat.

I'm only here toask you why or how $8 gas will impact net earnings. Penny, come on, baby, getout of me.

Let's

go.

Let's go. All right, so Steve, let's start first about, about just kind of your overall view of what this week is gonna bring and what people should be thinking about.

Well, there's a lot to unpack, Ken. I mean, first of all, Wednesday is like the mother of all market days, right? I mean, it, it, it's in theory, it's volatility personified. In reality, stuff doesn't always work out that way. And let me explain why. First, we have the Fed meeting at 2, you know, 2 o'clock, we get the announcement, then 2, then 2:30 is, is Powell's

press, which is interesting because this is Powell's seemingly so, his last, his last, uh.FOMC meeting.

Yeah, because, uh, over the weekend we learned that Tom Senator Tillis is going to, um, support Kevin Warsh. Um, personally, if it were me, he, it didn't really meet the, the, the announcement from Jeanine Pirro did not meet his criteria because it says, oh, by the way, we reserve the right to reopen this. And wasn't the other criteria supposed to be an end to the Lisa Cook investigation, which they've been silent about. But I'm not gonna, I'm not gonna throw a senator under.The bus. It's not my job. Do it. Do it, Steve. I just, I just kind of, we're over that. I just kind of over it. It's behind us. I, if, although if I were Powell, I would not leave the board of governors until this is well and truly done because that little, that one, that one line at the end of Piero's statement would freak me out as, and he's a, uh, he's a lawyer. He doesn't need my legal advice. That would be mine to him.

Ithink that's just Janine probably.Protect yourself. I don't know. I don't think they, I, I think it's

done. Well, he's, in any event, I think he is done as, as, as, as chair, and that's, so this, this will be his last hurrah. They're not, I, I think, you know, there's no expectation that they're gonna change policy, and he's, and, and to a certain extent, what can he say? It's gonna be more of like a val valedictory address.

Well, so let me ask a question before we move on to tech. To that exact point. Is what he is going to say important or not? Because this is it. Right now, it's gonna be the war era. So is it that people aren't necessarily gonna pay attention or is he gonna have the opportunity to lay out the narrative about where inflation is, where he thinks growth is, and what should happen?

I think the latter. I'd like, I'd like the unvarnished Jerome Powell. Like he's always, I've, I've often called him Goldilocks in a suit because he's always managed to be, even though he's not an economist by trade, the, the proverbial two-handed economist, right? Like, you know, yes, things are bad, but this is why it's good, or flip side, this is why it's good. But by the way, here are the risks.

And Brian, feel free to jump in here and tell us,

tell me, you know, I would love to just actually put a photo of today.Jerome Powell compared to when he first started, like, I think, yeah, I think he looks totallydifferent.

But

look,

that happens to everyone. Yeah, I know

it

does,

right?Not, not us though, not us, except, except for us, you know, I, I, let me push back on that because I, I don't want to say that the market can care less what the Fed chair has to say. I mean, it's the Fed chair. I mean, whatever he says in the economy, rates your name is important, but this market, guys, you guys know this better than me. I mean, with the trading experience is so fixated on all things AI.And the momentum in semis and, and you name it, I don't even know. I don't know if Pal steps up to that mic and he says something hawkish if these AI stocks take a tank. Well,

that's, that's my,

that's my question. That's part B of, that's part B of the volatility on, uh, potential volatility on Wednesday. Thank you, thank you for that. Let me. Let me take, let me take Ken Jones. Thank you very much for that lead-in. But yeah, that's exactly it. Now here's the thing with, here's the thing with the earnings that come out if they.In theory, if they all move in one direction or the other, up or down, my gosh, you know, I, I, you know, we, we could have a giant postmarket event. Rarely, that's the way it works. You usually get some up, some down, and that just becomes a, you know, sort of a wash from an index point of view, even though individual stocks might move dramatically.

And I, and then to your point, I think that's exactly the point, right? It's all gonna be focused on this spend, this capex spend, and what are they doing and when is it gonna be a return on investment?

Well, the interesting part to me is if I were gonna, you know, I'm thinking the way to hedge these earnings is either 1, you do it in the individual stocks, or 2, you do it with socks. And here's why. I mean, we're taping this, it looks like, it looks like as we're taping this now, Monday, Monday around 120.Sox is breaking its its 18-day winning streak, and we could talk about how unprecedented that is. I'm sure we could have have like 50 stats. I know you do. I, I do have some, but, but let me, but let me, let me just, let me not, look, we'll get to the, we'll let our, I'm just like I'm making it too easy for you, yeah, but so to me, but that's the key. If the, if the these, if the big hyper scaler say.Damn the torpedoes, we're gonna keep borrowing money. We're gonna keep spending money. We don't care if the stock market, we don't care what the investors think about, you know, whether we're changing from asset-light businesses to asset-heavy businesses, blah, blah, blah. If that spend continues, stocks is the way to go. If they say,You know what, we're taking a, we're taking a little bit of a breather here. That is not what semiconductor, that is not what a 50% rally in semi in socks is pricing in. And so to me, that's where, that's actually where I, I, I would consider hedging with socks as opposed.As opposed to hedging with, with some of these specific stocks or hedging with Qs or, or, you know, or something of that nature because that's, that's where it's going to be reflected. You're gonna get, you know, I, I doubt that they're, I doubt that somehow the semis will just be unchanged after all this.

I would be, I'd be, I'd be worried going to these, this max 7 earnings, and I, and I'll try to keep it like as simple as like possible when those Tesla earnings hit the wires.And Elon, you know, they didn't say anything in the, in the press release or the slide deck, and you hop into the earnings call 15 minutes. Elo's like $25 billion in capex. They were at $20 billion coming into this year. That company only spent $8.5 billion last year in capex. This is a meaningful.Acceleration and what did the market do? It sent Tesla shares down. Why shouldn't we expect the same damn thing from all six of these companies coming up, maybe except Apple because they farmed out its AI to Google, so we'll forget them for a second. But I'm looking at really some potentially big capex from all these companies and all these stocks get hit.

Well, the theme before, the theme until, you know, until recently was, we've switched from all cap spending is good, and we're just gonna reward companies for spending money to, we're going to, uh, we're, you know, we're gonna be more judicious about it, and we're going to be concerned about whether these, the business models that we loved about these companies is changing. These, these companies to me hadSort of magical business models, right? Like very few, very few assets, very low fixed costs, insanely high margins, and fewer

people too, and fewer people. I mean, they're firing thousands of people.

Well, that's, that's another key, right? I mean, but meta meta meta is telling you, Meta is telling you that maybe we're, we got to tighten the belts around people. Microsoft is in a more subtle way. We're gonna offer 7000 people early retire.Determine, um,

but let me ask you a question. Let go back one second. Do you think that that's all AI, or do you think any of it is like just an oversupply, like they're just cutting the fat because they so overhired in 22, 23, 24?

Oh, some of each,

I mean, right, so I don't necessarily think the, you know, they were trying to create this panic. Oh my God, AI is, I don't think it's

that. No, no, no, I, and, and I've talked about this. I, I know, I know, um.Joe Bruce Willis is a friend of Yahoo Finance. He and I have had this discussion, you know, offline. I'm like, you know, not at, not in great lengths, but sort of we were in a room together and I said, you know, isn't this a lot of, isn't, isn't some of this just cutting the fat, you know, they overhired, they overhired at 21, 22, and now th