Canaccord sees AI spending surge in strong earnings season

Investing.com -- The S&P 500 rose 1.05% last week, supported by gains on Thursday and Friday, according to a Monday outlook from Canaccord. The index reclaimed its recent consolidation range, with advancing stocks outnumbering decliners by 73.

The S&P 500 Equal Weight Index posted a smaller gain of 0.62% but reached a new record high during the week. Large-cap technology stocks led the advance in the later sessions.

Second-quarter GDP growth slowed to 1.5% from the previous quarter, missing the 2% estimate. Lower government spending and higher imports weighed on the figure, while consumer spending increased and private investment held steady.

Headline PCE inflation declined 0.1% from May to 3.7% year-over-year as gasoline and energy prices moderated. Core PCE rose 0.1%, bringing the annual rate to 3.3%. Healthcare, financial services, insurance, housing, and utilities continued to push core inflation higher.

The Federal Reserve kept interest rates unchanged at 3.50% to 3.75%. Three members voted in favor of a rate increase at the July meeting. Fed Chair Warsh stated the central bank remains committed to its 2% inflation target after more than five years of above-target price increases.

Hyperscaler capital expenditure plans for 2025-2027 increased from $2.25 trillion to $2.45 trillion during the second-quarter earnings season. META and GOOGL shares fell on higher AI spending plans, while MSFT's spending approach and AMZN's growth and margin expansion were received favorably.

Through the second quarter, 79% of S&P 500 companies and 67% of Russell 2000 companies have reported earnings. Earnings estimate revisions for small-cap stocks rose 4% compared to 3% for large-cap stocks. Revenue estimates improved 1% for all reporting companies over the past three months.

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