Micron Crushed Earnings, and the Market Shrugged 🤷‍♂️

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Micron just posted one of the biggest quarters in chip history and investors barely blinked, while the 10-year Treasury yield climbed to its highest level since 2002.

Let’s get into it 👇️ 

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🔼 The 10-year Treasury yield hit 5.34% Thursday, its highest level since 2002. The bond selloff is global, and higher oil prices are feeding fears that inflation will stay sticky. The 10-year yield sets the tone for mortgage rates and corporate borrowing, so the climb raises borrowing costs across the economy. The 30-year yield touched about 5.66%.

📉 Inflation cooled more than expected in August, with the Fed's preferred gauge rising 3.4% from a year earlier versus 3.7% expected. Core PCE, which strips out food and energy, came in at 3.0% against a 3.3% forecast. Combined with New York Fed President John Williams saying there is "no need for urgency" on the next hike, traders cut October rate-hike odds to below 40%.

📊 Stocks closed out a losing September on Wednesday after a late selloff erased gains from the cooler inflation data. The S&P 500 fell 0.4% for the month but still gained 2.1% for the third quarter. Separately, the government revised spring economic growth up to a 2.2% annual pace from 1.5%, a sign the economy is running hotter than thought.

✈️ Boeing beat Northrop Grumman to win the Navy's F/A-XX sixth-generation fighter contract, worth more than $20 billion for development. The jet will replace the F/A-18 Super Hornet and EA-18G Growler, with first deliveries targeted for the 2030s. It's Boeing's second sixth-generation fighter win after the Air Force's F-47. Northrop shares fell about 4% Wednesday.

💰️ Accenture beat expectations Thursday morning, posting record annual bookings of $84.5 billion. Fourth-quarter revenue of $18.7 billion topped the $18 billion estimate, and earnings of $3.29 a share beat $3.18. Shares spiked as much as 18% premarket before paring gains at the open. The stock had been down about 30% this year heading into the report.

💼 Weekly jobless claims fell to 197,000, below the 200,000 economists expected. Planned layoffs also dropped 20% from a year ago in September, per Challenger, Gray & Christmas, though hiring plans were the weakest for any September since 2011. Friday's jobs report is expected to show about 90,000 jobs added in September.

🛢️ Oil climbed about 2% Thursday after Chinese refiners suspended fuel exports for October. Brent crude pushed back to around $100 a barrel. Refiners halted exports to everywhere except Hong Kong and Macau, tightening fuel markets already strained by conflict in the Middle East and Ukraine.

Micron reported fiscal fourth-quarter results after the bell Wednesday, and the numbers were enormous.

Revenue hit a record $54.2 billion (nearly five times the $11.3 billion it brought in a year earlier and above Wall Street's estimate of roughly $51 billion).

Adjusted earnings came in at $33.42 a share, more than $1.50 above expectations.

The standout was data center revenue, which jumped 11-fold from a year ago to about $18 billion. 

Micron also guided to $61.5 billion in revenue for the current quarter, well ahead of the roughly $57 billion analysts expected.

The stock's reaction to all of this news: muted after hours, then down more than 2% in Thursday morning trading.

Micron makes memory chips, including high-bandwidth memory (HBM), the specialized chips that sit next to Nvidia's AI processors and feed them data. Memory is so scarce that management said it does not have "line of sight" to when supply and demand will balance, and it has already locked in most of its 2027 HBM supply at significantly higher prices.

The problem is that investors already knew the boom was real: Micron shares had climbed more than 270% this year heading into the report. Two details gave them pause.

First, Micron said it will raise capital spending in fiscal 2027, with about $25 billion planned for the first half alone, much of it for new factory space that won't be ready until late 2028. Memory is a famously boom-and-bust business, and a wave of new capacity is historically what turns a shortage into a glut.

Second, it guided gross margin slightly lower, to about 86.25% from 87%.

What to watch:

• Even after its run, Micron trades at less than 10 times the earnings it is on pace to generate over the next year, a sign the market is treating today's profits as close to a peak.

• Watch whether rivals Samsung and SK Hynix also ramp up spending, which would add to oversupply fears, and whether Nvidia and the big cloud companies keep raising their AI budgets.

• If demand holds through 2028, today's caution could look overdone. If it cools just as new factories come online, the memory cycle could turn fast.

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⚠️ Disclaimer: Not financial advice. Do your research before making any trades.