Morning Bid: US profit growth mushrooms

• SK Hynix shares fell nearly 10% despite a six-fold quarterly profit jump that missed expectations, dragging the KOSPI index down 6% and setting a cautious tone for U.S. megacap tech earnings
• S&P 500 annual profit growth estimates have ballooned to 39% through Q2, representing a significant increase of more than 10 percentage points since the start of July
• The Fed decision is one of the most uncertain in years, with markets split on rate cut expectations and multiple dissents likely; investors are also scrutinizing AI capex spending after Alphabet and Tesla disappointed last week

Summary: US Profit Growth Mushrooms

Key Developments

Big Tech Earnings Alert: South Korean chipmaker SK Hynix reported a record six-fold quarterly profit jump that nonetheless missed forecasts, causing shares to plunge nearly 10% and dragging the KOSPI index down 6% to early April levels. This sets a cautious tone ahead of Microsoft and Meta earnings due after market close.

Exceptional US Corporate Performance: S&P 500 aggregate profit growth estimates through Q2 now stand at a remarkable 39%—over 10 percentage points higher than early-month projections, according to LSEG data. However, investor concerns persist around AI capital expenditure levels following Alphabet and Tesla's recent reports.

Critical Fed Decision: Markets face one of the most anticipated Federal Reserve meetings in years, with a one-third probability of a rate cut priced into futures—the most divided market positioning since 2018, per Deutsche Bank. Multiple dissents are expected regardless of the outcome, with Chair Kevin Warsh's commentary closely watched.

Geopolitical Tensions: Oil prices rebounded to over $87 per barrel after the US and Saudi Arabia conducted strikes against Iran-aligned groups in Iraq and intercepted Iranian missiles targeting US bases, complicating the Fed's inflation outlook.

Consumer Sentiment Weakness: Despite surging corporate profits, the Conference Board's consumer confidence index fell to 90.8 from 92.2, missing expectations of 92.3. High energy prices contributed to the decline.

Market Milestone: Apple recently crossed $5 trillion in market capitalization for the first time, though broad market rotation occurred Tuesday.

The disconnect between exceptional corporate earnings and subdued consumer confidence highlights underlying economic tensions as major tech companies report and the Fed deliberates policy direction.