🎉 Amazon’s surprise party

What’s going on here?

Amazon’s impressive results had investors reaching for their wallets late on Thursday.

What does this mean?
Amazon's businesses were all systems go last quarter. Faster and more efficient logistics helped drive strong e-commerce revenue growth, in a win for the behemoth’s biggest segment. And its high-flying cloud business kept the momentum going, with sales rising by 16% from the same time last year – the fifth straight quarter that metric's slowed, sure, but still ahead of expectations. Add in an advertising surge – thanks in part to ramped-up investments in machine learning – and it’s little wonder that overall revenue grew by a better-than-anticipated 9%. Once investors learned that operating expenses crept up by the smallest proportion in over ten years, they’d heard enough, sending shares up 8%.

Why should I care?

The bigger picture: Clouding the issue.

Corporate belt-tightening is raining on Amazon's cloud parade, and the firm's wonder-segment is now shedding the most weight in the latest round of layoffs. And there might be even more rain coming soon: Amazon and Microsoft dominate the market, controlling as much as 70% of the cloud industry by some estimates – and that’s got British regulators sniffing around. Plus, those very authorities showed they’re not afraid to act earlier this week, putting the kibosh on Microsoft’s Activision purchase. With regulators taking potshots like that, the cloud might be next in the firing line.

Zooming out: Jewel in the crown.

Amazon’s new big plan involves diving into the world of lab-grown gems, with the help of diamond miner de Beers – in a bet that the shiny things are poised to revolutionize computer networks. The ultimate goal is to harness tailor-made diamonds for quantum computing, an emerging technology that could transform data security. And let’s not forget: diamonds are forever, so putting a ring on the finger of cloud computing might help keep Amazon’s trailing rivals at bay.

What’s going on here?

Data showed the stars and stripes staggering, with the US economy falling short of expectations last quarter.

What does this mean?

The US has been weathering interest rate hikes and red-hot inflation quite well in recent quarters, but it seems that the economy’s finally showing some cracks. Sure, a key measure of consumer spending on goods and services picked up nicely, and exports did their part too. But not everything was fine and dandy: business investment in equipment saw the largest drop since the pandemic, inventories dragged on growth, and the housing market kept on struggling. Add that all up, and the economy slowed to an annualized growth rate of 1.1% – well below the previous quarter’s 2.6% and far short of the 2% folk expected.

Why should I care?

The bigger picture: Tip of the iceberg.

This might not look like anything more than a slowdown, but the situation could be worse than it seems. Remember, this data looks back in time – and consumer spending, which propped up these numbers, has been on the slide recently. That’s got economists predicting that the economy will pretty much stall this quarter, with just 0.2% growth. And the outlook doesn’t brighten from there: further slowdowns, tightening credit conditions, and another expected interest rate hike next week have many economists bracing for a full-blown recession.

For markets: Easy does it.

If a recession does come knocking, the stock market might be in for a pretty unpleasant surprise. It's been standing strong so far this year, with anticipated rate cuts fueling visions of an ideal “soft-landing” scenario. But those dreams could easily be off the mark – and as soon as that becomes clear, markets might nosedive. That’s why it could be wise to keep some cash on the sidelines, instead of going all in right now.