Fragile nerves ahead of tech earnings

Last week was a good one to be away, as things got worryingly ugly on the economic data, earnings and AI fronts.

Mixed bank earnings were overshadowed by a hotter-than-expected CPI report that fuelled hawkish Federal Reserve (Fed) expectations, pushing October rate hike bets to roughly 50% before Warsh’s words pulled them backed below 13%, phew...), while US crude rose above $100 per barrel despite the controversial US decision to ease sanctions on Russian diesel. Meanwhile, a sharp selloff hit Nvidia-backed neocloud provider CoreWeave’s shares and bonds.

Funnily — or disquietingly — the thunder struck as co-founder Brannin McBee discussed securing investment-grade ratings to access what he described as insurers’ “unlimited” capital. That’s not necessarily what investors want to hear from a company pouring cash into infrastructure — and reporting negative free cash flow in the latest quarter. These famous last words certainly didn’t help: the cost of insuring CoreWeave’s debt against default surged to nearly 1’200 basis points, with pricing implying a more than 60% probability of default within five years, under the model’s assumptions. Rough. The stock price tanked nearly 24% last week.