Future outlook for the US and global markets with Mike Dolan
With a deadlocked debt ceiling threatening the U.S. government’s credit rating and an artificial intelligence boom sending semiconductor maker Nvidia NVDA.O soaring nearly 30%, two of this year’s major themes have caught investors’ attention overnight. collected.
Credit rating agency Fitch sees growing risk that the debt ceiling will not be raised by ‘X’ on June 1, even as negotiators in the White House and Congress have signaled some progress in debt-limit talks. We put the US sovereign “AAA” rating on “negative watch” for the following reasons. – Date when the Treasury ran out of money.
The tension further disrupted the short-term Treasury market and further complicated money management for investors and businesses.
The external risk of technical defaults, increasingly hawkish statements by Federal Reserve officials about further hikes in policy rates, and persistently high core inflation in the UK and other European countries combine to hurt. occured.
On Thursday, the one-month yield rose above 6% for the first time and the three-month yield rose to 5.5%, both well above the Fed’s target range of 5.0% to 5.25%.
Fears of debt limits and a more aggressive Fed policy are now entwined, and are the most obvious beneficiaries of the dollar’s surge to a two-month high, rising more than 3% in just over two weeks. The Chinese yuan, Japanese yen and Australian dollar all hit record lows this year against the dollar’s recovery.
Futures markets now see a one-in-three chance that the Fed will raise rates again next month, but a 50% chance of another rate hike before its meeting in late July. Expectations of easing by the end of the year are fading, with just a quarter of a percentage point cut from here by December priced in. Market expectations for easing in 2023 reached nearly 100 basis points earlier this month.
But worries in the bond and currency markets contrasted with a tech- and AI-driven boom in stocks, and Wednesday’s after-hours earnings from NVIDIA blew expectations.
The world’s most valuable publicly traded semiconductor company and fifth-largest U.S. stock has forecast second-quarter sales to beat Wall Street forecasts by more than 50%, powering ChatGPT and more. The service said it was increasing its supply to meet the surge in demand for the artificial intelligence chips it uses.
Nvidia shares soared 28% after the bell, trading at a record $391.50. The gain increased NVIDIA’s stock market value by approximately $200 billion to more than $950 billion.
Artificial intelligence stocks also surged in extended trading, adding nearly $300 billion to their market capitalization.
Rival chipmaker Advanced Micro Devices Inc. was up 10%. Microsoft and Alphabet, which are rushing to introduce generative AI into their web search platforms, each rose about 2%. AI software maker C3.ai (AI.N) and Palantir Technologies (PLTR.N), which recently launched its own AI platform, rose about 8 percent.
European chipmakers such as ASML (ASML.AS) also slipstreamed higher, up as much as 6% on Wednesday.
S&P 500 futures rose 0.6% before Bell and Nasdaq futures rose 1% due to the tech industry’s frenzy despite debt restraints and interest rate fears.
Importantly, NVIDIA’s results mean that the projected decline in annual gross earnings for the S&P 500 companies in the first quarter has now reversed for more than 96% of the companies currently reporting. Along with this, it is assumed that a technical revenue slump unfolded in his first three months of 2016. Year. Retailers such as Costco and Best Buy took the top spot on Thursday.
Elsewhere, the Q1’s rear view photos weren’t as bright. Germany’s statistics show that Europe’s largest economy actually contracted by 0.3% in the first quarter, entering a technological recession.
Rising geopolitical concerns also hit Chinese and Hong Kong stocks (.HSI) hard on Thursday.
And it wasn’t a good day for short sellers either. Profit-making betting on stock market declines is a key focus for U.S. prosecutors, and there will be more action by the Justice Department in the coming months, senior Justice Department officials said.
Events to watch out for later Thursday:
* US Q1 GDP Update, Weekly Unemployment Claims, Kansas City Fed May Manufacturing Index, Chicago Fed May National Activity Index, April Home Sales Pending
*Boston Fed President Susan Collins and Richmond Fed President Thomas Birkin will speak.ECB Vice President Luis De Guindos Releases European Central Bank Annual Report
* US Treasury 7-year bond auction
* US Corporate Earnings: Costco, Best Buy, Ralph Lauren, Dollar Tree, Autodesk, Ulta Beauty, Medtronic, Marvel, Workday
By Mike Dolan. edited by Toby Chopramike.dolan@thomsonreuters.com is in charge. Twitter: @reutersMikeD
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