In his latest post-FOMC press conference, Federal Reserve (Fed) President Jerome Powell made a statement that the Fed’s next move will likely not involve a rate hike, which pleased investors. However, it was revealed that during a meeting, many Fed members questioned whether the ‘high-for-longer’ rhetoric was enough to control inflation, leading to a discussion about potentially hiking rates. Fortunately, the release of the minutes coincided with a slowdown in April’s CPI data, preventing a dramatic scenario. The unexpected twist from the Fed minutes caused the US 2-year yield to approach the 4.90% level and reduced appetite for S&P500 and Nasdaq near their all-time high levels.
Nvidia recently announced another set of better-than-expected results and forecasts, resulting in US futures trading in the green. With Q1 sales reaching $26 billion, which was $2 billion higher than the company’s own forecast of $24 billion, Nvidia expects to make $28 billion in the current quarter. The company is expanding its business beyond chips with a new software platform called NIM, offering an ‘AI ecosystem’ that accelerates the deployment of foundation models on any cloud or data. Additionally, Nvidia will opt for a 10-to-1 stock split to boost demand as the price per share nears $1000. While Nvidia’s stock jumped 6% in after-hours trading, the reaction was softer than expected, indicating investors may have grown accustomed to blowout results.
Qualcomm has gained attention this week as it will power Microsoft’s and Dell’s AI-focused computers in the coming months. With an expected 50 million of these computers set to be shipped over the next year, compared to the 250 million-unit market, Qualcomm’s name has seen a resurgence. The Bank of Korea decided to keep its policy rate unchanged for the 11th meeting and revised its growth forecasts higher. The country also announced a $19 billion support package for its chipmakers to compete internationally. Samsung Electronics, with a PE ratio of around 27, could be a good alternative for investors looking to diversify their chip holdings beyond Nvidia and Qualcomm.
British PM Sunak’s surprise announcement of a general election on July 4 caught many off guard, with speculation that he may be concerned about rising inflation impacting his narrative of stabilizing inflation levels. The early election combined with a hotter-than-expected inflation print led to a change in expectations regarding a June rate cut from the Bank of England (BoE). As a result, Cable is pushing higher above the 1.27 level, but uncertainty surrounding the UK general election could cap the upside potential for sterling in the coming weeks. Overall, the financial markets are experiencing shifts due to various economic and political developments.
