- The Fed swaps indicate an anticipated quarter-point rate rise by July’s FOMC Meeting
- The 10-year Treasury yield rose by 4.4 bps to 3.784%
- Nvidia has gained the greatest single-day market value increase in US history
Wall Street is focusing on Nvidia’s (NASDAQ:) AI expansion, giving traders a brief respite from debt ceiling nervousness and Fed tightening. The market is rallying as Nvidia’s projected growth renews confidence that AI will be the key to the tech industry’s growth story. However, this was despite most of the morning’s data indicating the need for more Fed tightening.
Additionally, Speaker McCarthy offered positivity towards the eased debt ceiling drama by stating that some progress has been made, though issues do still remain. But Representative Kevin Hern added that a debt ceiling deal is possible by the following day afternoon.
As the risk of default grows, credit rating agencies are preparing for the worst-case scenarios. In order to prevent any market stress, Fitch Ratings’ decision to place the US credit rating at risk of being downgraded was a necessary measure. As we inch closer to the real X-date, markets should be becoming more apprehensive. This will likely occur during the first week of June.
Nvidia
Nvidia’s AI expansion has set them on track to become essential for tech investors. Discussions regarding FAANG (Facebook (NASDAQ:), Apple (NASDAQ:), Amazon (NASDAQ:), Netflix (NASDAQ:), and Alphabet (NASDAQ:)) have now shifted to MATANA (Microsoft (NASDAQ:), Apple, Tesla (NASDAQ:), Alphabet, Nvidia, and Amazon). AI investment is likely to accelerate into a boom stage.
With plans to expand substantially during the second half of the year, Nvidia is on track to become a trillion-dollar company. Robust orders for data centers are a great start to what could be an incredible ten-year cycle. Second-quarter sales are predicted to be around $11 billion +/- 2%, well above the estimated $7.18 billion consensus estimate. Nvidia is necessary for everyone looking to bring AI into the cloud.
US Data
This week’s weekly claim includes a major downward revision addressing fraudulent claims that weakened arguments indicating notable weaknesses within the labor market. Following a significant downward revision in the previous week, initial claims for state unemployment benefits went up by 4,000, reaching 229,000 for the week ending May 20. A revision was made for Massachusetts in the previous three months, lowering jobless claims by an average of 14,000 per week. Despite steadily rising claims earlier in the year, the resilient economy is not triggering enough job losses to allow wages to cool.
The second look of Q1 was revised upwards alongside personal consumption and Core PCE data. Gross domestic income posted the worst consecutive decline since the early days of the pandemic. GDI printed -2.3%, a slight improvement from the -3.3% seen in Q4.
The US economy is showing resilience, which should maintain a hawkish tone amongst Fed officials.
