Chip Maker’s stock now 5% of S&P, 6.5% of NASDAQ valuation
Market influence of AI as Nvidia stock, doubling this year, now makes up over 5% of the S&P 500. Key earnings and Fed policy awaited
United States Market
Nvidia and AI Influence
Nvidia’s earnings report is highly anticipated, with its stock having doubled this year, reflecting the importance of AI in the market. Nvidia now comprises over 5% of the S&P 500, 6.5% of the Nasdaq 100, and 20% of the VanEck Semiconductor ETF. The company’s results, expected to show a 243% revenue increase, are crucial for sustaining the current market rally.
Interest Rates and Inflation
Fed officials have indicated that interest rates are likely to remain unchanged in the near term. Fed Governor Christopher Waller mentioned the need for “several more months” of inflation data before any rate cuts, and Cleveland Fed’s Loretta Mester echoed this sentiment. Boston Fed President Susan Collins also suggested that controlling inflation may take longer than previously expected. Consequently, Fed futures do not fully price in a rate cut until November 7.
Market Performance
U.S. equity futures were mixed, with the Dow Jones up 0.1%, S&P 500 down 0.1%, and Nasdaq flat. Notable stock movements included Target’s 7% drop after disappointing earnings and Lululemon’s 4% decline following organizational changes. The dollar strengthened, and Treasury yields increased, with two-year yields at their highest in over a week.
Key Events
April existing home sales
Corporate earnings from Nvidia, Target, Synopsys, Analog Devices, TJX
FOMC minutes release
European Market
UK Inflation and Interest Rates
The UK’s inflation rate fell to 2.3% in April, down from 3.2% in March, but remained above the Bank of England’s 2% target. This lower-than-expected drop, influenced by reduced household energy tariffs, diminished the likelihood of a June rate cut, with money markets now doubting an August cut as well. UK gilt yields rose to a three-week high, and sterling reached its highest in a month.
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European Markets and Trade Concerns
European markets were affected by concerns over a potential trade war with China. The Stoxx 600 fell by 0.3%, with significant drops in automotive stocks. Mercedes-Benz, BMW, and Volkswagen saw declines amid discussions of higher import tariffs on large gasoline-powered cars in response to U.S. and EU tariff increases.
Economic Data and Market Movements
France’s CAC 40 down 0.6%
Germany’s DAX down 0.5%
Asian Regional Market
Japan and Trade Deficit
Japan reported a rise in its trade deficit as import costs grew faster than the 8% increase in exports. This led to the Nikkei 225 falling by 0.9%. The data was weaker than expected, contributing to market pessimism.
Market Performance
Hong Kong’s Hang Seng down 0.2%
Shanghai Composite nearly unchanged
South Korea’s Kospi flat
Australia’s S&P/ASX 200 down 0.1%
Taiwan’s Taiex up 1.5%, driven by a 2.7% rise in Taiwan Semiconductor Manufacturing Corp.
Key Events
Reserve Bank of New Zealand holding interest rates steady
Japan’s trade deficit data
Commodities and Currency
Oil Prices
U.S. crude oil prices fell by $0.53 to $78.13 per barrel, while Brent crude declined by $0.55 to $82.33 per barrel. The decline in oil prices influenced U.S. Treasury yields and contributed to a darker bond mood in Europe.
Currency Movements
U.S. dollar rose to 156.47 Japanese yen from 156.16 yen
Euro decreased to $1.0833 from $1.0854
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