Nvidia released its earnings report yesterday, showing that the tech company’s stock more than tripled in the past year as of November 21, 2023. Read on to find out all about movements in the market.
Bonds Rose as Expectations that Fed Has Ended Rate Hike Cycle Mount
The stock market lost strength yesterday amid a rally this month that puts the market on track for its best month since July 2022.
Bonds rose yesterday (yields fell) due to the high level of confidence among investors that the Federal Reserve (Fed) has come to the end of its rate hike.
Recent economic data support this forecast. The Consumer Price Index (CPI) came out lower than expected and employment data has shown the weakening sought by the Fed. Today the data on unemployment claims will be published and this could have an impact in this sense.
Yesterday the sales figure for existing homes was also somewhat lower than expected, which contributed to this trend.
In short, unless the economic scenario considerably changes, which seems unlikely, it can be said that the monetary adjustment cycle has ended. This will be valued positively by investors in the stock market.
The minutes of the last Fed meeting, published yesterday, did not provide the market with anything new. Central bank officials agreed to keep interest rates high for as long as necessary but definitely gave up on the need for further rate hikes.
Nvidia Tripled in Value This Year
Yesterday, however, was a day of correction in the markets. The S&P 500 halted its upward path given high "overbought" levels, while the Nasdaq 100 fell about 1%. These are setbacks that can be considered purely technical in nature.
On the somewhat less optimistic side is the fact that as the earnings season draws to a close, doubts have resurfaced about the sustainability of the gains led by the mega-cap group.
Corporations like Nvidia, which released Q3 earnings yesterday at the close of trading, have tripled in value this year. This is an absolutely extraordinary performance driven largely by expectations about AI developments.
Nvidia daily chart, November 22, 2023. Source: CAPEX.com WebTrader.
Fed Expected to Reduce Borrowing Costs in Q2 2024
There are also concerns that upcoming data could show not only a slowdown in the US economy but also an economy on the verge of a recession. In reality, this negative scenario had been anticipated for a long period of time without ever coming to fruition, quite the opposite.
If a deep slowdown finally occurs, the central bank will begin to reduce borrowing costs. Some analysts expect it for the 2nd quarter of next year and this could have a negative effect on the US Dollar. The currency has already begun to lose steam and pairs like the EUR/USD have gained 400 pips so far in November with still a long way up from a technical point of view.
Key Takeaways
- Bonds rose yesterday on investors’ confidence that the Fed is done with its rate hike cycle.
- US unemployment claims data to be released today.
- US sales figure for existing homes released yesterday was lower than expected.
- The S&P 500 stopped climbing yesterday while the Nasdaq 100 fell around 1%.
- Nvidia’s tripled its value this year.
- Investors are concerned that upcoming economic data could show that the US economy is on the verge of a recession.
- The US Dollar fell.
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Sources: Bloomberg, Reuters
