SHORT-LIVED ENTHUSIASM

Following Federal Reserve Chair Jerome Powell’s remarks suggesting that interest rate hikes may not be imminent despite inflationary pressures, traders on Wall Street initially responded with enthusiasm. This led to a significant uptick in U.S. stocks and a notable decline in Treasury yields. However, the market sentiment shifted when Powell did not explicitly indicate a potential rate cut in the near future, and this uncertainty resulted in a reversal of gains. Let’s highlight that concerns about a potentially hawkish stance from the Fed have been heightened as recent data shows a strong U.S. economy and challenges in controlling inflation, and as a result, bond traders have adjusted their forecasts, expecting fewer rate cuts compared to earlier in the year. Moreover, investors are now keeping a close eye on the potentially strong economic data from the upcoming April jobs report and inflation reports to gauge the future actions of the Fed.

RECORD OUTFLOWS

Despite Federal Reserve chairman Jerome Powell’s statements that interest rates would not be raised, U.S.-based bitcoin exchange-traded funds (ETFs) have experienced record outflows, totaling $563.7 million. Due to the Fed opting to maintain interest rates at their current levels and its plans to scale back their liquidity tightening program in June, there was brief surge in bitcoin prices, nonetheless, it then experienced a subsequent drop as investors rapidly pulled their money out, with BlackRock’s iShares Bitcoin Trust witnessing its first outflow of $36.9 million. Furthermore, adding to the market’s woes, Asia’s debut of spot bitcoin and ether ETFs in Hong Kong have failed to pick up significant volumes, further impacting cryptocurrency markets. Nevertheless, it is important to remark that Bitcoin has managed to stabilize this morning, and it is trading above $58,700 as of 8:00 AM CST.

STEADY UNEMPLOYMENT

According to the Labor Department, the number of Americans filing new claims for unemployment benefits held steady last week at 208,000 as despite a softening demand for labor and job openings decreasing to a three-year low, layoffs remain low as companies retain workers following challenges finding labor during and after the COVID-19 pandemic. The labor market is described as ‘relatively tight’ by Fed Chair Jerome Powell, with supply and demand conditions improving. Additionally, there were 64,789 layoffs announced by U.S.-based employers in April, marking a 28% drop from the previous month and 3.3% lower compared to a year ago. Moreover, it is worth highlighting that job cuts so far this year have decreased by 4.6% from the same period last year, with no impact on the upcoming employment report for April. Furthermore, nonfarm payrolls are expected to have increased by 243,000 jobs, while the unemployment rate is forecast to remain at 3.8%.

UNCERTAINTY IN AI MARKET

There seems to be a growing gap between AMD and Nvidia in the artificial intelligence sector, with AMD’s latest financial results disappointing investors and causing a stir in the chipmaker industry. AMD has  indicated that it might not achieve the same level of growth in the AI sector as its competitor Nvidia, and while AMD’s revenue forecast for the upcoming quarter was as expected, the stock price dropped by nearly 9% as investors were looking for stronger projections in AI. Analysts mentioned that AMD’s estimates for MI300 chips fell short of more optimistic forecasts, unlike Nvidia, which has consistently exceeded expectations in the AI field. Following the release of AMD’s quarterly earnings report, the whole chip sector experienced a decline, signaling a possible shift in investor excitement toward AI-related companies, as although some companies like Super Micro Computer reported revenue growth, the overall industry still faced a downturn. Analysts suggest that there may be changes in the market this quarter, with companies needing to surpass expectations and display long-term growth potential to maintain investor confidence.

POSSIBLE DROP EXPECTED

Apple will be unveiling its second-quarter earnings later this afternoon, and expectations are not so optimistic as there are concerns looming over a projected decline in iPhone sales from China by 19%. This drop follows consecutive quarters of revenue decreases in Greater China, a critical market for Apple. In addition, the company is facing competition from Huawei and challenges in AI technology. Consequently, analysts expect a 4.75% year-over-year revenue decline for this quarter, with iPhone revenue potentially decreasing by 10.8% to $45.75 billion. Nonetheless, despite these challenges, services revenue is anticipated to grow by 11%. Moreover, looking ahead to the Worldwide Developers Conference in June, Apple is gearing up to introduce new operating systems, focusing on integrating generative AI, and while Apple may be playing catch-up in the generative AI space, it is actively collaborating with tech giants to enhance its AI capabilities, and it is believed to have the potential to stand out in the future.