The Nasdaq is trading 2% higher after a massive jump of chip giant Nvidia, which also triggered gains in companies related to the hype around artificial intelligence. Nvidia trades nearly 30% higher after the AI chip leader's forecast surprised even the most optimistic investors. It's one of the biggest one-day gains in history, bringing the company to the threshold of $1 trillion in market value.
The S&P 500 is also benefiting from massive gains in Nvidia and several other AI-related stocks such as Microsoft, Alphabet, AMD, etc. However, the massive outperformance of AI stocks has not triggered a broad upswing as most stocks are trading in negative territory in New York.
Nvidia's massive gains could lead investors to once again invest in tech stocks, and AI stocks in particular, despite massive concerns about China's weakness, the European economy's recession, and a potentially catastrophic U.S. default. Fitch Ratings warned that the U.S.'s AAA rating is in jeopardy. Even if a settlement can be expected in the next 1-3 business days (or over the weekend), there is a very high probability that the U.S. will not be able to settle all its liabilities on time.
Yields on U.S. Treasury securities, especially very short-term securities, are rising due to the risk of default if the government exhausts its borrowing capacity.
In Asia, markets are mostly down, with sentiment in China deteriorating further. The technology-heavy Hang Seng Index lost another 1.9% during the day and the yuan breached the much-watched $7 per unit level. Geopolitical turmoil, ongoing financial problems in the real estate sector and slow demand growth are weighing on Chinese stocks.
Traders in Europe expect the Bank of England to raise interest rates much more – they are not falling for Bank of England Governor Bailey's optimistic tone. Swap markets are expecting another 100 basis point rate hike in the UK, further supporting GBP.
Commodity prices remain under pressure due to concerns about slow economic growth and ongoing uncertainties. Oil prices fell sharply after Russian Deputy Prime Minister Alexander Novak downplayed the prospect of further production cuts by OPEC+ countries – but falling inventories in the U.S. show that oil demand in the U.S. remains strong. Gold, which is in demand as a safe haven, is facing a strong USD and high yields on US Treasuries.
👁 ROB'S MARKET OVERVIEW:
May 25, 2023
🇺🇸 US Markets ↕️ (chaotic after Nvidia beat; if debt cap talks end positively; ↗️)
Cyclical Stocks ↕️/↘️ (mostly lower; AI stocks higher)
Tech/Growth Stocks ↕️/↘️ (mostly lower; AI stocks higher)
Financial Stocks ➡️
Defensive Stocks ➡️/↘️
Energy Stocks ➡️/↘️
USD, GBP ➡️/↗️
CHF, JPY ➡️
EUR, CAD ➡️/↘️
⚒ Commodity Markets ↕️
Oil prices ↕️ (after sharp losses, losses limited)
Natural Gas prices ↕️ (after sharp losses, losses limited)
Metal prices ↘️
Precious Metal prices ➡️/↘️ (under pressure from strong USD / rising treasury yields)
⚡️Cryptos ➡️ (under pressure from strong USD / rising treasury yields / benefiting from US default concerns)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)