Wall Street finished mixed, with Dow edging lower, while Nasdaq rose 1% on a tech-led rally amid cooler-than-expected US April CPI data, strengthening the odds for the Fed to pause rate hikes in its next meeting. The S&P 500 was slightly higher. The headline inflation cooled to 4.9% annually from 5% in the prior month, and the core CPI rose 5.5% from a year ago. Tech stocks were buoyed by a relief rally, while Google’s announcement of an AI-in-search folding phone further fueled the buying frenzy.
The US bond yields fell, sending the US dollar lower amid the 10th consecutive cooled CPI data. According to the CME Group FedWatch Tool, Fed may start the rate cut cycle as soon as September. However, gold prices slid, perhaps due to a technical correction. Crude oil also finished lower on a larger-than-expected US inventory build as recession fears were still lingering, despite a jump in the US tech shares.
The US sector rotation may have started pricing in an early rate-cut cycle. Funds continued to flow into AI-powered big techs as these stocks are being seen to benefit from lower rates and as cash-healthy in an economic downturn.
Asian markets may be resilient today but are set to open mixed, with the ASX 200 futures down 0.17%, Hang Seng Index up 0.13%, and Nikkei 225 futures sliding 0.31%.
- 7 out of 11 sectors in the S&P 500 finished higher, with technology and communication services leading gains, up 1.22% and 1.69%, respectively. Real estate stocks also took a ride on the fallen rates, up 0.98%. Cyclical stocks lagged broad markets, with energy, financials, and industrial sectors all finishing in the red.
- Google announced a series of AI-powered software and hardware at its annual developer conference. The Alphabet-owned search emerging company amazed investors with its rapid development into the fiercely competitive AI industry. The newly launched products include the new PalM 2 large language model for AI, new AI writing tools, Google Maps, Google’s Pixel Tablet starting at $499, and a $1,799 Pixel Fold folding phone. These features especially compete with iPhone and Microsoft’s Chat-GPT searching tool, Bing.
- Disney’s shares slumped 4.3% in after-hours trading, disappointing investors with its Disney+ subscribers’ loss. The entertainment giant lost momentum in its streaming business in the final quarter of 2022, when it lost 2.4 million users, followed by another decrease of 4 million to 157.8 million in the first quarter. The earnings per share was at $0.93 on a $21.79 million in revenue, in line with expectations.
- USD/JPY fell to just above 134.30, the lowest in one week, due to the weakened US dollar following further cooled CPI data. The pair may continue to slide toward the year-low of 127 as a double-top surfaced from a technical perspective.
- Oil prices snapped a four-day winning streak after the US reported an inventory build of 2 951 million barrels versus an expected 2.2 million draw. But the double-bottom pattern is still in play, suggesting it may have been just a technical correction.
ASX and NZX announcements/news:
- Nexdc (ASX: NXT) entered a trading halt pending an announcement regarding a new $618 million entitlement offer to build two new data centres. The Australian data centre operator updated its FY23 guidance to between A$250 million to $360 million in services revenue.
- Australian lithium miner, Allkem agreed to merge with US rival Livent in an all-stock deal. The merger will create a US$10.6 billion global producer. The new business will be listed on the ASX via CHESS depositary interest.
- New Zealand Food Price Index.
- Bank of Japan’s summary of opinions.
- China’s CPI & PPI for April.
- BOE’s rate decision.
- US PPI and unemployment claims.