U.S. stocks rise again in the wake of the Fed cut; FedEx gains
The hawks on the FOMC remain in charge. The Federal Open Market Committee (FOMC) on Wednesday cut key interest rates 0.25% as was widely anticipated in an 11 to 12 vote.
The “dot plot” was all over the place, since six FOMC members forecasted no further key interest rate cuts, while another non-voting FOMC member objected and said there should not have been any key interest rate cut. Two FOMC members forecasted one additional key interest rate cut this year. Treasury bond yields rose following the FOMC statement, and the U.S. dollar firmed up.
Wall Street was relieved on Thursday that new jobless claims declined to 231,000 in the last week, down from 264,000 in the previous week, which was the highest level for jobless claims in four years. Economists were expecting 240,000 new jobless claims, so this latest report was better than expected. Existing jobless claims remain high at 1.92 million, down just slightly from 1.93 million in the previous week.
Nvidia (NVDA) on Thursday announced a $5 billion investment in Intel (INTC), where both companies will custom-design and manufacture “multiple generations” of custom chips for data centers and personal computers. Interestingly, Nvidia and Intel are focused “on seamlessly connecting Nvidia and Intel architectures” using its interconnect technology called NVLink, which allows multiple graphics processing units to connect to each other or to central processing units for fast and efficient communication between chips in data centers. The NVLink interconnect helps to boost scaling to handle intense artificial-intelligence and high-performance computing workloads.
The Financial Times reported that the Cyberspace Administration of China told companies, including ByteDance and Alibaba, this week to end their testing and orders of the RTX Pro 6000D, Nvidia’s tailor-made product for China. This is expected to be leverage that President Xi can utilize to negotiate a better trade deal with the U.S. It will be interesting to see exactly what President Trump announces on Friday after his call with President Xi, other than the anticipated TikTok deal.
Finally, France continues to implode. The new French Prime Minister, Sebastien Lecornu’s negotiations with Parliament on a new budget are not going well. French unions have launched widespread anti-austerity protests. Lecornu has so far given little indication of concessions he is willing to make. As Prime Minister, he will need to strike deals with some opposition lawmakers to avoid being ousted, but his consultations with rival groups have so far made little progress. In the meantime, Marine Le Pen’s National Rally party is retaining its control over Parliament and pushing for strategic cuts.