Jamaica’s outlook revised to stable by Fitch after hurricane
Nvidia announced that its third-quarter revenue surged 62.4% $57 billion compared to $35.1 billion in the same quarter a year ago. Nvidia posted a 3.3% revenue surprise and a 3.2% earnings surprise. More importantly, the company raised its guidance above analysts’ estimates. Nvidia CEO Jensen Huang told investors on an earnings call that, “There’s been a lot of talk about an AI bubble,” and added, “From our vantage point, we see something very different.” I especially like that Huang said that Blackwell GPU sales were “off the charts.”
The Labor Department is back up and running and released the September payroll report on Thursday. Specifically, the Labor Department said that 119,000 jobs were created in September, which was much better than economists’ consensus estimate of 51,000. However, the September unemployment rate rose to 4.4%, up from 4.3% in August. Also notable is that July and August payrolls were revised down by 33,000. So, although the September payroll report looked good on the surface, the details about a higher unemployment rate and downward revisions were troublesome.
The FOMC minutes were released on Wednesday, and it is clear that a lot of Fed members are frustrated by the lack of economic data due to the recent federal government shutdown. The October payroll report will be delayed until December 16th, after the December FOMC meeting, which will likely further frustrate the Fed. Since the Fed is data-dependent, they may not cut at the December FOMC meeting, but stay tuned since there will be an insightful ADP private payroll report for November in early December that could influence a couple of FOMC members.
Before the end of the year, President Trump will nominate a new Fed Chairman, effectively making current Fed Chairman Jerome Powell a lame duck. A new, more pro-business Fed Chairman will be a positive development for both the stock and bond markets.
With some help from the Fed, I am expecting interest rates to decline from deflationary forces from China, plus a stronger U.S. dollar, making both commodities and imports cheaper. Recent ADP labor data may convince the Fed to cut key interest rates sooner rather than later as the AI job apocalypse persists. Furthermore, recent data that rental prices are starting to decline may help the Consumer Price Index (CPI) decline due to the fact that Owners’ Equivalent Rent is a major component. Finally, lower crude oil prices are also helping to lower inflationary pressures. So, the Fed will be cutting key interest rates in the upcoming months due to AI-related labor weakness as well as cooling inflationary forces.