US producer prices were far hotter than expected. Not a good set of numbers for those hoping for the Fed to cut rates. So, bond yields are up—and bond prices are down. Now, traders are pricing in just a 25% chance for the Fed to cut rates in May.
Companies might be rooting for inflation to stay high. Their profits stay higher…
Investors are putting their cash to work, with the latest flow data showing the biggest outflow from cash in 8 weeks, per Reuters. A survey by GS shows that folks are hanging out in Mega Cap tech still. Five stocks fueled 75% of the S&P’s gain this year. Marinate on that.
Folks don’t want to borrow at high rates, and banks are seeing default rates increase, so they’re putting deposits to work in credit, from mortgage debt to CLOs. They added $41bn to portfolios in 4Q23. Guess what will happen if demand for loans rise? Money will follow, and the recent price action will reverse and banks turn to lending again.
He’s looking for gov approval to get boatloads of cash from the Middle East to build more capacity for semi production for cutting-edge computing chips so that his AI dreams come true. TSM and Samsung Electronics are the leaders in that field, so they’re rooting for Altman. But, there’s a whole host of concerns: national security, environmental, energy availability/pricing, and geopolitical. The US Commerce Dept is looking to hand out $100bn of semi subsidies to get projects built in the US, so Sam’s efforts could compete with that. To stay on the AI topic, I thought the chart below was funny.
US new home construction fell in Jan. Buyers want to see rates move lower. Building permits, which is a proxy for future construction, was down too. When you’re looking at 7% rates, it’s easier to wait sometimes, especially when you can taste the Fed cut around the corner.
OpenAI is talking about an AI system that can create realistic videos based on text prompts, per Bloomberg. Are we headed toward a fake Internet, where you have no clue if what you’re watching is real?
First, Coinbase shares are up after generating the 1st quarterly profit in 2 yrs, per CNBC. Second, Hong Kong stocks were up a lot as well. Hang Seng +2.48%, Enterprises index +2.7%, Tech index +3.7%, Mainland Properties +6.8%. Third, Applied Materials is forecasting rev above estimates, based on a semi recovery, per Bloomberg.
