News
-
Key themes:
- Markets opened on a broadly positive note, buoyed by NVIDIA’s consensus-beating earnings. However, the rally proved short-lived as concerns about stretched technology stock valuations resurfaced.
- The release of US payrolls data for September surprised to the upside with 119k new jobs, prompting investors to consider the likely next FOMC policy move very carefully.
- The S&P 500 gained around 2% in early trading, but trended downwards to finish the day 0.9% lower. US Treasuries rallied despite the stronger payrolls figure, with the market apparently focusing more on the uptick in the unemployment rate.
- Australian government bond yields also climbed by 5bp at the 10Y point, as RBA Assistant Governor Sarah Hunter reiterated the RBA’s view that the Australian labour market remains a little tight.
-
(FT)
- September Job Additions: The US added 119,000 jobs, surpassing economist expectations of 50,000 and reversing August’s revised loss of 4,000 positions after downward adjustments to prior months.
- Unemployment Rate Increase: The rate climbed to 4.4 percent from 4.3 percent, marking the highest level since 2021 amid the first Bureau of Labor Statistics report following the government shutdown.
- Mixed Economic Signals: Strong hiring data supports Federal Reserve hawks favoring steady rates, while rising unemployment aids doves pushing for cuts to support the labor market.
- Fed Rate Decision Outlook: A December interest rate cut faces 50/50 odds, complicated by internal divisions between inflation risks and labor needs, with two 0.25 percentage point reductions already this year.
- Market Reactions: US Treasury yields and the dollar declined after the report, as stock futures rose, with the S&P 500 poised for a 1.6 percent opening gain.
- Survey Discrepancies: Unemployment figures derive from household surveys, contrasting with business surveys showing robust hiring, highlighting conflicting labor market indicators.
- Shutdown Impacts: The federal government shutdown delayed data collection, preventing an October jobs report and forcing inclusion of some data in November’s release, further clouding Fed deliberations.
-
(FT)
- Nvidia Results: Strong earnings prevent market meltdown and postpone AI over-investment concerns.
- Fiscal Largesse: Republican tax cuts and incentives frontloaded to boost household refunds by $700 average and lower corporate taxes to 16%, turning fiscal impulse positive for GDP growth.
- Interventionist White House: Potential stimulus checks, bond market support to cap Treasury yields, and tariff retreats if economic pressures mount.
- Corporate Profits: S&P 500 revenues exceed inflation with widening margins beyond just Magnificent 7, showing broad sector strength.
- Big Tech Valuation: Average forward P/E of 28 with 11% revenue growth, comparable to overvalued Costco, urging market calm on AI hype.
- Cheap Oil: Prices at $60 provide broad economic stimulus outside oil sector.
- Tariff Uncertainty: Supreme Court ruling against emergency tariffs could enhance business confidence despite short-term policy flux.
- Bitcoin Volatility: Price drop from $126,000 to $90,000 linked to macro factors like Fed rates and AI correction, correlating closely with Nasdaq and tech ecosystem.
-
(FT)
- Nvidia’s explosive growth: Company with nearly $200bn annual revenue achieved over 60% growth, defying norms for large firms.
- Record earnings beat: Latest quarter exceeded analyst estimates for sales and profit, with full sell-out of current chips and orders piling up.
- Massive revenue surge: $73bn growth in past four quarters surpasses entire yearly revenue of Morgan Stanley or IBM.
- Unprecedented scale: Nvidia’s current growth pace at $4.5tn market cap dwarfs Google’s similar rate when it had $150bn valuation.
- Monopoly advantages: 90% market share in AI chips yields 73% gross margins and strong pricing power, unlikely to face antitrust challenges.
- Future revenue variability: Projections range from $4.6tn to $2.4tn by 2030, depending on AI investment estimates and potential market share erosion.
- AI boom exposure: Nvidia’s dominance makes it highly vulnerable to shifts in demand or competition, unlike diversified rivals like Microsoft or Google.