The new year craze in artificial intelligence and chatbots seems to have electrified chip designer Nvidia , whose stock surged more than 8% before the bell after it forecast first-quarter revenue above Wall St estimates late Wednesday. Its CEO Jensen Huang said use of its chips to power AI had "gone through the roof in the last 60 days." The world's largest supplier of chips used in data centers for training AI has become a key hardware supplier for large tech companies such as Microsoft Corp that are building services like chat-powered search engines. Chip stocks rose around the world on Thursday in the slipstream of Nvidia's earnings report. S&P500 stock futures jumped about 0.5% and back above 4,000 points ahead of the open. If the AI boom is one vignette in a world economy that appears to be skirting widely-forecast recession and regenerating some momentum, then the interest rate implications are considerable - not just in how high they go, but how long they stay up there.
The Federal Reserve at least seems keen on the higher-for-longer message that's shaken world stock and bond markets this week. While most Fed policymakers rallied behind a decision to further slow the pace of interest rate hikes at its last policy meeting - suggesting some still saw another half-point rate rise as warranted - minutes from the meeting showed they all saw curbing unacceptably high inflation as the "key factor". Bond yields rose following the release of the minutes and the U.S. dollar also advanced. And as the minutes pre-date red-hot jobs and retail data for January, the message from Fed officials is probably even sterner now. New York Federal Reserve Bank President John Williams on Wednesday said the Fed is "absolutely" committed to bringing inflation back down to its 2% target over the next few years, by bringing demand down in line with constrained supply. The signals from other central banks were similar. Bank of England interest rate-setter Catherine Mann said on Thursday that it was too soon to sound the all clear on inflation and the BoE should continue to raise borrowing costs. Investors seem to be taking all that on board. A Reuters poll of equity analysts showed global stock markets are expected to correct in the next three months. The Feb. 10-22 poll of more than 150 strategists, analysts and fund mangers covering 17 global stock indices, found that 56% were expecting their local market to fall in the next three months. A total of 48 out of 86 respondents said the chances of a correction were either high or very high.
But well chosen recovery stocks continue to do well. British
engineering firm Rolls-Royce surged 18.1% on Thursday
after the company's CEO forecast more profit growth in 2023
after last year's beat. A key factor was optimism around civil
aerospace, the firm's biggest division, as travel recovers from
the pandemic.
Key developments that may provide direction to U.S. markets
later on Thursday:
* US Q4 GDP revision and corporate profits estimate; weekly
jobless claims; Kansas City Fed Feb business index; Chicago Fed
Jan business index
* San Francisco Federal Reserve President Mary Daly, Atlanta Fed
President Raphael Bostic speak; Bank of Spain Governor Pablo
Hernandez de Cos speaks
* G20 finance ministers and central bankers meet in Bengaluru in
southern India; Japan chairs separate G7 finance chiefs meeting
* U.S. Treasury sells 7-year notes
* U.S. corp earnings: Intuit, Edison, Booking, Moderna, Alliant
Energy, Autodesk, Teleflex, Newmont, Warner Bros Discovery,
PG&E, Domino's, American Tower, American Electric Power, Keurig
Dr Pepper, CBRE, Evergy etc
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ U.S. natural gas prices drop lowest since Sept. 2020 US mortgage demand growth 2022 was worst year for chip stocks since 2008 crisis Banking on value ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (By Mike Dolan, editing by Christina Fincher mike.dolan@thomsonreuters.com. Twitter: @reutersMikeD)
Messaging: mike.dolan.reuters.com@thomsonreuters.net))