By Jamie McGeever
ORLANDO, Florida, May 19 (Reuters) – Wall Street fell on Tuesday, slammed again by inflation worries that pushed long-dated bond yields to the highest since 2007, as investors dismissed conflicting signals on U.S.-Iran talks and looked ahead to Nvidia’s earnings on Wednesday.
In my column today, I also look ahead to Nvidia’s results. Another bumper report is expected, but it comes at a potentially critical juncture for the company and wider sector: if the AI juggernaut is to slow down, it could be for the oldest of old-school reasons – rising interest rates.
If you have more time to read, here are a few articles I recommend to help you make sense of what happened in markets today.
1. Warsh’s arrival leaves long bonds without a safety net: Mike Dolan
2. World awaits new Fed Chair’s vision on independence
3. EXCLUSIVE-US not in hurry to extend China trade truce, Bessent says
4. UK finance ministry presses supermarkets to cap food prices, sources say
5. Nvidia shares set for $350 billion price swing after earnings, options show
Today’s Key Market Moves
• STOCKS: South Korea -3.3%, Europe up slightly, UK basically flat. S&P 500 and Dow -0.7%, Nasdaq -0.8%.
• SECTORS/SHARES: Five sectors on the S&P 500 fall, six rise. Comms services, consumer discretionaries, industrials, financials down 1% or more, materials -2%. Akamai Technologies -6% on bond offering, Cisco -3%.
• FX: Yen slips through 159/$, Tokyo cranks up warnings. India’s rupee hits new low for sixth day in a row
• BONDS: 30-year U.S. yield highest since 2007, flirts with 5.20%. U.S. futures now indicating more than 50% chance of rate hike this year.
• COMMODITIES/METALS: Oil down ~0.8% as Vance cites Iran progress, precious metals slide: gold -1%, silver and platinum -4%.
Today’s Talking Points
* Nvidia Day
The world’s most valuable company releases its latest earnings on Wednesday, and it is expected to be another blockbuster. But after years of near-monopoly in chips used to train AI systems, Nvidia is facing competition from tech giants building their own chips. The market is much larger, but also more contested.
And tens of billions of dollars in revenue is no guarantee shares immediately rise either. In February, shares tumbled 5.5% the day after earnings, the biggest drop in 10 months, even as revenue leaped 94%. A further 4% slide the next day wiped out $450 billion of market cap in 48 hours. And last November shares slid 3% the day after results, and 6% in the three days after the prior earnings report last August 27.
* Rock, meet hard place
Ugly UK jobs data Tuesday, ugly inflation data Wednesday? If so, the Bank of England is in an even more invidious position than it might have feared. Raise rates to cap prices, or support the creaking labor market? Other central banks will be watching closely – they could find themselves in the same boat soon.
Figures on Tuesday showed UK payrolls fell by 100,000 in April, the biggest drop since the start of the pandemic. CPI inflation data on Wednesday is expected to show a sharp rise in monthly rates but cooling annual gains. BoE officials will be praying there are no surprises. Not on the upside, anyway.
* Intervention tension
Japan is sounding the FX intervention alarm. Again. Finance Minister Satsuki Katayama warned at the G7 meeting in Paris that Tokyo is ready to act, as the yen slides toward 160 per dollar, which seemed to be the catalyst for Japan wading back into the market to buy yen on April 30.
Traders will take note and many may reduce long dollar/short yen positions. But if Japan has spent 10 trillion yen since April 30 defending the currency, as sources suggest, that’s a lot of money to buy you barely three weeks of breathing room.
What could move markets tomorrow?
• Developments in the Middle East
• Japan Tankan survey (May)
• China interest rate decision
• Indonesia interest rate decision
• Taiwan current account (Q1)
• Taiwan export orders (April)
• Germany producer price inflation (April)
• Euro zone inflation (April, final)
• UK PPI and CPI inflation (April)
• Bank of England Governor Andrew Bailey testifies to Treasury Select Committee, alongside BoE colleagues Sarah Breeden, Swati Dhingra and Catherine Mann
• U.S. Treasury sells $16 billion of 20-year notes at auction
• U.S. Federal Reserve minutes of April 28-29 policy meeting
• U.S. earnings include Nvidia, Lowe’s, Target
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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
(Reporting by Jamie McGeever;)
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