Market 05/23: Signs of production and employment heating up again

Video Recap 05/22: FED Unexpectedly Talks About Rate Hikes - Nvidia Shatters All Expectations

Auction of Treasury Inflation-Protected Securities (TIPS) 10Y

FYI: The principal amount when buying TIPS (principle) will be adjusted upward if inflation and downward if deflation.

• TIPS interest rate remains fixed but coupon payment will be adjusted according to inflation conditions.

• TIPS 10Y auctioned only 6 times a year: in odd months 1, 3, 5, 7, 9, 11, mainly from foreign investor demand.

• High Yield: 2.184% (March 2024 auction session: 1.932%)

  • Dealers bidding at High Yield: 63.66% (March: 2.9%)

With sticky inflation and the Fed extending the tightening period — TIPS yields also rise unexpectedly higher than previous session!

S&P PMI May highest in 2 years - despite national economic activity index declining

⁩Manufacturing activity S&P PMI May expands the most in 2 years

S&P Global's preliminary May PMI estimates show manufacturing activity continues to expand:

• Composite PMI: 54.4, highest since April 2022 (estimate 51.1 | previous 51.3).

• Manufacturing PMI: 50.9, highest in 2 months (> estimate | previous 50).

• Services PMI: 54.8, highest in 12 months (< estimate 51.2 | previous 51.3).

→ Warning sign that inflation is hard to cool down.

• All component indices in Manufacturing PMI show recovery trend.

Chicago Fed National Activity Index declines

• Chicago Fed Activity Index drops to -0.23 (previous: -0.04).

  • All component indices record declines.

Kansas City Fed Manufacturing Index recovers

• Kansas City Fed Manufacturing Index recovers to level -2 (estimate -7, previous -8).

  • New orders decrease — Employment increases again.

New home sales fell in April

• New home sales in April fell to 634,000, down -4.7% MoM (estimate -2.2% & previously +5.4%).

  • Yesterday, existing home sales also fell more than expected

  => Overall housing market: home buying demand down due to high mortgage rates.

• Notably, previous months' home sales data are being revised downward.

• Average new home price up +3.9% YoY (~ 433,500 USD), near record high.

  • Average selling price at 505,700 USD.

• Meanwhile, new home supply also rose to 9.1 in April - marking continuous increase for 1 year.

Initial jobless claims this week fell the most since September

• Initial jobless claims fell to 215,000 - largest drop since September (forecast: 220,000, previous: 223,000).

  → Labor demand and layoffs both decreased.

  • Continuing claims remained at 1.79 million.

However, note that weekly data is quite volatile and does not reflect the trend!

Company earnings reports: NVIDIA, Snowflake

NVIDIA ER: Massive revenue growth - Revenue data center up more than 400% YoY

• Revenue: up +18% QoQ, reached 26 billion USD (beat estimates by 1.5 billion USD).

• Gross margin: 78% (up +2% QoQ).

• Operating margin: 65% (up +3% QoQ).

• Non-GAAP EPS: 6.12 USD (beat estimates by 0.54 USD).

• Dividend up 150%.

Q2 FY2025 guidance:

• Revenue: ~28 billion USD (beat estimates by 1.2 billion USD).

• NVIDIA revenue breakdown by segment:

• Since IPO, NVIDIA has risen 245,000%.

• Semiconductor industry has significant growth potential:

  • TSMC predicts global semiconductor industry annual revenue growth could reach 10%.

Snowflake ER: Raised product revenue guidance

• Number of customers: up +21% YoY, reached 9,822.

• Customers spending >1 million USD: up +30% YoY, reached 485.

• Customer retention rate (NRR): 128% (down -3% QoQ).

• Revenue: up +33% YoY, reached 829 million USD (beat estimates by 43 million USD).

• Non-GAAP EPS: 0.35 USD (expected 0.03 USD).

• FY2025 product revenue guidance: 3.30 billion USD (raised by 50 million USD vs. prior guidance).

Crypto market: Ethereum ETF approval becoming a “political issue”

• SEC discussing issuance of Ethereum ETF.

Decision on Ethereum Spot ETF could come today or tomorrow.

• A group of House lawmakers urges SEC to approve Spot Ethereum ETF as decision deadline approaches.

Other news: Bird flu outbreak in the US and Australia

1. OpenAI signs agreement granting access to content from some of the largest news publications owned by News Corp media group, valued at 250 million USD.

2. US and Australia report human bird flu cases, warn of increasing numbers. (See more here)

   • FDA warns of up to 25% mortality rate in new virus strain.

   • Surge in demand from vaccine stockpiles drives up stock prices of vaccine manufacturers: Moderna +14%, BioNTech +11%, CureVac +18%, Novavax +5.3%.

3. Boeing delays aircraft delivery to China due to China's periodic review of batteries related to cockpit voice recorder equipment.

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