Jobs data cooled NVDA, AMD, TSM +.. rally ?
Another week just whisked by with the blink of an eye.
US market almost had another week of winning streak; had it not been spooked by: (see below)
Official Jobs reports data released, especially US Non-Farm payroll.
Fed chair Mr Jerome Powell’s annual testify meeting with US Congress.
President Biden’s State of the Union address.
Indexes performance.
3 composite indexes performances: (see above)
DJIA: -0.63% (-246.08 to 38,772.69).
S&P 500: -0.14% (-7.30 to 5,123.69).
Nasdaq: -1.10% (-179.10 to 16,085.11).
US market was still trending on Monday, before it got jittery on Tuesday in anticipation of Mr Powell’s annual testify with US Congress over 2 days.
Mounted a recovery on Thursday before it was cut-short by the President’s address and Friday’s jobs report.
Various US Jobs reports.
ADP Employment report
On 06 Mar 2024, US private payroll report was released. (see above)
Private sector employment increased by 140,000 jobs in February 2024.
Annual pay was up +5.1% YoY.
According to ADP’s Chief Economist - Nela Richardson:
Job gains remain solid.
Pay gains are trending lower but are still above inflation.
In short, the labor market is dynamic, but does not tip the scales in terms of a Fed rate decision this year.
Jobs Opening and Labour Turnover Surveys (JOLTs).
Data for December 2023- JOLTs was revised lower to 8.889 Million unfilled positions instead of previously reported 9.026 Million.
US job openings (for January 2024) fell marginally, while hiring declined as labour market conditions continue to ease gradually. (see above)
Based on Labor Department's Bureau of Labor Statistics, job openings (a measure of labour demand), slipped -26,000 to 8.863 Million on the last day of January 2024.
Number of resignations also fell by -54,000 to 3.385 Million in the same period.
US Weekly Jobless Claims.
For the week ending 02 Mar 2024, the number of Americans filing new claims for unemployment benefits was unchanged from last week (data of 217,000) as the labor market continued to gradually ease. (see above)
Economic growth for Q1 2024 is expected to slow marginally as the resilient labor market underpins consumer spending.
FWDBONDS, Chief Economist - Christopher Rupkey said:
New layoffs remain relatively modest.
This indicates, there is no immediate deterioration of labour market conditions heading US way.
On Fri, 08 Mar 2024, the most anticipated US Non-Farm payroll (for February 2024) report was released, to positive turned negative fanfare.
US February jobs report showed employers added 275,000 payroll positions.
Poll by Dow Jones, the hiring topped market expectations of 198,000 jobs, implying that US economy is still running hot.
Thankfully, unemployment rate unexpectedly ticked higher to 3.9% for the same measuring period. (see above)
Wage growth was lighter than feared, offering morsels of hope that inflation has cooled enough to appease the Fed.
KeyBank, Chief Investment officer - George Mateyo summed:
People will be able to take away whatever message they want to from the Non-Farm payroll report.
We think the data skews positive.
It should provide sufficient confidence to the Fed that a modest adjustment to interest rates is appropriate.
In addition, Academy Securities said Friday’s non-farm jobs report may have appeared strong at first glance.
A closer look reveals “disturbingly weak” data.
Based on Academy Securities, Head of Macro strategy - Peter Tchir’s analysis:
There were 2 sizable downward revisions in data from the past 2 months.
Namely, Nov 2023 reported data of 199,000 jobs were revised down by -26,000 (-13.07%) to 173,000 the following month.
Similarly, Jan 2024 reported data of 353,000 jobs were revised down by -124,000 (-35.13%) to 229,000.
Suggesting the labour market is weaker than investors previously though.
Coupled with the marginal rise in latest unemployment rate” (3.9%), it does not bode well for US economy.
The “quit” rate in US’s January JOLTs implies workers do not think it is easy to find another job.
Taking all jobs’ reports into consideration — the data points to a US jobs market that is “slightly ‘below normal’” and “heading the wrong direction” at a time when consumer delinquencies is rising.
The development could be “weak enough” to add downside pressure to equities., Tchir added.
Was this the reason Wall Street decided to turn tail on Fri, 08 Mar 2024 afternoon; after fully digesting the NF report?
Powell’s Annual Congress meeting.
Overall, the much feared annual meeting was deftly handled by US central bank chairman.
3 of 5 key takeaways from Mr Powell’s 2 days meeting with US Congress gave US market a stablizing shot in the arm:
US economy growth is solid and is likely to continue. Recession risks is not elevated in the near term. On US’s economy “soft landing”, Mr Powell said the Fed would not officially declare as yet. At the same time, the Fed is keeping a closed tab of commercial real estate issues.
Powell reiterated the Fed’s forward guidance on interest rates indicating “its policy rate is likely at its peak”. At some point in 2024, it will be the right time to dial back policy restraint, re-emphasizing repercussions of moving too quickly or aggressively.
The Fed is looking for “a bit more evidence” that inflation is headed sustainably to the Fed’s 2% target before cutting rates. It wants to see more good, relatively low inflation data.
Fed interest cut.
Mr Powell’s meeting and overall positive replies gave hope to Wall Street once again.
The latest CME Fedwatch tool for May 2024 & June 2024, are saying so. (see below)
CME Fedwatch tool for June 2024
Analysts’ interpretation of Fed Chairman’s sessions with Congress once again permit optimism to set in. (see above)
While probability of an interest cut in May 2024 by 25 basis points to “500 - 525” remains at 23.2%.
Probability of an interest cut in June 2024 by -0.25% to “500 - 525” hovers to 57.46%. (see above)
Biden’s State of the Union (SOTU) address.
Personally, I think it was President Biden’s SOTU address coupled with US Non Farm payroll (Feb 2024) that caused both US market and more importantly semiconductor stocks to consolidate.
The SOTU took place on Thu, 07 Mar 2024 evening, right after Mr Powell’s meeting with Congress earlier on in the day.
The hour long speech touched on bot domestic and international challenges. It was the latter that caught my eyes & ears.
He alluded to stringent export controls that ban the export to China of leading-edge semiconductors and related technologies to ensure that they “can’t be used in China’s weapons.
In August 2023, the Biden administration has been shook to the core by Huawei released of its Mate 60 series of mobile phone; despite all the obstacles stacked in front of the Chinese tech giant.
Even before the SOTU dust has settled, the Biden administration is already mulling on its next clam-down move against Chinese firms - CXMT and chipmaker ChangXin Memory Technologies Inc. (see above)
At second glance, the semiconductor clash looks set to get worse and not better, as the US-China trade war escalates, amidst a global economy slows down.
In the coming weeks, will the following semiconductor stocks continue to consolidate:
$NVIDIA Corp(NVDA)$ - lost -5.55% on Fri, 08 Mar 2024.
$Advanced Micro Devices(AMD)$ - lost -1.89% on Fri, 08 Mar 2024.
$Intel(INTC)$ - lost -4.66% on Fri, 08 Mar 2024.
$Taiwan Semiconductor Manufacturing(TSM)$ - lost -190% on Fri, 08 Mar 2024.
$ARM Holdings Ltd(ARM)$ - lost -6.65% on Fri, 08 Mar 2024.
On a possible worst case scenario, will the US government issue an outright ban on all things semiconductor related to China, based on its vast amount of patents?
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Do you think the US government will continue to tighten its grip on semiconductor-related exports to China?
Do you think in the medium to long term, all semiconductor companies will suffer from loss of doing business with China?
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