Amazon Flexes New Chip, Lisa Su Shines, Hassert as Fed Front-Runner?
Here's the latest in the race for a new Fed head, how the chip wars just got more exciting and why you should keep close watch on AMD.
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I suppose that the selection should not surprise anyone. On Tuesday evening, the Wall Street Journal reported that earlier in the day, the Trump administration had canceled interviews with Vice Pres. JD Vance of several well-publicized candidates to become the next Fed Chair. Those candidates were the president's long-time economic adviser Kevin Hassert, former Fed Gov. Kevin Warsh and current Fed Gov. Christopher Waller. No reason was given. It appears no attempt to reschedule was made.
As most readers are likely well aware, Pres. Trump held a cabinet meeting during the day on Tuesday. From that meeting, the president told reporters that he had narrowed his list of potential future Fed Chairs to just one. Later Tuesday, at a public event, the president referred to Hassert, who has been with the president through both of his administrations, as a "potential Fed Chair."
So, no, we do not have a publicly announced selection, but it does appear, as many had started to suspect, that Kevin Hassert had emerged as the front-runner for the job. Hassert will likely end up the nominee from a process run by Treasury Sec. Scott Bessent, where interviews had begun months earlier with as many as 11 seriously considered candidates.
Current Fed Chair Jerome Powell's term as the nation's top central banker expired this coming May. Powell's term as a member of the Fed's Board of Governors does not expire until January 2028, so in theory, though it would be unusual, Powell could stick around in a policy impacting capacity long after his time as the Fed's leader ends. Whoever inherits the role of Fed Chair from Powell, likely Hassert, will inherit a Federal Open Market Committee openly struggling to balance the central bank's dual mandate as both the nation's employment situation and consumer-level inflation simultaneously require attention.
What's To Come...
Over the weekend, Pres. Trump had said that he knew who he wanted to nominate to next lead the Fed. Betting markets immediately singled out Hassert as that front-runner, though he pushed back against the idea on the CBS News show "Face the Nation" with Margaret Brennan on Sunday.
Hassert's public statements over recent months have shown an inclination to favor the promotion of economic activity over taking on inflation. In a November event at the Economic Club of Washington, Hassert told the audience that he agreed with the president's opinion that interest rates could probably be much lower and showed a preference for a half-percentage point rate cut at the Fed's upcoming Dec. 10 policy decision. Futures markets are currently pricing in an 87% probability for a quarter point rate cut next week and a 13% likelihood for no cut at all.
As for a market reaction, while this "rumor" moved closer to becoming news on Tuesday, yields at the long end of the Treasury more or less flat-lined while yields at the short end of the curve pressed lower (indicating the purchase of T-Bills). It appeared that the keyword reading algorithms that control equity market price discovery in this modern era, at least at the index level, reacted well to the idea of a Kevin Hassert led Fed.
Semi-Immediate Concern
Over recent days, readers may have noticed that both the Secured Overnight Financing Rate and the Tri-Party General Collateral Rate have worked their way higher, even topping 4%. These rates are derived from the overnight repo market and are an indicator that bank reserves are running a little low and that liquidity conditions are tightening. Are these emergency levels? No. These rates have flirted with these levels and even higher levels than this as recently as October.
These tightening conditions are likely what provoked the Powell-led Fed to wind down the central bank's quantitative tightening program. The problem would be that the Fed started to wind down that program a bit later than it should have. We, here and others, did warn the Fed. As usual, they thought they knew better. As usual, they, being mostly academics and not practitioners, missed the mark. To be clear, this is a concern. This is not an emergency. The situation has to be closely monitored as we move into year's end.
The solution? Should our central bankers decide that reserves are no longer ample, the Fed will need to act and add to the balance sheet through the purchase of short-term Treasury debt products. This will inject liquidity into the system while simultaneously pressuring short-term interest rates. Not rocket science, but they can't go to sleep on the issue.
Marketplace
On Tuesday, the major U.S. equity indexes rallied, but that rally was selective in nature. It would be difficult to call Tuesday a solid day for the broader marketplace. Cryptocurrencies rallied sharply, as Bitcoin approached the $94,000 earlier this overnight / early morning session. I guess that kicks some dirt on the ideas that I had concerning this space earlier this week. Gold and silver have come off of their earlier highs, though neither has given up the ghost. Why would one sell such assets if a perceived dove were being talked about as the next Fed head?
The S&P 500 gained just 0.25% for the session on Tuesday as the Nasdaq Composite added 0.59%. As much of the positive activity for the day was focused on big tech, the Nasdaq 100 gained a nice 0.84%. Small to mid-caps struggled as the Russell 2000, S&P 600 and S&P 400 gave up 0.17%, added 0.06% and gave up 0.35% respectively.
Only three of the 11 S&P sector SPDR ETFs ended the day in the green, led by Tech (XLK) and followed by the Industrials (XLI) . The losers were led lower by Energy (XLE) , the Materials (XLB) and all four defensive sectors. In support of the Tech sector and the Nasdaq indices, the Philadelphia Semiconductor Index gained 1.84% on the regular session.
Why? Early on Tuesday, the WSTS (World Semiconductor Trade Statistics) forecast that the global semiconductor market was likely to grow by more than 25% reaching $975 billion in 2026. The WSTS sees memory and logic chips boosted by AI-focused demand leading that charge. Intel (INTC) and NXP Semiconductor (NXPI) led the group, both adding a rough 8% or better for the day.
Breadth?
Don't ask. While the major equity indexes painted the tape with a light shade of green, a moderate majority of individual stocks had trouble keeping up. Losers beat winners by a 5-to-4 margin at the NYSE and by something close to a 12-to-11 margin at the Nasdaq. Advancing volume took a 48.7% share of composite Nasdaq-listed trade and a 41.5% share of composite NYSE-listed activity. Did the day's activity really matter? Outside of tech, not technically.
Aggregate trading volume edged slightly higher on a day-over-day basis across NYSE-listings and slightly lower across Nasdaq-listings. Aggregate trade across the membership of the S&P 500 printed 16% below the 50-day trading volume simple moving average for the index and has not come within 12% of that line since Monday, Nov. 24. Either nobody knows what to do, or nobody cares right now. I'll have to get back to you on that. I thought that the trading volume would return this week. So far, it has not.
On The Semis...
At Amazon's (AMZN) AWS Re:Invent conference on Tuesday, AWS CEO Matt Garman unveiled the Tranium3, which is Amazon's latest in-house custom chip. Custom chips have become more popular as mega-cap investors in AI-focused infrastructure search for ways to control capital spending. Broadcom (AVGO) collaborated with Alphabet (GOOGL) to create the TPUs (tensor processing units) used in the launch of Google's Gemini 3 multimodal AI model.
Meta Platforms (META) has recently discussed using TPUs as an alternative to Nvidia- (NVDA) or Advanced Micro Devices- (AMD) designed GPUs. GPUs are a step up in broader capability, but also considerably more costly to buy in bulk. Still, Amazon introduced "AWS Factories" at the conference on Tuesday.
This product will provide AI infrastructure to clients using their own on-premise data centers. This platform will combine Amazon's TPUs and with Nvidia's GPUs (graphics processing units) and grant access for clients to Nvidia's accelerated computing platform, accelerated applications and full-stack AI software.
Count AMD out? I don't think so. Lisa Su is every bit the winner that Jensen Huang is. Still a supplier to OpenAI, as large buyers look for capital spending solutions and as GPUs are far more capable than TPUs (tensor processing units), margin may suffer a bit, but I would not be surprised in the least to see AMD take some market share from Nvidia in the GPU space as they once did to Intel in the CPU, or central processing unit, space. She won't steal Jensen's lunch as she did to Intel, but she will compete and she will compete effectively.
Economics
(All Times Eastern)
07:00 - MBA 30 Year Mortgage Rate (Weekly): Last 6.4%.
07:00 - MBA Mortgage Applications (Weekly): Last 0.2% w/w.
08:15 - ADP Employment Report (Nov): Expecting 18K, Last 42K.
08:30 - Export Prices (Sep): Expecting 0.0% m/m, Last 0.3% m/m.
08:30 - Import Prices (Sep): Expecting 0.1% m/m, Last 0.3% m/m.
09:15 - Industrial Production (Sep): Expecting 0.1% m/m, Last 0.1% m/m.
09:15 - Capacity Utilization (Sep): Expecting 77.3%, Last 77.4%.
09:45 - S&P Global Services PMI (Nov-F): Flashed 55.0.
10:00 - ISM Non-Manufacturing Index (Nov): Expecting 52.1, Last 52.4.
10:30 - Oil Inventories (Weekly): Last +2.774M.
10:30 - Gasoline Stocks (Weekly): Last +2.513M.
The Fed
(All Times Eastern)
Fed Blackout Period.
Today's Earnings Highlights
(Consensus EPS Expectations)
Before the Open: (DLTR) (1.08), (M) (-.15)
After the Close: (FIVE) (.24), (PVH) (2.54), (CRM) (2.86), (SNOW) (.31), (PATH) (.15)
At the time of publication, Guilfoyle was long INTC, NVDA, AMD equity.
