Game on for Trump and Xi?
Watch trade, chip tech -- i.e. Nvidia and AMD -- and import controls as the Asia-Pacific Economic Cooperation forum begins. Also, why some lights will turn on at the BLS.
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The Asia-Pacific Economic Cooperation forum will kick off in just a few weeks in Gyeongju, South Korea, lasting from late October into early November. Representatives of the 21 member nations will meet as they do annually. There is one potential meeting that may matter more than any other one at this summit. Presidents Donald Trump and his counterpart, China's Xi Jinping are expected to meet on the sidelines of the forum. Many wonder if the world's two largest economies can finally come to a true trade deal or if the current status quo will just continue to be extended.
Already the pre-forum games have begun. Late Thursday, Beijing unveiled more expansive trade restrictions of rare earth minerals and metals. The new rules would require non-Chinese companies to get approval for selling magnets containing any rare earths originally sourced from mainland China or even refined using Chinese originated technology. The new restrictions supposedly will kick in on Dec. 1.
When asked, Pres. Trump said that he had not yet been briefed on the matter and added, "We have the ultimate export -- and we import from China massive amounts; maybe we have to stop doing that." What is Beijing really after? Probably, and this is conjecture, some relaxing of rules governing Chinese investment in the U.S. as a means toward tapping to an increased degree, the U.S. consumer. The U.S. has made that somewhat more difficult on national security grounds.
There's More
After that news broke, headlines crossed the tape that the U.S. Senate had passed bipartisan legislation that would require high-end AI-capable chip designers such as Nvidia (NVDA) and Advanced Micro Devices (AMD) to prioritize U.S.-based customers over Chinese-based customers.
This measure, officially named "The Guaranteeing Access and Innovation for National Artificial Intelligence Act" is part of the larger annual defense policy bill, will aim to improve U.S. business competitiveness in emerging technologies, while limiting exports to China and other potentially adversarial nations.
The issue has made for strange allies as the bill's co-sponsors are the very conservative Jim Banks of Indiana and the very liberal Elizabeth Warren of Massachusetts. The House has already passed its own version of the larger defense bill, so the future of this additional piece of legislation would be unknowable at this moment. It would have to get through the House once the two larger defense bills are reconciled to iron out their differences before ever heading to the president's desk.
We're Not Done...
After that news, the Financial Times reported that Beijing was stepping up enforcement of its import controls on semiconductors. especially all advanced semiconductor products. Beijing had already directed local firms to avoid purchasing these chips and to cancel existing orders, so I don't know if this has an increased impact upon US businesses than what was already in place.
This may be a way to show China's resolve ahead of the Trump - Xi meeting that the mainland can be less dependent on U.S. technology. This may also be driven by a belief that Chinese-designed chips have caught up from a technological perspective, at least to the chips that had been designed by Nvidia and AMD specifically for the Chinese market.
Marketplace
Equity markets were weaker on Thursday, but not much weaker. Treasury markets were weaker on Thursday, but not much weaker. Gold and Bitcoin were weaker on Thursday, but not much weaker. Was anything stronger, but not much stronger? Yes, the US Dollar Index. Correlation? Perhaps. Causation? Could be. Longer-term? Probably.
On Thursday, the New York Giants treated the Super Bowl Champion Philadelphia Eagles like a Division II college football team. Hi Jim. I know you still read me. Too bad, I am a Jets fan. Our Super Bowl quarterback is 82 years old. My Dad took me to the AFL playoff game the next season where the Jets were dethroned as AFL and Super Bowl champs. I may be the only financial pundit you read today that actually attended a pre-merge AFL game. Enough football.
The S&P 500 gave up a modest 0.28% on Thursday as the Nasdaq Composite gave back just 0.08%. The small to mid-cap indexes were hit harder, taking a beating spanning from -0.61% to -1.09%. The Dow Transports were slapped around to the greatest degree (-1.26%) of all of the equity indexes I follow closely, led lower by truckers and maritime transport. That's good for economic growth, right? (Shaking my head from left to right and back).
Breadth
Minty fresh? More like, uhm. No. Ten of the 11 S&P sector SPDR ETFs closed out the Thursday session in the red, led lower by three cyclical sectors that all gave up more than 1%, Industrials (XLI) the worst among them. Staples (XLP) were the only winner for the day and three of the top four performances came from groups that we identify as defensive in nature. The algos know where to go when the rain falls and the winds blow.
Losers beat winners by better than a 3-to-1 margin at the NYSE and by a rough 5 to 3 at the Nasdaq. Advancing volume took just a 33.9% share of composite NYSE-listed trade on Thursday as aggregate trade across names listed at the Big Board actually increased by just a smidgen from Wednesday's levels.
Bearish reversal? Not even close, my friends. Advancing volume took a rather impressive 59.5% share of Nasdaq-listed trade as aggregate trade across Nasdaq-listed names ebbed a bit from Wednesday. In other words, nothing to see here. Move it along.
Interesting
On Thursday, Microsoft (MSFT) announced that its Azure cloud computing platform had deployed its first large scale cluster of Nvidia's GB300 NVL72 systems. These systems feature more than 4,600 Blackwell Ultra GPUs connected with the Quantum-X800 infiniband networking platform. Yeah, we used to wear ghillie suits and nobody could see us. I am indeed from a different epoch.
Microsoft (MSFT) CEO Satya Nadella commented on X, "First of many as we scale to hundreds of thousands of GB300's across our DCs, and rethink every layer of the stack across silicon, systems, and software to support next gen AI workloads." Ian Buck, Nvidia's VP of Hyperscale and High-Performance Computing, added "This co-engineered system delivers the world's first at-scale GB300 production cluster, providing the supercomputing engine needed for OpenAI to serve multitrillion-parameter models. This sets the definitive new standard for accelerating computing."
I remember the first time a Wall Street firm named me a Vice President, a Senior VP, a Director and a Managing Director, almost always of block trading. Sounds dull now. I want to be a VP of Hyperscale and High-Performance Computing. That sounds almost as cool as being a DoD certified Jungle Expert. Almost.
Not a Bailout ...
A currency swap is not a bailout. Buying $20 billion worth of Argentine pesos with U.S. dollars certainly does put taxpayer money at market risk, but it is not a donation. The risks of having the Argentine peso and Argentine sovereign debt must be considered the greater risk to have undertaken this swap in the first place.
Better than Expected
The U.S. Treasury auctioned off $22 billion worth of brand spanking new Thirty-Year Long Bonds on Thursday. Yes, the high yield awarded of 4.734% did tail the "when issued" by 0.4 basis point, but that's where the negativity ended. Bid to cover was above the six-month average for the series at 2.382.
On top of that, Indirects (foreign accounts) took down 64.5% of the issuance, up from 62% last month, while domestic demand remained strong at 26.9% of the auction. This left dealers with just an 8.7% slice of the pie, which was the lowest share for Dealers on record for 30-year paper. Maybe the price wasn't perfect, but the Treasury did not really have to go too far to find very strong demand.
Come Back, Shane!
Apparently, the Bureau of Labor Statistics has recalled a number of recently furloughed employees necessary to get the September consumer price index data, which is due next Wednesday, ready by the end of the month. The agency was directed by the White House Office of Management and Budget to bring back enough employees as required to assemble this measure of September inflation as that number is a necessary component in the calculation of next year's Social Security payments. No, the shutdown is not over.
(Tentative) Economics
(All Times Eastern)
10:00 - U of M Consumer Sentiment (Oct-adv): Expecting 54.8, Last 55.1.
10:00 - U of M One-Year Inflation Expectations (Oct-adv): Expecting 4.5%, Last 4.7%.
10:00 - U of M Five-Year Inflation Expectations (Oct-adv): Expecting 3.6%, Last 3.7%..
1:00 p.m. - Baker Hughes Total Rig Count (Weekly): Last 549.
1:00 - Baker Hughes Oil Rig Count (Weekly): Last 422.
2:00 -Federal Budget Statement (Sep): Last $-345B.
The Fed
(All Times Eastern)
09:45 - Speaker: Chicago Fed Pres. Austan Goolsbee.
1:00 p.m. - Speaker: St. Louis Fed Pres. Alberto Musalem.
Today's Earnings Highlights
(Consensus EPS Expectations)
No significant quarterly earnings scheduled.
At the time of publication, Guilfoyle was long NVDA, AMD, MSFT equity.
