Stocks Rise, Bonds Fall as AI Shares Take Flight | 26/5/2023

Stocks rose as a bullish sales forecast from Nvidia sparked a rally in artificial-intelligence companies. Traders also cheered movement in the debt talks. Speaker Kevin McCarthy said the negotiating teams made “some progress” on Wednesday, while there are still issues to be solved. One of the main GOP negotiators said later that the two sides are narrowing their differences but haven’t reached an agreement to avert a default. The S&P lifted 0.9%, the NASDAQ rose 1.7% but the Dow was 0.1% lower. Asian equity futures are higher.

Treasury yields rose as stock gains curbed demand for the haven of government debt. What’s more, a resolution in the debt talks would lift a cloud over the economy, making it easier for the Fed to keep raising rates. Boston Fed President Susan Collins said the central bank may have reached, or be approaching, a point where it can pause. The 2-year yield rose 16bps to 4.53% while the 10-year jumped 7.5bps to 3.82%. Swaps show traders expect another quarter-point increase by the Fed’s July meeting. A seven-year Treasury sale drew solid demand. Bank of England policymaker Jonathan Haskel signaled he’s likely to support further rate increases in the UK.

U.S Fed Funds futures

A gauge of the dollar’s strength extended gains into a fourth day, the longest winning streak since October. The yen weakened past 140 against the greenback for the first time since late November, underscoring diverging expectations for monetary policy in Japan and the US. The South African rand tumbled after central bank Governor Lesetja Kganyago warned that further currency weakness is likely.

  • USD/JPY up 0.5% to 140.17
  • AUD/USD fell 0.6% to 0.6505
  • NZD/USD fell 0.9% to 0.6060
  • EUR/USD -0.3% to 1.0722

Crude oil dropped, gold weakened and the Bloomberg Dollar Spot Index advanced.

Analytics by,

Lenny Hayes 

Chief Technical officer of Tradehall