REUTERS
"Intel forecasts second-quarter revenue below estimates, shares fall"
By Arsheeya Bajwa and Max A. Cherney
April 25, 2024
April 25 (Reuters) - Intel forecast second-quarter revenue and profit below market estimates on Thursday, as it faces weak demand for its traditional data center and personal computer chips amid efforts to build its contract manufacturing business.
Shares of the Santa Clara, California-based company fell close to 6% in extended trading.
The company expects second-quarter revenue in the range of $12.5 billion to $13.5 billion, compared with analysts' average estimate of $13.57 billion, according to LSEG data.
Intel forecast second-quarter adjusted earnings of 10 cents per share, also below expectations.
Enterprises have prioritized spending on advanced and speedy AI server chips, hurting demand for Intel's central processing units (CPUs), which have been the mainstay chip powering data centers for decades.
According to analysts, surging demand for graphics processing units (GPUs) useful for AI applications has also reduced the appetite for CPUs, which are Intel's main product.
Intel's total revenue of $12.72 billion in the first quarter marginally missed expectations of $12.78 billion.
Sales at its data center business rose 5% to $3 billion during the period.
Nvidia's powerful GPUs dominate the AI market, as large and small companies have sought to acquire tens of billions of dollars worth of its processors.
Still, constrained supply for these advanced and speedy processors has left Intel with the opportunity to capitalize on the towering demand, though it is a late entrant in the market.
Intel forecasts more than $500 million in revenue from its Gaudi AI chips this year, CEO Patrick Gelsinger told Reuters on Thursday.
Preliminary results from IDC showed the PC market returned to growth in the first quarter after about two years of declines.
Revenue from the client computing segment, which houses Intel's PC chips, rose 31% during the quarter.
Intel's contract manufacturing business, or foundry, is working to catch industry leader TSMC, but its profitability is years away.
Revenue from the foundry business fell 10% in the first quarter.
The company recorded an adjusted gross margin of 45.1% for the first quarter, compared with analysts' expectation of 44.3%.
Inter-segment eliminations of $4.4 billion were made to prevent double-counting of revenue.
Reporting by Arsheeya Bajwa in Bengaluru; Editing by Shilpi Majumdar
https://www.reuters.com/technology/inte ... 024-04-25/
THE DAILY NEWS
Re: THE DAILY NEWS
REUTERS
"Biden announces preliminary deal with Micron for up to $6.14 bln in chip grants"
By Jarrett Renshaw and Nandita Bose
April 25, 2024
WASHINGTON, April 25 (Reuters) - U.S. President Joe Biden traveled to Syracuse, New York, on Thursday and announced a preliminary agreement with memory chip maker Micron Technology for up to $6.14 billion in subsidies for two chip factories.
The agreement signed by the U.S. Commerce Department will fund facilities in New York and Idaho under the 2022 CHIPS and Science Act, which aims to boost domestic manufacturing of chips and reduce reliance on supplies from China and Taiwan.
Biden said the United States used to have 40% of the chips market but over time production moved outside the country and the pandemic exposed weaknesses in the U.S. supply chain that hurt critical industries.
"I'm determined that I'm never going to let us be vulnerable to wait lines again, what is essential is we're going to make it here in America together," Biden said.
The Commerce Department said the federal grants would support the construction of a fabrication plant, or fab, in Clay, New York, a first step toward Micron's plans to invest about $100 billion in New York and create 13,500 jobs.
The grants also provide initial funding for a facility in Boise, Idaho, unlocking a planned $25 billion investment in a fab to be co-located with Micron's research and development facilities there and should create 6,500 jobs, Commerce said.
Micron's investment will be the "largest private investment in New York and Idaho's history," and will create over 70,000 jobs, including 20,000 direct construction and manufacturing jobs and tens of thousands of indirect jobs," the White House said.
Biden, who is running for re-election in November's presidential election, used his visit to Syracuse to tout his administration's efforts to revitalize U.S. manufacturing and strengthen national security.
"American manufacturing is back, new factories are going up all across the country, and communities like Syracuse are writing the great American comeback story," Biden said.
In the evening, the president will speak at a campaign event in Westchester County, New York.
Biden signed the $52.7 billion CHIPS bill in August 2022 to subsidize U.S. semiconductor production and research.
Semiconductors were invented in the United States, but domestic companies produce only about 10% of the world's chips and none of the most advanced ones.
The White House said Thursday's announcement also included at least $40 million in funds for training and workforce development, as well as creation of four more workforce hubs in upstate New York, Milwaukee, Philadelphia and Michigan.
Under the agreement, Micron committed to providing affordable high-quality childcare for its workers across its facilities.
The company also affirmed "workers' rights to organize, to share feedback without fear of reprisal, and to collectively bargain," the White House said.
Reporting by Jarrret Renshaw, Nandita Bose and Andrea Shalal; Editing by Tom Hogue and Diane Craft
https://www.reuters.com/technology/bide ... 024-04-25/
"Biden announces preliminary deal with Micron for up to $6.14 bln in chip grants"
By Jarrett Renshaw and Nandita Bose
April 25, 2024
WASHINGTON, April 25 (Reuters) - U.S. President Joe Biden traveled to Syracuse, New York, on Thursday and announced a preliminary agreement with memory chip maker Micron Technology for up to $6.14 billion in subsidies for two chip factories.
The agreement signed by the U.S. Commerce Department will fund facilities in New York and Idaho under the 2022 CHIPS and Science Act, which aims to boost domestic manufacturing of chips and reduce reliance on supplies from China and Taiwan.
Biden said the United States used to have 40% of the chips market but over time production moved outside the country and the pandemic exposed weaknesses in the U.S. supply chain that hurt critical industries.
"I'm determined that I'm never going to let us be vulnerable to wait lines again, what is essential is we're going to make it here in America together," Biden said.
The Commerce Department said the federal grants would support the construction of a fabrication plant, or fab, in Clay, New York, a first step toward Micron's plans to invest about $100 billion in New York and create 13,500 jobs.
The grants also provide initial funding for a facility in Boise, Idaho, unlocking a planned $25 billion investment in a fab to be co-located with Micron's research and development facilities there and should create 6,500 jobs, Commerce said.
Micron's investment will be the "largest private investment in New York and Idaho's history," and will create over 70,000 jobs, including 20,000 direct construction and manufacturing jobs and tens of thousands of indirect jobs," the White House said.
Biden, who is running for re-election in November's presidential election, used his visit to Syracuse to tout his administration's efforts to revitalize U.S. manufacturing and strengthen national security.
"American manufacturing is back, new factories are going up all across the country, and communities like Syracuse are writing the great American comeback story," Biden said.
In the evening, the president will speak at a campaign event in Westchester County, New York.
Biden signed the $52.7 billion CHIPS bill in August 2022 to subsidize U.S. semiconductor production and research.
Semiconductors were invented in the United States, but domestic companies produce only about 10% of the world's chips and none of the most advanced ones.
The White House said Thursday's announcement also included at least $40 million in funds for training and workforce development, as well as creation of four more workforce hubs in upstate New York, Milwaukee, Philadelphia and Michigan.
Under the agreement, Micron committed to providing affordable high-quality childcare for its workers across its facilities.
The company also affirmed "workers' rights to organize, to share feedback without fear of reprisal, and to collectively bargain," the White House said.
Reporting by Jarrret Renshaw, Nandita Bose and Andrea Shalal; Editing by Tom Hogue and Diane Craft
https://www.reuters.com/technology/bide ... 024-04-25/
Re: THE DAILY NEWS
"Biden in Syracuse to celebrate Micron's $6.1 billion CHIPS grant - President's visit comes after two law enforcement officers were slain in a shootout in Salina, eight miles from Micron's campus"
By Larry Rulison, Albany, New York Times Union
April 25, 2024
ALBANY – President Joe Biden landed in Syracuse on Thursday to celebrate a $6.1 billion grant awarded to Micron Technology, the memory chipmaker that is building a $100 billion manufacturing campus in the town of Clay, just north of the city.
Biden was joined by Gov. Kathy Hochul and U.S. Senate Majority Leader Charles Schumer of New York at the Milton J. Rubenstein Museum of Science & Technology in Syracuse's Armory Square.
In addition to touting the Micron award, being awarded through the $52 billion CHIPS and Science Act, the president was planning to meet with the families of the two police officers killed in a shootout on April 14 in the town of Salina, about six miles north of where Biden was speaking.
Funerals for the two men, Lt. Michael Hoosock of the Onondaga County Sheriff's Department, and Syracuse police Officer Michael Jensen, were held last week.
Both departments and their members were still reeling from the tragedy.
As a result, State Troopers were tasked with providing security for the president's visit instead of local law enforcement, which criticized the White House for not rescheduling the trip.
The $6.1 billion grant Micron will receive is coming from the $52 billion CHIPS and Science Act, the chip industry subsidy program that was authored by Schumer and designed to revitalize the domestic chip sector in the face of China seeking to dominate the industry and its supply chain.
Micron's award, which also includes $7 billion in federal loans, is the third CHIPS grant to be announced for large manufacturers.
The Micron event in Syracuse comes a month after Schumer and Hochul celebrated a $1.5 billion CHIPS grant that was awarded to GlobalFoundries to assist the company's construction of a second factory at the site, which supplies chips to the military, automakers and telecommunications companies among other industries.
The grant would also go toward an expansion at GlobalFoundries' chip factory in Essex Junction, Vt. outside Burlington.
The $6.1 billion grant for Micron will be in addition to $7.5 billion in loans that the company can access.
The funding is not only for the Syracuse-area project but also a new fab, or factory, that Micron is planning in its home state of Idaho.
https://www.timesunion.com/business/art ... 0headlines
By Larry Rulison, Albany, New York Times Union
April 25, 2024
ALBANY – President Joe Biden landed in Syracuse on Thursday to celebrate a $6.1 billion grant awarded to Micron Technology, the memory chipmaker that is building a $100 billion manufacturing campus in the town of Clay, just north of the city.
Biden was joined by Gov. Kathy Hochul and U.S. Senate Majority Leader Charles Schumer of New York at the Milton J. Rubenstein Museum of Science & Technology in Syracuse's Armory Square.
In addition to touting the Micron award, being awarded through the $52 billion CHIPS and Science Act, the president was planning to meet with the families of the two police officers killed in a shootout on April 14 in the town of Salina, about six miles north of where Biden was speaking.
Funerals for the two men, Lt. Michael Hoosock of the Onondaga County Sheriff's Department, and Syracuse police Officer Michael Jensen, were held last week.
Both departments and their members were still reeling from the tragedy.
As a result, State Troopers were tasked with providing security for the president's visit instead of local law enforcement, which criticized the White House for not rescheduling the trip.
The $6.1 billion grant Micron will receive is coming from the $52 billion CHIPS and Science Act, the chip industry subsidy program that was authored by Schumer and designed to revitalize the domestic chip sector in the face of China seeking to dominate the industry and its supply chain.
Micron's award, which also includes $7 billion in federal loans, is the third CHIPS grant to be announced for large manufacturers.
The Micron event in Syracuse comes a month after Schumer and Hochul celebrated a $1.5 billion CHIPS grant that was awarded to GlobalFoundries to assist the company's construction of a second factory at the site, which supplies chips to the military, automakers and telecommunications companies among other industries.
The grant would also go toward an expansion at GlobalFoundries' chip factory in Essex Junction, Vt. outside Burlington.
The $6.1 billion grant for Micron will be in addition to $7.5 billion in loans that the company can access.
The funding is not only for the Syracuse-area project but also a new fab, or factory, that Micron is planning in its home state of Idaho.
https://www.timesunion.com/business/art ... 0headlines
Re: THE DAILY NEWS
RIGZONE
"Oil Posts Weekly Gain as Market Tightens"
by Bloomberg | Julia Fanzeres and Jack Wittels
Friday, April 26, 2024
Oil rose this week amid signs of a tightening physical market while traders continue to assess lingering Middle East risks.
West Texas Intermediate edged higher to settle just below $84 a barrel, concluding a weekly advance of 2% for the June contract.
A report earlier this week showed US crude stockpiles dropping to the lowest since January, while gauges such as the WTI cash roll and key timespreads are signaling supply constraints.
The roll, which reflects supply-demand balances at Cushing, Oklahoma, climbed to the highest in two years.
Meanwhile, WTI’s prompt spread — the gap between its two nearest contracts — has strengthened to 72 cents in backwardation, up from 55 cents last week.
Crude’s gains are being restrained by US economic data showing inflation rose in March, reinforcing concerns of persistent price pressures.
The data followed weaker US economic growth and traders paring back expectations for the timing of a Fed rate reduction.
Crude has advanced this year, supported by supply cuts from OPEC+ and political risks in the Middle East, including heightened tensions between Israel and Iran that helped lift Brent above $90 a barrel earlier this month.
Israel is stepping up preparations for a potential all-out war with Hezbollah.
Despite the strength in crude futures, there are concerns in other corners of the oil markets.
A sharp drop in returns from making diesel is prompting some Asian refiners to make modest reductions in operating rates, which could crimp regional oil imports.
Analysts have meanwhile forecast a decline in margins for making the fuel in Europe.
Prices:
WTI for June delivery rose 0.3% to settle at $83.85 a barrel in New York.
Brent for June settlement rose 0.6% to settle at $89.50 a barrel.
https://www.rigzone.com/news/wire/oil_p ... 8-article/
"Oil Posts Weekly Gain as Market Tightens"
by Bloomberg | Julia Fanzeres and Jack Wittels
Friday, April 26, 2024
Oil rose this week amid signs of a tightening physical market while traders continue to assess lingering Middle East risks.
West Texas Intermediate edged higher to settle just below $84 a barrel, concluding a weekly advance of 2% for the June contract.
A report earlier this week showed US crude stockpiles dropping to the lowest since January, while gauges such as the WTI cash roll and key timespreads are signaling supply constraints.
The roll, which reflects supply-demand balances at Cushing, Oklahoma, climbed to the highest in two years.
Meanwhile, WTI’s prompt spread — the gap between its two nearest contracts — has strengthened to 72 cents in backwardation, up from 55 cents last week.
Crude’s gains are being restrained by US economic data showing inflation rose in March, reinforcing concerns of persistent price pressures.
The data followed weaker US economic growth and traders paring back expectations for the timing of a Fed rate reduction.
Crude has advanced this year, supported by supply cuts from OPEC+ and political risks in the Middle East, including heightened tensions between Israel and Iran that helped lift Brent above $90 a barrel earlier this month.
Israel is stepping up preparations for a potential all-out war with Hezbollah.
Despite the strength in crude futures, there are concerns in other corners of the oil markets.
A sharp drop in returns from making diesel is prompting some Asian refiners to make modest reductions in operating rates, which could crimp regional oil imports.
Analysts have meanwhile forecast a decline in margins for making the fuel in Europe.
Prices:
WTI for June delivery rose 0.3% to settle at $83.85 a barrel in New York.
Brent for June settlement rose 0.6% to settle at $89.50 a barrel.
https://www.rigzone.com/news/wire/oil_p ... 8-article/
Re: THE DAILY NEWS
CNBC
"10-year Treasury yield slips after latest U.S. inflation report"
Samantha Subin @SAMANTHA_SUBIN Sophie Kiderlin @IN/SOPHIE-KIDERLIN-B327B914A/ @SKIDERLIN Alex Harring @ALEX_HARRING
PUBLISHED FRI, APR 26 2024
The U.S. 10-year Treasury yield fell Friday as traders parsed the closely watched inflation data released earlier in the day.
The 10-year Treasury yield slipped around 4 points to 4.667%.
The yield on the 2-year Treasury lost almost a basis point to trade at, 4.987%.
Yields and prices move in opposite directions and one basis point equals 0.01%.
March’s core personal consumption expenditures price index excluding food and energy came in at 2.8% on an annualized basis, slightly above the 2.7% rate anticipated by economists polled by Dow Jones.
Including food and energy, the Fed’s preferred inflation gauge increased 2.7% from a year ago, also higher than the consensus forecast of 2.6%.
Both measures rose 0.3% month over month, in line with expectations.
“There wasn’t any startling news,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott.
“It mostly matched expectations, or at least prior numbers, to suggest once again that inflation is at least moderating to a point that keeps the prospects of a rate cut or two on the table.”
During the previous session, the yields on the 10-year Treasury and 2-year Treasury soared to their highest levels since November.
That followed the release of a weaker-than-expected U.S. gross domestic product reading.
GDP grew 1.6% in the first quarter, far lower than the 2.4% economists surveyed by Dow Jones had expected.
The report also reflected that consumer prices rose far more than in the previous quarter, sparking renewed concerns about sticky inflation and the outlook for Federal Reserve monetary policy.
These releases come ahead of the Fed’s policy meeting next week, at which the central bank is expected to keep rates unchanged.
Uncertainty remains around what guidance policymakers may give on interest rates.
Questions around whether there could be fewer rate cuts than anticipated this year, or even none at all until 2025, have emerged in recent weeks as market expectations for when the first rate cut will take place were pushed backward.
https://www.cnbc.com/2024/04/26/us-trea ... -data.html
"10-year Treasury yield slips after latest U.S. inflation report"
Samantha Subin @SAMANTHA_SUBIN Sophie Kiderlin @IN/SOPHIE-KIDERLIN-B327B914A/ @SKIDERLIN Alex Harring @ALEX_HARRING
PUBLISHED FRI, APR 26 2024
The U.S. 10-year Treasury yield fell Friday as traders parsed the closely watched inflation data released earlier in the day.
The 10-year Treasury yield slipped around 4 points to 4.667%.
The yield on the 2-year Treasury lost almost a basis point to trade at, 4.987%.
Yields and prices move in opposite directions and one basis point equals 0.01%.
March’s core personal consumption expenditures price index excluding food and energy came in at 2.8% on an annualized basis, slightly above the 2.7% rate anticipated by economists polled by Dow Jones.
Including food and energy, the Fed’s preferred inflation gauge increased 2.7% from a year ago, also higher than the consensus forecast of 2.6%.
Both measures rose 0.3% month over month, in line with expectations.
“There wasn’t any startling news,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott.
“It mostly matched expectations, or at least prior numbers, to suggest once again that inflation is at least moderating to a point that keeps the prospects of a rate cut or two on the table.”
During the previous session, the yields on the 10-year Treasury and 2-year Treasury soared to their highest levels since November.
That followed the release of a weaker-than-expected U.S. gross domestic product reading.
GDP grew 1.6% in the first quarter, far lower than the 2.4% economists surveyed by Dow Jones had expected.
The report also reflected that consumer prices rose far more than in the previous quarter, sparking renewed concerns about sticky inflation and the outlook for Federal Reserve monetary policy.
These releases come ahead of the Fed’s policy meeting next week, at which the central bank is expected to keep rates unchanged.
Uncertainty remains around what guidance policymakers may give on interest rates.
Questions around whether there could be fewer rate cuts than anticipated this year, or even none at all until 2025, have emerged in recent weeks as market expectations for when the first rate cut will take place were pushed backward.
https://www.cnbc.com/2024/04/26/us-trea ... -data.html
Re: THE DAILY NEWS
CNBC
"Key Fed inflation measure rose 2.8% in March from a year ago, more than expected"
Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM
PUBLISHED FRI, APR 26 2024
KEY POINTS
* The core personal consumption expenditures price index excluding food and energy increased 2.8% from a year ago in March, unchanged from February and slightly higher than expected.
* Personal spending rose 0.8% on the month, more than the personal income increase of 0.5%.
* The personal saving rate fell to 3.2%, down 0.4 percentage points from February and 2 full percentage points from a year ago.
Inflation showed few signs of letting up in March, with a key barometer the Federal Reserve watches closely showing that price pressures remain elevated.
The personal consumption expenditures price index excluding food and energy increased 2.8% from a year ago in March, the same as in February, the Commerce Department reported Friday.
That was above the 2.7% estimate from the Dow Jones consensus.
Including food and energy, the all-items PCE price gauge increased 2.7%, compared with the 2.6% estimate.
On a monthly basis, both measures increased 0.3%, as expected and equaling the increase from February.
Markets showed little reaction to the data, with Wall Street poised to open higher.
Treasury yields fell, with the benchmark 10-year note at 4.67%, down about 0.4 percentage points on the session.
Futures traders grew slightly more optimistic about two potential rate cuts this year, raising the probability to 44%, according to the CME Group’s FedWatch gauge.
“Inflation reports released this morning were not as a hot as feared, but investors should not get overly anchored to the idea that inflation has been completely cured and the Fed will be cutting interest rates in the near-term,” said George Mateyo, chief investment officer at Key Wealth.
“The prospects of rate cuts remain, but they are not assured, and the Fed will likely need weakness in the labor market before they have the confidence to cut.”
Consumers showed that they are still spending despite the elevated price levels.
Personal spending rose 0.8% on the month, a touch higher even than the 0.7% estimate though the same as February.
Personal income increased 0.5%, in line with expectations and higher than the 0.3% increase the previous month.
The personal saving rate fell to 3.2%, down 0.4 percentage points from February and 2 full percentage points from a year ago as households dipped into savings to keep spending afloat.
The report follows bad inflation news from Thursday and likely locks the Fed into holding the line on interest rates through at least the summer unless there is some substantial change in the data.
The Commerce Department reported Thursday that PCE in the first quarter accelerated at a 3.4% annualized rate while gross domestic product increased just 1.6%, well below Wall Street expectations.
With inflation still percolating two years after it began its initial ascent to the highest level in more than 40 years, central bank policymakers are watching the data even more intently as they contemplate the next moves for monetary policy.
The Fed targets 2% inflation, a level that the core PCE has been above for the past three years.
The Fed watches the PCE in particular because it adjusts for changes in consumer behavior and places less weight on housing costs than the more widely circulated consumer price index from the Labor Department.
While they watch both headline and core measures, Fed officials believe the index excluding food and energy provides a better look at longer-run trends as those two categories tend to be more volatile.
Services prices increased 0.4% on the month while goods were up 0.1%, reflecting a swing in consumer prices as goods inflation dominated since the early days of the Covid pandemic.
Food prices showed a 0.1% decline on the month while energy rose 1.2%.
On a 12-month basis, services prices are up 4% while goods have barely moved, increasing just 0.1%.
Food is up 1.5% while energy has gained 2.6%.
https://www.cnbc.com/2024/04/26/pce-inf ... rcent.html
"Key Fed inflation measure rose 2.8% in March from a year ago, more than expected"
Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM
PUBLISHED FRI, APR 26 2024
KEY POINTS
* The core personal consumption expenditures price index excluding food and energy increased 2.8% from a year ago in March, unchanged from February and slightly higher than expected.
* Personal spending rose 0.8% on the month, more than the personal income increase of 0.5%.
* The personal saving rate fell to 3.2%, down 0.4 percentage points from February and 2 full percentage points from a year ago.
Inflation showed few signs of letting up in March, with a key barometer the Federal Reserve watches closely showing that price pressures remain elevated.
The personal consumption expenditures price index excluding food and energy increased 2.8% from a year ago in March, the same as in February, the Commerce Department reported Friday.
That was above the 2.7% estimate from the Dow Jones consensus.
Including food and energy, the all-items PCE price gauge increased 2.7%, compared with the 2.6% estimate.
On a monthly basis, both measures increased 0.3%, as expected and equaling the increase from February.
Markets showed little reaction to the data, with Wall Street poised to open higher.
Treasury yields fell, with the benchmark 10-year note at 4.67%, down about 0.4 percentage points on the session.
Futures traders grew slightly more optimistic about two potential rate cuts this year, raising the probability to 44%, according to the CME Group’s FedWatch gauge.
“Inflation reports released this morning were not as a hot as feared, but investors should not get overly anchored to the idea that inflation has been completely cured and the Fed will be cutting interest rates in the near-term,” said George Mateyo, chief investment officer at Key Wealth.
“The prospects of rate cuts remain, but they are not assured, and the Fed will likely need weakness in the labor market before they have the confidence to cut.”
Consumers showed that they are still spending despite the elevated price levels.
Personal spending rose 0.8% on the month, a touch higher even than the 0.7% estimate though the same as February.
Personal income increased 0.5%, in line with expectations and higher than the 0.3% increase the previous month.
The personal saving rate fell to 3.2%, down 0.4 percentage points from February and 2 full percentage points from a year ago as households dipped into savings to keep spending afloat.
The report follows bad inflation news from Thursday and likely locks the Fed into holding the line on interest rates through at least the summer unless there is some substantial change in the data.
The Commerce Department reported Thursday that PCE in the first quarter accelerated at a 3.4% annualized rate while gross domestic product increased just 1.6%, well below Wall Street expectations.
With inflation still percolating two years after it began its initial ascent to the highest level in more than 40 years, central bank policymakers are watching the data even more intently as they contemplate the next moves for monetary policy.
The Fed targets 2% inflation, a level that the core PCE has been above for the past three years.
The Fed watches the PCE in particular because it adjusts for changes in consumer behavior and places less weight on housing costs than the more widely circulated consumer price index from the Labor Department.
While they watch both headline and core measures, Fed officials believe the index excluding food and energy provides a better look at longer-run trends as those two categories tend to be more volatile.
Services prices increased 0.4% on the month while goods were up 0.1%, reflecting a swing in consumer prices as goods inflation dominated since the early days of the Covid pandemic.
Food prices showed a 0.1% decline on the month while energy rose 1.2%.
On a 12-month basis, services prices are up 4% while goods have barely moved, increasing just 0.1%.
Food is up 1.5% while energy has gained 2.6%.
https://www.cnbc.com/2024/04/26/pce-inf ... rcent.html
Re: THE DAILY NEWS
REUTERS
"Wall Street shares close up as megacap tech stocks rally"
By Chibuike Oguh
April 26, 2024
Summary
* March PCE data in line with estimates
* Alphabet jumps on first-ever dividend, $70 bln buyback plan
* Microsoft gains after earnings beat estimates
* Indexes up: Dow 0.40%, S&P 1.02%, Nasdaq 2.03%
NEW YORK, April 26 (Reuters) - U.S. stocks closed higher on Friday, buoyed by a rally in megacap growth stocks following robust quarterly results from technology heavyweights Alphabet and Microsoft in addition to moderate inflation data.
Investors cheered Alphabet's first-ever dividend, its $70 billion stock buyback program, and better-than-expected first-quarter results.
Its shares jumped 10% and reached a record high, lifting the Google-parent's market value above $2 trillion.
Microsoft shares rose 1.8% after its third-quarter revenue and profit exceeded Wall Street estimates, driven by gains from artificial intelligence (AI) adoption across its cloud services.
Other megacap growth stocks also closed higher: Amazon.com rose 3.4%, Nvidia gained 5.8%, and Meta Platforms added 0.4%.
However, Apple (AAPL.O), opens new tab fell 0.3% and Tesla (TSLA.O), opens new tab closed down 1.1%. On Wednesday, Meta results had disappointed investors even as the company ratcheted up spending on AI.
Six out of the 11 major S&P 500 sectors finished higher, led by gains in communication services, technology, consumer discretionary and materials.
The S&P 500 and the Nasdaq registered their biggest weekly percentage gains since early November 2023.
Benchmark S&P 500 snapped three weeks of losses, while the Nasdaq ended four straight weeks of declines.
"The earnings reports of Microsoft and Google allayed a lot of the concerns about the fact that the spending on data centers and AI, which Meta had raised a day before, was going to compress margins," said Tom Plumb, president and lead portfolio manager at Plumb Funds in Madison, Wisconsin.
"Both Google and Microsoft had indicated that with their current capital plans, they still expected their margins to expand."
"That allayed a lot of the fears that people had about the growth of data computing," Plumb added.
U.S. Commerce Department data showed monthly inflation rose moderately in March on an annual basis while coming in line with estimates on a monthly basis.
The report offered some relief to financial markets spooked by worries of stagflation a day after data showed inflation surging and economic growth slowing in the first quarter.
After the data, money markets priced in a firmer chance of a Federal Reserve rate cut in September.
The yield on the benchmark 10-year Treasury note fell after the data, last standing at 4.6630%.
The Dow Jones Industrial Average rose 153.86 points, or 0.40%, to 38,239.66, the S&P 500 gained 51.54 points, or 1.02%, to 5,099.96 and the Nasdaq Composite gained 316.14 points, or 2.03%, to 15,927.90.
Shares of Snap surged nearly 28% after the social media firm beat first-quarter estimates for revenue and user growth.
Pinterest shares also finished up 4%.
Exxon Mobil lost ground by nearly 3% after America's largest oil company missed analysts' estimates with first-quarter profit falling 28% from a year ago.
Intel dropped 9.1% after the chipmaker's forecast for second-quarter revenue and profit did not meet estimates.
Intel faces weak demand for its traditional data center and PC chips.
Advancing issues outnumbered decliners by a 2.25-to-1 ratio on the NYSE.
On the Nasdaq, 2,685 stocks rose and 1,460 fell as advancing issues outnumbered decliners by a 1.84-to-1 ratio.
The S&P 500 posted 21 new 52-week highs and eight new lows while the Nasdaq recorded 59 new highs and 88 new lows.
Volume on U.S. exchanges was 9.88 billion shares, compared with the 11.01 billion average for the last 20 days.
Reporting by Chibuike Oguh in New York; Shristi Achar A and Shashwat Chauhan in Bengaluru; Editing by Maju Samuel and David Gregorio
https://www.reuters.com/markets/us/futu ... 024-04-26/
"Wall Street shares close up as megacap tech stocks rally"
By Chibuike Oguh
April 26, 2024
Summary
* March PCE data in line with estimates
* Alphabet jumps on first-ever dividend, $70 bln buyback plan
* Microsoft gains after earnings beat estimates
* Indexes up: Dow 0.40%, S&P 1.02%, Nasdaq 2.03%
NEW YORK, April 26 (Reuters) - U.S. stocks closed higher on Friday, buoyed by a rally in megacap growth stocks following robust quarterly results from technology heavyweights Alphabet and Microsoft in addition to moderate inflation data.
Investors cheered Alphabet's first-ever dividend, its $70 billion stock buyback program, and better-than-expected first-quarter results.
Its shares jumped 10% and reached a record high, lifting the Google-parent's market value above $2 trillion.
Microsoft shares rose 1.8% after its third-quarter revenue and profit exceeded Wall Street estimates, driven by gains from artificial intelligence (AI) adoption across its cloud services.
Other megacap growth stocks also closed higher: Amazon.com rose 3.4%, Nvidia gained 5.8%, and Meta Platforms added 0.4%.
However, Apple (AAPL.O), opens new tab fell 0.3% and Tesla (TSLA.O), opens new tab closed down 1.1%. On Wednesday, Meta results had disappointed investors even as the company ratcheted up spending on AI.
Six out of the 11 major S&P 500 sectors finished higher, led by gains in communication services, technology, consumer discretionary and materials.
The S&P 500 and the Nasdaq registered their biggest weekly percentage gains since early November 2023.
Benchmark S&P 500 snapped three weeks of losses, while the Nasdaq ended four straight weeks of declines.
"The earnings reports of Microsoft and Google allayed a lot of the concerns about the fact that the spending on data centers and AI, which Meta had raised a day before, was going to compress margins," said Tom Plumb, president and lead portfolio manager at Plumb Funds in Madison, Wisconsin.
"Both Google and Microsoft had indicated that with their current capital plans, they still expected their margins to expand."
"That allayed a lot of the fears that people had about the growth of data computing," Plumb added.
U.S. Commerce Department data showed monthly inflation rose moderately in March on an annual basis while coming in line with estimates on a monthly basis.
The report offered some relief to financial markets spooked by worries of stagflation a day after data showed inflation surging and economic growth slowing in the first quarter.
After the data, money markets priced in a firmer chance of a Federal Reserve rate cut in September.
The yield on the benchmark 10-year Treasury note fell after the data, last standing at 4.6630%.
The Dow Jones Industrial Average rose 153.86 points, or 0.40%, to 38,239.66, the S&P 500 gained 51.54 points, or 1.02%, to 5,099.96 and the Nasdaq Composite gained 316.14 points, or 2.03%, to 15,927.90.
Shares of Snap surged nearly 28% after the social media firm beat first-quarter estimates for revenue and user growth.
Pinterest shares also finished up 4%.
Exxon Mobil lost ground by nearly 3% after America's largest oil company missed analysts' estimates with first-quarter profit falling 28% from a year ago.
Intel dropped 9.1% after the chipmaker's forecast for second-quarter revenue and profit did not meet estimates.
Intel faces weak demand for its traditional data center and PC chips.
Advancing issues outnumbered decliners by a 2.25-to-1 ratio on the NYSE.
On the Nasdaq, 2,685 stocks rose and 1,460 fell as advancing issues outnumbered decliners by a 1.84-to-1 ratio.
The S&P 500 posted 21 new 52-week highs and eight new lows while the Nasdaq recorded 59 new highs and 88 new lows.
Volume on U.S. exchanges was 9.88 billion shares, compared with the 11.01 billion average for the last 20 days.
Reporting by Chibuike Oguh in New York; Shristi Achar A and Shashwat Chauhan in Bengaluru; Editing by Maju Samuel and David Gregorio
https://www.reuters.com/markets/us/futu ... 024-04-26/
Re: THE DAILY NEWS
REUTERS
"US inflation increases moderately; consumer spending boosts Q2 outlook"
By Lucia Mutikani
April 26, 2024
Summary
* March PCE price index increases 0.3%
* PCE inflation rises 2.7% on year-on-year basis
* Core PCE price index gains 0.3%; up 2.8% year-on-year
WASHINGTON, April 26 (Reuters) - U.S. monthly inflation rose moderately in March, but stubbornly higher costs for housing and utilities suggested the Federal Reserve could keep interest rates elevated for a while.
The report from the Commerce Department on Friday, which also showed strong consumer spending last month, offered some relief to financial markets spooked by worries of stagflation after data on Thursday showed inflation surging and economic growth slowing in the first quarter.
"Markets should breathe a sigh of relief this morning," said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance.
"Given the elevated levels of inflation, and this is the new normal for 2024, the market is going to need to get over hopes for Fed rate cuts."
The personal consumption expenditures (PCE) price index increased 0.3% last month, matching the unrevised gain in February, the Commerce Department's Bureau of Economic Analysis said.
Goods prices edged up 0.1% as increases in the costs of gasoline, clothing and footwear were partially offset by a decline in prices of motor vehicles and parts.
Services prices rose 0.4%, quickening from February's 0.3% advance.
They were boosted by a 0.5% increase in the cost of housing and utilities, which include rents.
Rents have remained sticky even as the supply of apartments has increased and independent measures showed a decline in rent demands.
Economists expect that these lower rents should start showing up in the data at some point this year.
Transportation services prices shot up 1.6%, while financial services and insurance were 0.5% more expensive.
In the 12 months through March, inflation rose 2.7% after advancing 2.5% in February.
The increase in inflation last month was broadly in line with economists' expectations.
There had been fears that inflation could exceed forecasts in March after the release of the advance gross domestic product report for the first quarter on Thursday showed price pressures heated up by the most in a year.
The spike in inflation occurred in January.
The PCE price index is one of the inflation measures tracked by the U.S. central bank for its 2% target.
Monthly inflation readings of 0.2% over time are necessary to bring inflation back to target.
U.S. Treasury prices rose, with the yield on the benchmark 10-year note backing away from a five-month high reached in the previous session.
The dollar advanced versus a basket of currencies, while stocks on Wall Street were trading higher.
Fed policymakers are expected to leave rates unchanged next week.
The central bank has kept its benchmark overnight interest rate in the 5.25%-5.50% range since July.
It has raised the policy rate by 525 basis points since March 2022.
Financial markets initially expected the first rate cut to come in March.
That expectation got pushed back to June and then September as data on the labor market and inflation continued to surprise on the upside.
A handful of economists continue to expect that borrowing costs may be lowered in July on the belief that the labor market will slow noticeably in the coming months.
Others believe the window for rate cuts is rapidly closing.
"Fed officials will likely not have enough evidence based on inflation data alone to cut rates as soon as June," said Veronica Clark, an economist at Citigroup.
"But we continue to think officials will be increasingly uncomfortable leaving rates at restrictive levels for too long and will find evidence in May and June inflation data to cut rates in July."
SERVICES INFLATION HOT
Excluding the volatile food and energy components, the PCE price index increased 0.3% in March after rising by the same unrevised margin in February.
Core inflation increased 2.8% on a year-on-year basis in March, matching February's advance.
PCE services inflation excluding energy and housing climbed 0.4% after a 0.2% gain in February.
The so-called super core inflation rose 3.5% on a year-on-year basis in March.
Policymakers are monitoring the super core inflation to gauge their progress in fighting inflation.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased by a solid 0.8%, matching the rise in February.
The data was included in the GDP report, which showed consumer spending moderating to a still-solid 2.5% pace in the first quarter from the brisk 3.3% pace in the October-December period.
The economy grew at a 1.6% rate last quarter, held back by an increase in the trade deficit.
The wider trade gap reflected a surge in imports, a function of strong domestic demand.
Households spent more on both goods and services last month.
Goods outlays vaulted 1.3%, with gasoline and other energy products as well as food and beverages, recreational goods and vehicles, and household equipment accounting for the jump.
Services spending rose 0.6%, lifted by healthcare, housing and utilities as well as financial services and insurance.
When adjusted for inflation, consumer spending climbed 0.5%.
The so-called real consumer spending also increased 0.5% in February.
March's strong gain put consumer spending on a higher growth path heading into the second quarter.
"Consumers appear to have solid momentum coming out of the first quarter," said Daniel Silver, an economist at JPMorgan.
"While we don't have much hard data for the second quarter at this point, the end-point for the first quarter suggests that second-quarter spending growth could be strong."
Personal income increased 0.5% after a 0.3% gain in February, boosted by a 0.7% rise in wages amid a tight labor market.
But higher inflation eroded some of the increase.
Disposable household income after accounting for inflation and taxes rebounded 0.2% after slipping 0.1% in February.
Consumers saved less and also tapped into savings.
The saving rate fell to a 16-month low of 3.2% from 3.6% in February.
"The low saving rate is not a huge concern because we think it mostly reflects the strong state of household balance sheets, with debt-to-income ratios low, the cost of servicing debt still extremely low, and household net worth rising rapidly amid elevated house and equity prices," said Michael Pearce, deputy chief U.S. economist at Oxford Economics.
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Paul Simao
https://www.reuters.com/markets/us/us-i ... 024-04-26/
"US inflation increases moderately; consumer spending boosts Q2 outlook"
By Lucia Mutikani
April 26, 2024
Summary
* March PCE price index increases 0.3%
* PCE inflation rises 2.7% on year-on-year basis
* Core PCE price index gains 0.3%; up 2.8% year-on-year
WASHINGTON, April 26 (Reuters) - U.S. monthly inflation rose moderately in March, but stubbornly higher costs for housing and utilities suggested the Federal Reserve could keep interest rates elevated for a while.
The report from the Commerce Department on Friday, which also showed strong consumer spending last month, offered some relief to financial markets spooked by worries of stagflation after data on Thursday showed inflation surging and economic growth slowing in the first quarter.
"Markets should breathe a sigh of relief this morning," said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance.
"Given the elevated levels of inflation, and this is the new normal for 2024, the market is going to need to get over hopes for Fed rate cuts."
The personal consumption expenditures (PCE) price index increased 0.3% last month, matching the unrevised gain in February, the Commerce Department's Bureau of Economic Analysis said.
Goods prices edged up 0.1% as increases in the costs of gasoline, clothing and footwear were partially offset by a decline in prices of motor vehicles and parts.
Services prices rose 0.4%, quickening from February's 0.3% advance.
They were boosted by a 0.5% increase in the cost of housing and utilities, which include rents.
Rents have remained sticky even as the supply of apartments has increased and independent measures showed a decline in rent demands.
Economists expect that these lower rents should start showing up in the data at some point this year.
Transportation services prices shot up 1.6%, while financial services and insurance were 0.5% more expensive.
In the 12 months through March, inflation rose 2.7% after advancing 2.5% in February.
The increase in inflation last month was broadly in line with economists' expectations.
There had been fears that inflation could exceed forecasts in March after the release of the advance gross domestic product report for the first quarter on Thursday showed price pressures heated up by the most in a year.
The spike in inflation occurred in January.
The PCE price index is one of the inflation measures tracked by the U.S. central bank for its 2% target.
Monthly inflation readings of 0.2% over time are necessary to bring inflation back to target.
U.S. Treasury prices rose, with the yield on the benchmark 10-year note backing away from a five-month high reached in the previous session.
The dollar advanced versus a basket of currencies, while stocks on Wall Street were trading higher.
Fed policymakers are expected to leave rates unchanged next week.
The central bank has kept its benchmark overnight interest rate in the 5.25%-5.50% range since July.
It has raised the policy rate by 525 basis points since March 2022.
Financial markets initially expected the first rate cut to come in March.
That expectation got pushed back to June and then September as data on the labor market and inflation continued to surprise on the upside.
A handful of economists continue to expect that borrowing costs may be lowered in July on the belief that the labor market will slow noticeably in the coming months.
Others believe the window for rate cuts is rapidly closing.
"Fed officials will likely not have enough evidence based on inflation data alone to cut rates as soon as June," said Veronica Clark, an economist at Citigroup.
"But we continue to think officials will be increasingly uncomfortable leaving rates at restrictive levels for too long and will find evidence in May and June inflation data to cut rates in July."
SERVICES INFLATION HOT
Excluding the volatile food and energy components, the PCE price index increased 0.3% in March after rising by the same unrevised margin in February.
Core inflation increased 2.8% on a year-on-year basis in March, matching February's advance.
PCE services inflation excluding energy and housing climbed 0.4% after a 0.2% gain in February.
The so-called super core inflation rose 3.5% on a year-on-year basis in March.
Policymakers are monitoring the super core inflation to gauge their progress in fighting inflation.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased by a solid 0.8%, matching the rise in February.
The data was included in the GDP report, which showed consumer spending moderating to a still-solid 2.5% pace in the first quarter from the brisk 3.3% pace in the October-December period.
The economy grew at a 1.6% rate last quarter, held back by an increase in the trade deficit.
The wider trade gap reflected a surge in imports, a function of strong domestic demand.
Households spent more on both goods and services last month.
Goods outlays vaulted 1.3%, with gasoline and other energy products as well as food and beverages, recreational goods and vehicles, and household equipment accounting for the jump.
Services spending rose 0.6%, lifted by healthcare, housing and utilities as well as financial services and insurance.
When adjusted for inflation, consumer spending climbed 0.5%.
The so-called real consumer spending also increased 0.5% in February.
March's strong gain put consumer spending on a higher growth path heading into the second quarter.
"Consumers appear to have solid momentum coming out of the first quarter," said Daniel Silver, an economist at JPMorgan.
"While we don't have much hard data for the second quarter at this point, the end-point for the first quarter suggests that second-quarter spending growth could be strong."
Personal income increased 0.5% after a 0.3% gain in February, boosted by a 0.7% rise in wages amid a tight labor market.
But higher inflation eroded some of the increase.
Disposable household income after accounting for inflation and taxes rebounded 0.2% after slipping 0.1% in February.
Consumers saved less and also tapped into savings.
The saving rate fell to a 16-month low of 3.2% from 3.6% in February.
"The low saving rate is not a huge concern because we think it mostly reflects the strong state of household balance sheets, with debt-to-income ratios low, the cost of servicing debt still extremely low, and household net worth rising rapidly amid elevated house and equity prices," said Michael Pearce, deputy chief U.S. economist at Oxford Economics.
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Paul Simao
https://www.reuters.com/markets/us/us-i ... 024-04-26/
Re: THE DAILY NEWS
REUTERS
"Investors brace for 5% Treasury yields as US inflation worries mount"
By David Randall
April 26, 2024
NEW YORK, April 26 (Reuters) - As U.S. inflation worries grow, some investors are preparing for the 10-year U.S. Treasury yield to breach a 16-year high of 5% hit last October.
Bond yields, which move inversely to prices, have climbed in recent weeks as signs of persistent inflation erode expectations for how deeply the Federal Reserve will be able to cut interest rates without further fueling consumer prices.
The yield on the benchmark 10-year note is up 80 basis points this year and last stood at 4.70%, a five-month high.
Many investors are betting further weakness lies ahead for bonds.
Global fund managers' fixed income allocations in the latest BofA Global Research survey are down to their lowest level since 2003.
Bearish Treasury positioning among some classes of hedge funds stands at its highest level of the year, according to BofA data, even as other asset managers have increased their bullish bets.
"It all boils down to one word: inflation."
"If the market doesn't see signs that inflation is contained, then there's no reason that yields won't keep pushing higher," said Don Ellenberger, senior portfolio manager at Federated Hermes.
He has decreased his portfolio's interest rate sensitivity, wary that sticky inflation and labor market strength could push yields as high as 5.25%.
Further evidence that inflation is heating up again came on Thursday, with data showing the personal consumption expenditures (PCE) price index excluding food and energy rose far more than expected in the first quarter.
Futures markets showed investors now expect the Fed to deliver just 35 basis points in rate cuts this year, compared to the more than 150 points that were priced in at the beginning of 2024.
Another hot inflation reading on Friday, when PCE data for March will be released, could further close the window on rate-cut expectations this year.
More insights on the economy could come at the conclusion of the U.S. central bank's monetary policy meeting on May 1.
'HIGH-WATER MARK'
The level of Treasury yields is closely watched by market participants, as elevated yields can translate into higher borrowing costs for consumers and companies and tighten financial conditions in the economy.
A sharp run-up in yields during the latter part of 2023 sparked a sell-off in the S&P 500, though equities rebounded when yields reversed.
This year's rally in stocks has stumbled in recent weeks as yields have risen, with the S&P 500 cutting its gains to around 6% on a year-to-date basis, from more than 10%.
Some investors have used the weakness in bonds to add to their fixed income holdings, confident that yields are unlikely to rise much further unless the Fed says it is looking to once again raise its benchmark overnight interest rate from the current 5.25%-5.50% range.
Others, however, have been skeptical inflation will cool anytime soon.
"Inflation is not coming down like the Fed thought it was," said Arthur Laffer, president of Laffer Tengler Investments, who is bearish on longer-dated Treasuries and believes yields could rise as high as 6%.
"You're not getting paid to take risk in the bond market right now."
Michael Purves, head of Tallbacken Capital Advisors, wrote it's "not inconceivable" that the 10-year Treasury yield could reach its 2007 high of 5.22%, if higher prices for oil and other raw materials continue pushing up inflation.
The price of Brent crude is up about 17% on a year-to-date basis, even after retreating in the last week on easing fears of a wider conflict in the Middle East.
Fiscal worries are another factor that could push yields higher.
Ratings agency Fitch downgraded the U.S. credit rating last year partly due to concern over rising debt levels.
Many investors anticipate a rise in term premiums - or the compensation demanded to hold long-term debt.
"The fiscal conditions of the U.S. are starting to matter, and it can put tremendous pressure on yields and push down on equity valuations in a very short period of time if the market starts to worry more," said Bryant VanCronkhite, a senior portfolio manager at Allspring Global Investments, who expects 10-year Treasury yields to move above 5%.
Still, there are reasons to think a return to 5% yields would be a "high-water mark" for investors, said Alex Christensen, a portfolio manager at Columbia Threadneedle Investments who is overweight two-year Treasuries.
The market narrative that dominated since the so-called Fed pivot in December "was very one-sided and left little room for changes in the inflationary trend," Christensen said.
He believes the Fed is unlikely to pivot towards rate increases.
"We think the general inflationary trend is stable to lower," he said.
Reporting by David Randall; Editing by Ira Iosebashvili and Paul Simao
https://www.reuters.com/markets/us/inve ... 024-04-26/
"Investors brace for 5% Treasury yields as US inflation worries mount"
By David Randall
April 26, 2024
NEW YORK, April 26 (Reuters) - As U.S. inflation worries grow, some investors are preparing for the 10-year U.S. Treasury yield to breach a 16-year high of 5% hit last October.
Bond yields, which move inversely to prices, have climbed in recent weeks as signs of persistent inflation erode expectations for how deeply the Federal Reserve will be able to cut interest rates without further fueling consumer prices.
The yield on the benchmark 10-year note is up 80 basis points this year and last stood at 4.70%, a five-month high.
Many investors are betting further weakness lies ahead for bonds.
Global fund managers' fixed income allocations in the latest BofA Global Research survey are down to their lowest level since 2003.
Bearish Treasury positioning among some classes of hedge funds stands at its highest level of the year, according to BofA data, even as other asset managers have increased their bullish bets.
"It all boils down to one word: inflation."
"If the market doesn't see signs that inflation is contained, then there's no reason that yields won't keep pushing higher," said Don Ellenberger, senior portfolio manager at Federated Hermes.
He has decreased his portfolio's interest rate sensitivity, wary that sticky inflation and labor market strength could push yields as high as 5.25%.
Further evidence that inflation is heating up again came on Thursday, with data showing the personal consumption expenditures (PCE) price index excluding food and energy rose far more than expected in the first quarter.
Futures markets showed investors now expect the Fed to deliver just 35 basis points in rate cuts this year, compared to the more than 150 points that were priced in at the beginning of 2024.
Another hot inflation reading on Friday, when PCE data for March will be released, could further close the window on rate-cut expectations this year.
More insights on the economy could come at the conclusion of the U.S. central bank's monetary policy meeting on May 1.
'HIGH-WATER MARK'
The level of Treasury yields is closely watched by market participants, as elevated yields can translate into higher borrowing costs for consumers and companies and tighten financial conditions in the economy.
A sharp run-up in yields during the latter part of 2023 sparked a sell-off in the S&P 500, though equities rebounded when yields reversed.
This year's rally in stocks has stumbled in recent weeks as yields have risen, with the S&P 500 cutting its gains to around 6% on a year-to-date basis, from more than 10%.
Some investors have used the weakness in bonds to add to their fixed income holdings, confident that yields are unlikely to rise much further unless the Fed says it is looking to once again raise its benchmark overnight interest rate from the current 5.25%-5.50% range.
Others, however, have been skeptical inflation will cool anytime soon.
"Inflation is not coming down like the Fed thought it was," said Arthur Laffer, president of Laffer Tengler Investments, who is bearish on longer-dated Treasuries and believes yields could rise as high as 6%.
"You're not getting paid to take risk in the bond market right now."
Michael Purves, head of Tallbacken Capital Advisors, wrote it's "not inconceivable" that the 10-year Treasury yield could reach its 2007 high of 5.22%, if higher prices for oil and other raw materials continue pushing up inflation.
The price of Brent crude is up about 17% on a year-to-date basis, even after retreating in the last week on easing fears of a wider conflict in the Middle East.
Fiscal worries are another factor that could push yields higher.
Ratings agency Fitch downgraded the U.S. credit rating last year partly due to concern over rising debt levels.
Many investors anticipate a rise in term premiums - or the compensation demanded to hold long-term debt.
"The fiscal conditions of the U.S. are starting to matter, and it can put tremendous pressure on yields and push down on equity valuations in a very short period of time if the market starts to worry more," said Bryant VanCronkhite, a senior portfolio manager at Allspring Global Investments, who expects 10-year Treasury yields to move above 5%.
Still, there are reasons to think a return to 5% yields would be a "high-water mark" for investors, said Alex Christensen, a portfolio manager at Columbia Threadneedle Investments who is overweight two-year Treasuries.
The market narrative that dominated since the so-called Fed pivot in December "was very one-sided and left little room for changes in the inflationary trend," Christensen said.
He believes the Fed is unlikely to pivot towards rate increases.
"We think the general inflationary trend is stable to lower," he said.
Reporting by David Randall; Editing by Ira Iosebashvili and Paul Simao
https://www.reuters.com/markets/us/inve ... 024-04-26/
Re: THE DAILY NEWS
REUTERS
"Chipmaker Intel falls as AI competition hurts forecast"
By Reuters
April 26, 2024
April 26 (Reuters) - Intel shares slumped more than 12% on Friday after a downbeat forecast signaled that the boom in AI was diverting enterprise spending away from its traditional data center chips.
The stock has fallen around 30% so far this year as Intel trails rival chip companies such as Nvidia in producing advanced artificial intelligence (AI) chips and components.
Intel forecast second-quarter revenue of $12.5 billion to $13.5 billion, compared with analysts' average estimate of $13.57 billion, according to LSEG data.
"While we believe they are doing everything they can to try to repair things, it is clear the company is profoundly broken, and it will take years to see the fruits of their (currently exhaustive) labor," Bernstein analysts said in a note.
Intel is planning a $100 billion spending spree across four U.S. states to build and expand factories.
It also unveiled a new AI chip earlier this year to keep up with competition.
Friday's drop was set to erase nearly $19 billion from the company's market value, which stood at $149.4 billion as of Thursday's close.
Businesses have prioritized spending on advanced and speedy AI server chips, hurting demand for Intel's central processing units, which had long been the mainstay chip powering data centers.
Although encouraged by the launch of Intel's Gaudi 3 AI chip, "we worry the company will continue to cede wallet share within the overall data center compute market to the likes of Nvidia and Arm", Goldman Sachs analysts said.
Still, Intel is optimistic that a fresh upgrade cycle for personal computers around a new version of Microsoft's Windows operating system will help PC sales in the second half of the year.
That could translate to more demand for its chips used in those devices.
The company's earnings contrasted strong results from Microsoft and Alphabet, which are Nvidia clients and also design in-house chips for their data centers.
Reporting by Zaheer Kachwala in Bengaluru; Editing by Devika Syamnath
https://www.reuters.com/technology/inte ... 024-04-26/
"Chipmaker Intel falls as AI competition hurts forecast"
By Reuters
April 26, 2024
April 26 (Reuters) - Intel shares slumped more than 12% on Friday after a downbeat forecast signaled that the boom in AI was diverting enterprise spending away from its traditional data center chips.
The stock has fallen around 30% so far this year as Intel trails rival chip companies such as Nvidia in producing advanced artificial intelligence (AI) chips and components.
Intel forecast second-quarter revenue of $12.5 billion to $13.5 billion, compared with analysts' average estimate of $13.57 billion, according to LSEG data.
"While we believe they are doing everything they can to try to repair things, it is clear the company is profoundly broken, and it will take years to see the fruits of their (currently exhaustive) labor," Bernstein analysts said in a note.
Intel is planning a $100 billion spending spree across four U.S. states to build and expand factories.
It also unveiled a new AI chip earlier this year to keep up with competition.
Friday's drop was set to erase nearly $19 billion from the company's market value, which stood at $149.4 billion as of Thursday's close.
Businesses have prioritized spending on advanced and speedy AI server chips, hurting demand for Intel's central processing units, which had long been the mainstay chip powering data centers.
Although encouraged by the launch of Intel's Gaudi 3 AI chip, "we worry the company will continue to cede wallet share within the overall data center compute market to the likes of Nvidia and Arm", Goldman Sachs analysts said.
Still, Intel is optimistic that a fresh upgrade cycle for personal computers around a new version of Microsoft's Windows operating system will help PC sales in the second half of the year.
That could translate to more demand for its chips used in those devices.
The company's earnings contrasted strong results from Microsoft and Alphabet, which are Nvidia clients and also design in-house chips for their data centers.
Reporting by Zaheer Kachwala in Bengaluru; Editing by Devika Syamnath
https://www.reuters.com/technology/inte ... 024-04-26/