05701-A-0326 Chip duo NVIDIA and AMD hit new highs, while Tesla plummeted by over 10%

According to data released on Thursday, despite the Federal Reserve maintaining high interest rates, the US economy remains resilient: the initial annualized growth rate of US real GDP in the fourth quarter of 2023 was 3.3%, which slowed down from the third quarter and still exceeded expectations. Consumer spending is the main driving force, and the core inflation indicator favored by the Federal Reserve, PCE, grew by 2% in the fourth quarter, which was flat with the third quarter and in line with expectations; New home sales in December increased by 8% beyond expectations, and the number of first-time applicants for unemployment benefits rebounded above expectations last week, but still close to a multi-year low.
After the release of GDP data, the probability of the market expecting the Federal Reserve to cut interest rates in March has rebounded compared to Wednesday. Commentary states that the probability of the Federal Reserve cutting interest rates and achieving a soft landing has increased; Although the core PCE has reached the Fed’s inflation target of 2%, the Fed still has the motivation to keep interest rates unchanged in the near future; GDP is the data from last year, but it reinforces the logic of the Federal Reserve adopting a cautious attitude this year. The Federal Reserve is expected to cut interest rates cautiously and slowly this year.
After the release of GDP, the yield on US Treasury bonds declined, and the yield on interest rate sensitive two-year US Treasury bonds fell more than 10 basis points from the daily high, causing US stocks to open higher. Technology stocks that have been driving the US stock market higher in recent days have shown mixed performance during the trading session. S&P continues its historic high momentum from the past few days. Microsoft, Google, and Meta closed at historic highs. The financial reports continue to have a significant impact on leading stocks, with Q4 performance falling below expectations and Tesla warning that its production growth rate in 2024 will be significantly lower than in 2023, resulting in a more than 10% decline, dragging down the Nasdaq market and narrowly failing to maintain its upward momentum. The gains of two artificial intelligence (AI) chip giants have slowed down, AMD continues to reach historic highs, and Nvidia has turned lower during the trading session.
The European Central Bank announced after the meeting that it would continue to maintain interest rates as expected by the market, without implying decision-makers to consider whether to relax the currency. Central Bank Governor Lagarde said that it is too early to discuss a rate cut, and there may be a rate cut once in the summer. Market insiders believe that this meeting revealed a dovish bias, with the European Central Bank acknowledging a downturn in economic growth and a decrease in inflation compared to December expectations. Although the ECB has not yet discussed interest rate cuts, Lagarde has opened the door to rapid rate cuts when data is suitable.

After the European Central Bank meeting, investors’ expectations of interest rate cuts have increased. The price of European treasury bond rebounded in the session. The benchmark 10-year German bond yield broke away from the high since early December, which was refreshed earlier in the day. The interest sensitive two-year German bond yield plunged in the session, once falling more than 10 basis points from the daily high. The euro quickly smoothed out gains and turned down in the market. The weakening of the euro, combined with the improvement of US GDP, has boosted the US dollar index, approaching the six week high set on Tuesday.
In commodities, gold rose with the support of the downward trend in US bond yields, but under the pressure of the strengthening US dollar, it turned down several times during the trading session and ended with a slight rebound. International crude oil is accelerating its rise, reaching a high in nearly a month and achieving its best daily performance in three weeks. This is mainly due to the positive demand outlook of the US GDP boosting the oil market. In addition, the US Department of Energy announced on Wednesday that US crude oil inventories fell more than 9 million barrels more than expected last week, and crude oil production decreased month on month, falling from the historical high set in the previous week. Commentary states that due to the cold weather in the northern United States, local oil production has fallen to a six-month low.
S&P hit a new historical high in five consecutive days, with chip stock indexes turning lower. Tesla hit its largest annual decline, with Microsoft, Google, and Meta hitting a new closing high in a row
The three major US stock indexes opened higher for the second consecutive day. In the early morning session, the S&P 500 index rose by about 0.6%, hitting a historic intraday high for five consecutive trading days. In the afternoon session, most of the gains were recouped, and the closing session approached the daily high. The Dow Jones Industrial Average rose over 230 points and 0.6% in the morning, followed by a short-term decline in the afternoon. In the end of the day, the increase expanded to over 200 points, breaking the daily high. The Nasdaq Composite Index rose by over 0.7% at the end of the morning session, hitting a daily high. It turned lower in the afternoon and fell by over 0.3% at the end of the day, locking in an upward trend at the end of the day