Marketmind: Nikkei and Nasdaq stalk records, CPI lurks

By Thomson Reuters Feb 13, 2024 | 5:14 AM

A look at the day ahead in U.S. and global markets from Mike Dolan

Frenetic trading activity around artificial intelligence and chipmakers has tech heavy stock indexes from Wall St’s Nasdaq to Japan’s Nikkei just a stone’s throw from all-time highs – even if Tuesday’s U.S. inflation update had them back off for now.

With US annual consumer price inflation expected to ebb to a near 3-year low of 2.9% – and below 3% for the first time since March 2021 – rates and bonds markets held steady.

Even though Federal Reserve futures markets now have sights firmly set on May rather than March for the first interest rate cut in the cycle, the central bank will welcome another retreat in CPI even if core rates remain stick.

Further encouragement came on Monday as the New York Fed’s household survey showed 3-year inflation expectations falling to just 2.4% – the lowest in almost four years.

But with China’s markets still closed for the Lunar New Year holiday, all the markets buzz was once again in tech and AI.

Aided by both the tech sector boost and a softening yen toward 150 per dollar for the first time since November, Japan’s Nikkei – one of the investment darlings of the year so far – soared almost 3% and closed at a fresh 34-year high as trading resumed after a long holiday weekend.

It’s now just 2% from the record peak it set at the height of Japan’s property bubble in 1990.

On of the drivers of Tuesday’s gains was SoftBank, which climbed 6.27% – buoyed in turn by the extraordinary share price boom in chip developer Arm Holdings, in which SoftBank has a 90% stake.

Infused with the AI frenzy, Arm’s shares surged another 40% on Monday – adding to a staggering rally that’s seen it gain more than 80% since its earnings projections were released last Wednesday. And its market value has now reached a record $141 billion, nearly tripling since its initial public offering last September.

What’s more, Monday saw chip giant Nvidia cross above Amazon.com in market capitalization at one point amid the same AI euphoria – briefly making it the fourth-most valuable U.S. company.

All the excitement saw the Nasdaq surpass its record closing high from November 2021 at one stage during Monday’s trading – just half a percent from its all-time intraday peak.

It slipped back before the close, however, with Tesla falling again and increasingly separated out from the so-called ‘Magnificent 7″ grouping of megacap tech stock leaders. Embroiled in a price war with Chinese rivals, Tesla’s stock is down almost 25% so far this year.

Nasdaq futures fell back about 0.5% before the open, with S&P500 futures down about 0.4% as the inflation release was awaited.

With the January NFIB small business survey due later, small caps outperformed on Monday – climbing 1.8% and the large caps stumbled at new highs.

Elsewhere, Bitcoin touched its highest since December 2021 at $50,383 and steadied above $50,000 for a second day running. The world’s largest crypto token has risen nearly 18% this year, helped by last month’s regulatory nod for U.S.-listed exchange traded funds (ETFs) and an expected ‘halving’ event later this year.

In Europe, sterling rose and British stocks and bonds fell after news that UK pay grew at the weakest pace in more than a year at the end of 2023 even as the jobless rate fell again.

The drop in wage growth was not as big as forecast, however, and probably not significant enough to spur the Bank of England into quicker action towards cutting interest rates.

Key diary items that may provide direction to U.S. markets later on Tuesday:

* U.S. Jan consumer price inflation report, NFIB Jan small business survey

* Energy and climate ministers gather in Paris for IEA’s 2024 Ministerial Meeting

* U.S. corporate earnings: AIG, Airbnb, Lyft, Coca-Cola, Marriott, MGM Resorts, Molson Coors, Biogen, Hasbro, Moody’s, Robinhood, Eversource Energy, Ecolab, Howmet Aerospace, Incyte, DaVita, Invitation Homes, Akamai Technologies, Welltower, EQT, Leidos, Zoetis, Zillow

(Editing by Bernadette Baum)