U.S. Indexes closed higher on Wednesday as markets grew increasingly optimistic that the Middle East conflict may be approaching its final stages. President Trump said talks with Iran are in their final stages, while Al Hadath reported that the Pakistani Army Chief may visit Iran tomorrow to announce a final draft agreement, with the next round of negotiations expected to take place in Islamabad after the Hajj season (25th–30th May). Oil prices extended losses following the headlines, with WTI and Brent both falling by around USD 6/barrel. The decline in crude supported Treasuries and weighed on the Dollar against major peers. Energy was the worst-performing sector amid the sharp downside in oil, while Consumer Discretionary, Technology and Materials outperformed. Airlines were among the biggest gainers in the S&P 500 as lower fuel costs boosted sentiment (JETS +6.6%). Semiconductor (SMH +3.8%, SOXX +4.7%) and memory names (DRAM +3.5%) rallied ahead of Nvidia earnings, with many sell-side firms expecting a beat-and-raise quarter. Elsewhere, the FOMC Minutes leaned hawkish, with the majority viewing hikes as likely warranted should inflation remain persistent, although markets largely looked through the release. In supply, the US 20-year bond auction was broadly average and generated little market reaction. In FX, Antipodes outperformed while the Dollar lagged alongside lower oil prices and firmer Treasuries. Sterling also strengthened despite softer-than-expected UK CPI data as it benefitted from the risk environment and Dollar weakness. Precious metals benefited from the weaker Dollar backdrop. Looking ahead, focus remains firmly on Iran after reports suggested Tehran is reviewing a text sent by the US, following Iran’s own 14-point proposal delivered three days ago. The April FOMC Minutes leaned notably hawkish, although much of the tone was already signalled by recent Fed commentary and Powell’s latest press conference. The key takeaway was the growing support within the Committee for shifting away from an easing bias and the increasing willingness among officials to consider further tightening if inflation remains persistent. A majority of participants said additional policy firming would likely become appropriate should inflation continue to run above the Fed’s 2% target, while many participants said they would have preferred removing the easing bias language from the statement altogether. Policymakers also noted that elevated inflation and uncertainty surrounding the Middle East conflict could require rates to remain restrictive for longer than previously anticipated. Only several suggested it would likely be appropriate to lower rates once there are clear indications that disinflation is firmly back on track or if solid signs emerge of greater labour market weakness. Regarding inflation, participants warned that sustained high energy prices combined with tariffs could risk broader inflation pressures becoming embedded, although most still viewed longer-term inflation expectations as stable. On the labour market, most officials viewed conditions as stabilising, citing unemployment, hiring and layoff data, although some noted signs of underlying softness. Overall, the Minutes reinforced the Fed’s growing focus on upside inflation risks over downside labour market concerns. Fed Member Paulson said inflation remains too high, and that rate cuts are likely only appropriate once inflation is brought back under control, while reiterating that current policy is in an appropriate place. She added that it is healthy for markets to consider the possibility of an extended hold or even further hikes if inflation risks persist. Elsewhere, Paulson described the labour market as stable while noting consumption is slowing but remains resilient. The Philadelphia Fed President also warned that hikes may need to be considered if growth rises above potential or additional inflation risks emerge, while stressing that risks to both inflation and the broader outlook remain “super-elevated”. After the close we got the long awaited earnings from NVIDIA: NVIDIA delivered a record quarterly result, with revenue of $81.62B exceeding Wall Street’s $79.19B forecast and adjusted earnings per share of $1.87 coming in ahead of the $1.77 estimate. The figures underline the sustained pace of capital flowing into artificial intelligence infrastructure, with the company’s data centre division again doing the heavy lifting. Data centre revenue reached $75.2B in the first quarter, surpassing analyst expectations of $73.48B and reinforcing Nvidia’s position at the centre of the global AI buildout. The segment has become the dominant driver of the company’s financial profile, with hyperscalers and cloud providers continuing to absorb GPU capacity at a pace that shows little sign of moderation. The forward guidance was equally striking. Nvidia projected Q2 revenue of $91.0B, plus or minus 2%, translating to a range of $89.18B to $92.82B and clearing the consensus estimate of $87.36B by a meaningful margin. Adjusted operating expenses for the second quarter are expected to come in at approximately $8.3B, above the $7.93B estimate, suggesting the company is continuing to invest heavily in its cost base to sustain growth. Gross margins held firm. The Q1 adjusted gross margin of 75.0% was accompanied by Q2 guidance of 74.5% to 75.5%, indicating that pricing power across Nvidia’s product stack remains robust despite an increasingly competitive environment and ongoing questions around supply chain capacity. Beyond the operational numbers, management made two significant capital allocation announcements. The quarterly cash dividend was lifted to $0.25 per share from the prior $0.01, a 25-fold increase that signals considerable confidence in the company’s ability to generate cash. An additional $80B share buyback authorisation was also announced, providing a substantial return of capital mechanism for shareholders. Elsewhere, Oil closed flat while Gold ended the day with a 1.8% loss.
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