U.S. Indices closed mixed on Wednesday (SPX +0.1%, NDX +0.6%, DJI -0.2%). Gains were seen in the Mag-7 led sectors, namely, Communications (GOOGL +3.7%), Tech (NVDA +4.2%), and Consumer Discretionary (TSLA +4.0%). Additionally, AMD’s announced USD 6bln stock buyback boosted sentiment in the semiconductor space, with the company noting the decision reflects confidence in growth prospects amongst other things. Meanwhile, Healthcare led the downside, while Materials and Real Estate followed. Weighing on the latter and small caps RUT’s underperformance (-0.9%) was the continued rally in US yields, where traders trimmed bets of Fed rate cuts by year-end, now seeing less than two full 25bps rate cuts on anticipation of improved economic growth following the 90-day US/China tariff reduction. In FX, the Dollar was firmer against major peers except for the Japanese Yen, which was helped by KRW-led regional strength. The Dollar was supported by the widening rate differential versus G10s and BBG reports that the US “are not looking to weaken the Dollar as part of trade deal”. Keeping on trade, White House Economic Adviser Hassett said that the admin has more than 20-25 deals on the table, and when President Trump returns, he will announce the next deal. FBN’s Gasparino reported that deals with Japan and South Korea are said to be “close”. Concerning Fedspeak, Goolsbee (2025 voter) and Jefferson (voter) were in fitting with recent rhetoric from Fed members, though Jefferson noted Q1 GDP data overstated deceleration in activity. For crude, prices settled lower with traders citing profit-taking following the recent upside, as attention turns to Ukraine/Russia talks on Thursday. Pressure on Iran from the US showed no signs of easing, with another set of sanctions from the US targeting individuals in China and Iran. The move is likely aimed at forcing Iran to make a deal, a prospect US President Trump reiterated he wants in Saudi Arabia today. Attention on Thursday turns to Fed Chair Powell and US data for April, namely, PPI, Retail Sales, Initial Claims, Industrial Production, and Philly Fed Business Index (May). Fed Member Goolsbee said some part of April inflation represents the lagged nature of data and the Fed is still holding its breath. Chicago Fed President said it will take time for current inflation trends to show up in data, and right now is a time for the Fed to wait for more information and try to get past the noise in the data. Goolsbee added that cannot jump to conclusions about long-term trends given all the short-term volatility. Meanwhile, Jefferson speaking for the first time since early April, said the current moderately restrictive policy rate is in a good place to respond to economic developments. On data, said Q1 GDP overstated deceleration in activity, and recent inflation data are consistent with further progress toward the 2% goal, but the future path is uncertain due to tariffs. Jefferson added watching closely for signs in hard data of weaker activity. On tariffs, stated that it could lead to higher inflation, and still uncertain if the impact would be temporary or persistent. Jefferson noted labour market is still solid. Elsewhere, both Oil and Gold closed lower on Wednesday by 1.23% and 2.21% respectively.
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