Ahead of Nvidia earnings the S&P closed lower at 5,888. After the bell Nvidia had another “double beat”, beating on both the top and bottom lines while taking a smaller hit from the China ban than originally expected. I’m sure some analyst who covers Nvidia or books appearances on CNBC can give you the full rundown, but suffice for now to say Nvidia sees solid AI demand continuing. While Nvidia looked like it was moving higher after hours, it can't hold a candle to the ~24% pop that Abercrombie & Fitch shares had after earnings yesterday. I didn’t listen or read anything about the Abercrombie earnings, but I’m pretty sure if they put some Nvidia chips in a pair of jeans to power something AI they’d be cooking with fire.
Where Were The Vigilantes?
With all the talk of the end of the dollar, deficits, bond vigilantes and the like, yesterday’s 5Y Treasury auction seemed to go off without a hitch, including a record 78% indirect (foreign) bidder takedown. The 2Y yield ended at 3.99% and the 10Y at 4.47%. We’ll see how the market digests the notoriously tricky 7Y tenor.
Powell Rangers - Uncertain As Usual
Away from the market, the minutes of the May 6-7 FOMC Minutes were released and if you had that members viewed uncertainty around the economic outlook as having increased on your bingo card, good for you. Nonetheless they were still describing economic activity and the labor market as 'solid', though they did wave a hand at those quirky net export numbers messing with the picture. Inflation, the perennial party crasher, remains 'somewhat elevated'. As we already had heard, with risks to both higher unemployment and higher inflation, the Fed has decided to wait for more clarity.
FAIT Accompli
The minutes did reiterate that the fate of FAIT (Flexible Average Inflation Targeting) is most certainly that it will be retired when the Fed completes its policy framework review. The minutes suggested participants see “flexible inflation targeting, under which policy seeks to return inflation to 2 percent without making up for previous deviations from target” as more robust.
Day Ahead
On the day ahead we’ll get some economic data including a read of GDP. An intriguing narrative on the back of Tuesday’s Conference Board Consumer Sentiment data is that the previously weak “soft” data will catch up with the mostly positive hard data.
Meanwhile, At Abercrombie HQ…
If they embed a GPU into a pair of cargo shorts, I’m going all in.
XTODs:
XTOD: In case there were any doubts that FAIT is being abandoned, we got this excerpt from the May FOMC minutes: (1/3) https://pbs.twimg.com/media/GsEJw-iXMAAGXVB?format=png&name=900x900
XTOD: New SF public school plan would
- eliminate homework and weekly tests from counting toward semester grade
- allow students to take the final exam multiple times
- convert all B grades into As, and all Fs into Cs
It’s hard to see the difference between this policy and what you’d get if a bunch of 10yos locked the teachers in a closet and rewrote the rules.
XTOD: How can I put this? "Expected utility maximizers don't maximize utility."
Why? Because utility is not usually an ergodic quantity in the mathematical models used by economists, and maximizing its expected value doesn't mean much in the real world.
XTOD: "The impediment to action advances action. What stands in the way becomes the way." — Marcus Aurelius
XTOD: don’t live an unconscious life https://x.com/i/status/1927485216702296386
https://x.com/DavidBeckworth/status/1927833429128729070
https://x.com/DKThomp/status/1927700160337117617
https://x.com/ole_b_peters/status/1927689244660642163
https://x.com/GregoryMcKeown/status/1927832275200397693
https://x.com/patrick_oshag/status/1927485216702296386
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