Market Monitor: Treasury Yields and Nvidia's Surge
Date: 17th January 2024
Author: Emmanuel Baiden – Senior Research Analyst
Treasury yields experienced an early Wednesday increase, with the 10-year yield maintaining a position above 4%. The yield on the 10-year Treasury note edged higher to 4.0694%, persisting above the 4% mark observed throughout the previous week. Concurrently, the 2-year Treasury yield rose by approximately 5 basis points to trade at 4.278%.
Treasury Yields on the Rise
Investors closely monitored fresh data and commentary from Federal Reserve members, with the spotlight on December retail sales data set to be released on Wednesday. Anticipation surrounds the potential impact on recessionary fears and concerns about economic growth if U.S. consumer spending cools. Economists polled by FactSet project a 0.2% increase for the month, slightly under November's 0.3% uptick.
On Tuesday, yields saw an uptick following remarks from Federal Reserve Governor Christopher Waller, who hinted at potential rate cuts this year while emphasising a measured approach. At the World Economic Forum in Davos, European Central Bank members cautioned against overestimating rate cut projections.
Klaas Knot, the president of the Dutch central bank, stated on CNBC that the euro zone’s central bank assesses overall financial conditions. He emphasized that "the more easing the market has already done for us, the less likely we will cut rates."
Nvidia's Soaring Prospects
Shares of Nvidia, one of our buy recommendations, surged on Tuesday as investor optimism over the prospects of higher demand for artificial intelligence (AI)-powered chips led Wall Street analysts to increase their price targets for the semiconductor giant.
Nvidia's stock rose by 3% to $563.65, reaching a new record high. KeyBanc raised the price target to $740 from $650. The median price target from 53 analysts covering Nvidia is $625.
?Nvidia plans to commence mass production later this year of an AI chip designed for its Chinese customers to comply with tightened U.S. export rules. The H20 chip, the most powerful of three China-focused chips developed by Nvidia, aims to meet restrictions announced in October.
While challenges delayed the original launch schedule, Nvidia's strategy involves compliance with new restrictions, including the introduction of chips like the L20 and L2. The chipmaker has yet to announce the sale of these products. In late December, Nvidia launched a modified version of an advanced gaming chip designed to comply with the new rules.
Nvidia's strategic move aligns with efforts to preserve its market share in China, addressing the impact of tightened U.S. export restrictions on certain products.
As these developments unfold, investors are advised to stay vigilant and adapt their strategies, accordingly, keeping an eye on further shifts in the financial landscape.
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[Disclaimer: This newsletter provides financial insights for informational purposes only. It does not constitute financial advice or recommendations for investment decisions.]
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