The recent U.S. economic data has been quite mixed, especially in terms of employment, a key indicator that the Federal Reserve focuses on during its interest rate deliberations.
In September, the U.S. employment rate rose from 60% in the previous month to 60.20%, and the unemployment rate fell from 4.2% to 4.1%, which was better than market expectations. The inflation data for September also continued to decline for the sixth consecutive month, reaching 2.4%, the lowest since February 2021.
On the other hand, the number of initial jobless claims for a single week was higher than expected, and the Producer Price Index (PPI) showed some deceleration, which may partially offset the positive effects mentioned above.
The market has also adjusted its expectations for the Federal Reserve's interest rate decision in November, shifting from a majority betting on a 50 basis point rate cut to supporting a more moderate 25 basis point rate cut. Federal Reserve officials have also expressed support for gradual rate cuts, which may further provide justification for a 25 basis point rate cut next month.
However, before that, the capital market will still pay attention to economic data. This week, retail sales data and initial jobless claims data will be released, and the market will continue to express its sentiment based on the performance of these data and their implications for the Federal Reserve's interest rate decisions.
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U.S. stocks hit new highs again.
Against the backdrop of the market's general expectation of a 25 basis point rate cut by the Federal Reserve in November, the stock market continues to improve. The S&P 500 index rose by 0.77% overnight, closing at 5,859.85 points; the Dow Jones Industrial Average (DJI.US) also hit a new high, closing at 43,065.22 points, up 0.47%; the Nasdaq index (IXIC.US) rose by 0.87%, closing at 18,502.69 points.
The surge in chip stocks was the biggest contributor to the stock market's performance. Nvidia (NVDA.US) shares hit a new high, rising by 2.43%, closing at $138.07, with a market value expanding to $3.39 trillion, $129.9 billion less than the market value of the highest-valued Apple (AAPL.US), and $271.4 billion higher than the market value of the third-highest valued Microsoft (MSFT.US).
In addition to Nvidia, a favorite in the AI chip sector, reaching a new high, other stocks in the AI semiconductor industry chain also rose significantly. Semiconductor design company ARM (ARM.US) saw a gain of over 6%, while Applied Materials (AMAT.US) and Qualcomm (QCOM.US) rose by more than 4%. Lam Research (LRCX.US) and ASML (ASML.US) rose by more than 3%; TSMC (TSM.US), the AI chip foundry for Nvidia and Apple, also closed up by 0.73%, at $192.21, with its market value once again approaching $1 trillion.
Driven by the AI concept, especially by AI chips like Nvidia's, the Nasdaq index has reached a very high level, with a cumulative increase of 23.26% so far this year. Data from Wind shows that the price-to-earnings ratio of the Nasdaq index may have reached as high as 44.20 times. Looking at Wind's charts, since June 2023, the index's price-to-earnings ratio has been hovering around the 40 times level.As the saying goes, the higher you climb, the colder it gets. The higher the stock index rises, the more people worry about the impending turning point, as if it were a game of musical chairs where players are already on edge, listening for when the music will stop so they can escape in time.
The concept of AI has been hyped for a long time, and AI-related stocks like NVIDIA and TSMC have been hovering at high levels. According to data from the NASDAQ exchange, based on NVIDIA's current price of $138.07, its expected price-to-earnings ratio is as high as 50.87 times, indicating that the market has already factored in the potential strong growth in AI chip deliveries.
NVIDIA's new product, Blackwell, is currently in high demand, which Huang Renxun described as "Insane." The capital market may have high expectations for this product, and its valuation has already reflected the profit growth potential brought by Blackwell's delivery. In the next few quarters, as NVIDIA's AI chip deliveries ramp up, its actual performance will be put to the test.
From past experience, once optimism accumulates to a certain point, any disappointment can become a reason to turn around. Market participants need to be vigilant about shifts in sentiment.
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