Stocks closed slightly higher on Tuesday as investors await the reaction to Nvidia’s earnings and Friday’s important PCE inflation data, let’s dive into some other facets of the markets.
sources: FactSet, CNBC, IBD
Snapshot
source: MarketWatch
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China
A Chinese military plane breached Japan’s airspace.
IBM is pulling it R&D programs out of China amid rising geopolitical tension between Washington and Beijing. IBM’s revenue in China fell 19.6% last year as domestic competitors upgraded service offerings and Beijing pushed Chinese buyers to purchase from local suppliers.
In its push to increase domestic manufacturing, China added capacity to produce 40 million vehicles this year despite only selling 22 million at home. Similarly, the country is on pace to make 750 gigawatts of solar cells, though it only need 220 gigawatts domestically in 2023. Output of steel rose over the last year as well, despite slowing domestic demand and indications of oversupply.
In trade news, Canada joined the U.S. and other allies in heaping tariffs on to China. Imports of Chinese EVs, steel and aluminum entering Canada will incur significant fees.
Fed rate cuts could result in Chinese firms selling $1 trillion in dollar denominated assets.
Temu owner PDD Holdings shocked the markets with a particularly grim forecast. During a post-earnings briefing, its CEO state about 10 times that revenue and profits will inevitably decline.
China seems increasingly willing to escalate tensions with the Philippines over control of a vital trade route in the South China Sea.
sources: Bloomberg, WSJ
“The secret of life is honesty and fair dealing. If you can fake that, you’ve got it made.” – Groucho Marx
Commodities
Grain prices remain under pressure as conditions in the U.S. farmbelt point to bumper crops. After peaking during Covid, grain prices have been falling and so far, 2024 isn’t any difference. Adding to the pain of low prices, farmers are facing high costs for essentials such as seed and fertilizer, further squeezing margins.
Goldman Sachs and Morgan Stanley both lowered their forecasts for crude oil to below $80 per bbl in 2025. Concerns about existing oversupply, slow economic growth and potential reaction from OPEC+ were among the reasons for the change.
sources: Bloomberg, FactSet, WSJ
Energy
The U.S. government and the state of Michigan are spending $2 billion to restart a nuclear reactor on the shores of Lake Michigan. Governments are scrambling to respond to surging demand for electricity from AI server farms as fossil fuel costs rise. Officials are also rushing to meet climate reduction target. When the plant comes back online, it will be the first decommissioned plant to ever be put back to work.
source: WSJ
In other news:
Mark Zuckerberg claims the White House pressured FaceBook to take down content related to the pandemic in 2021.
CrowdStrike releases Q2 earnings today, a little over a month after a software update from the company caused a global outage impacting businesses from banks to hospitals. The outage happened during the final weeks of the company’s quarter, which is typically a critical time for software vendors to close deals.
Stock grants have made many Nvidia employees millionaires though demanding working conditions haven’t allowed many the time to enjoy their spoils.
Disparities are forming in the U.S. commercial real estate (CRE) markets which have suffered a $557 billion drop in market value. The impact is hitting established downtowns in places like Chicago and LA hard, while many outer neighborhoods are holding up well.
According to research from the cybersecurity firm Arkose, an online group is selling tools to help hackers bypass CAPTCHA authentication screens. The tools use machine learning, are trained on images and updated frequently. The tools are sold in kits for under $200.
sources: WSJ, CNBC, Bloomberg, IBD, MarketWatch
The stinger
Disclaimer
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