The stock market rally gave some bullish signals during the week as Nvidia rebounded and the Nasdaq set a record close. But stocks generally retreated on a hot CPI inflation report and Mideast fears, with the Dow Jones and Russell 2000 below their 50-day lines. Taiwan Semiconductor reported strong sales, led by AI chips, while Google unveiled an in-house AI processor. JPMorgan Chase, Wells Fargo and Citigroup kicked off bank earnings, while Delta Air Lines topped views.
AI Leads But Broad Stock Market Slides
The stock market rally gave some bullish signals with the Nasdaq setting a record close Thursday as Nvidia rebounded. But the Nasdaq erased weekly gains. The S&P 500, Dow Jones and Russell 2000 retreated, with the latter two below their 50-day lines. Hot inflation and Mideast fears weighed on sentiment. Crude oil rose on Mideast tensions. The 10-year Treasury spiked to a 2024 high, but backed off.
Inflation Data Not All Bad
March inflation data wasn't quite the disaster that was feared after Wednesday's consumer price index, which showed both overall and core prices up 0.4%. Producer price index data on Thursday provided some measure of relief because a few components, most notably health care services prices, feed directly into the Fed's primary inflation measure, the core PCE price index. Still, after both reports, economists expect the core PCE price index will rise between 0.25% and 0.3% in March. That's still too fast for the Fed to start cutting rates, especially after a sizzling March jobs report. Markets now see a slim chance of a June rate cut and roughly 50-50 odds for a July cut. A clear job-market slowdown would make a rate cut more likely, and some forward indicators point to a softening. But new claims for jobless benefits fell 11,000 to 211,000 in the week through April 6.
JPMorgan Tumbles On Guidance
JPMorgan Chase, Wells Fargo and Citigroup beat first-quarter estimates, along with asset manager BlackRock and asset custodian State Street. But JPMorgan maintained its full-year net interest income guidance. Analysts expected a higher target. JPMorgan stock tumbled. Wells Fargo fell modestly for the week, along with State Street. Citigroup and BlackRock fell solidly.
Google Unveils AI Chip
Google parent Alphabet hosted a cloud computing conference, highlighting new generative AI use cases from companies spanning across various industries. Also, it announced an expansion of its partnership with cybersecurity firm Palo Alto Networks. Further, Google unveiled a new AI chip for cloud services based on Arm Holdings designs. For Workspace, Google launched Google Vids, an AI-powered video creation app that assists with writing, editing and production. GOOGL stock rose to a new high.
Meta Platforms unveiled its next-generation AI chip. Meta, Google, Amazon.com and Microsoft have developed in-house AI chips to lessen their Nvidia dependence.
AI Chips Fuel TSMC Sales
Taiwan Semiconductor Manufacturing topped expectations for first-quarter sales thanks to booming demand for artificial intelligence chips. The world's largest chip foundry, better known as TSMC, said its March-quarter sales rose 16.5% year over year in local currency. Analysts had been looking for a 13.9% increase. TSMC generated the equivalent of $18.86 billion in March-quarter sales, vs. estimates for $18.26 billion. In the year-earlier period, its sales totaled $16.62 billion. TSMC's customers include AMD, Apple and Nvidia, to name a few.
Delta Earnings Soar
Kicking off results for carriers, Delta Air Lines reported an 80% EPS gain, comfortably beating, while revenue rose 6% to $12.6 billion. Corporate travel demand accelerated with managed corporate sales increasing 14% year over year. Meanwhile, domestic unit revenues rose 3% year over year. Delta guided in-line for Q2 and the full year. Delta stock reversed lower on earnings, but rose modestly for the week, near a buy point.
In Brief
Smart Global reported a 69% EPS tumble that slightly beat views, while a 27% revenue slide to $284.8 million missed. The company sees continued struggles in its memory business. Shares fell.
PriceSmart reported a 5% EPS gain with revenue up 13% to $1.29 billion, slightly beating. The operator of warehouse clubs in Latin America and the Caribbean will pay a $1-a-share special dividend.
Vertex Pharmaceuticals will buy Alpine Immune Sciences for $65 a share or $4.9 billion, a 67% premium to Tuesday's close. ALPN is working on a treatment for inflammatory kidney diseases.
Regeneron Pharmaceuticals was accused by the Justice Department of fraudulently inflating Medicare reimbursement rates for eye drug Eylea. The biotech's shares fell.
