By Mike Dolan
June 4 (Reuters) -
What matters in U.S. and global markets today
By Mike Dolan, Editor-at-Large, Finance and Markets
The S&P 500 failed to clock its 10th straight daily gain on Wednesday and there are some clouds gathering in markets. Despite the frenzy in the red-hot chip sector, Broadcom, now the world's sixth-biggest company by market cap, stumbled after its latest earnings release.
The chipmaker’s stock dropped more than 13% overnight following a slight miss on sales and revenue forecasts.
That reaction speaks to the high bar companies must now meet to impress markets amid the AI boom. In the words of one analyst, the market now demands perfection.
I’ll get into that and more below.
But first, check out my latest column on why Kevin Warsh's Fed could catch investors off guard.
And listen to the latest episode of the Morning Bid daily podcast. Subscribe to hear Reuters journalists discuss the biggest news in markets and finance seven days a week.
SUMMER CLOUDS
Broadcom’s miss also speaks to the rising competition in the sector, where shares of chip designers like Marvell Technology have zoomed higher over the past week. Marvell’s shares touched a record high after Nvidia CEO Jensen Huang on Tuesday stated it is likely to become a trillion-dollar company.
Meantime, the broader economy has shown few signs of slowing, fuelling hawkish bets on the Federal Reserve's next move, with futures now seeing almost a 50% chance of a rate rise as soon as October.
The Fed's so-called Beige Book, which lays out the economic conditions facing policymakers when they meet this month, showed activity has picked up even as energy price pressures have become pervasive.
That was clear in the recently released ISM business surveys for May, as well as labor market numbers like May’s forecast-beating 122,000 rise in ADP private sector payrolls.
The May employment report will be released tomorrow, but overall U.S. economic surprise indexes are running at their most positive in three years.
There's been little relief on the energy front, meantime, with oil prices still elevated as we enter a crunch month for global crude supplies. And despite reports of a ceasefire between Israel and Lebanon boosting hopes for a broader Iran deal, fighting continued in southern Lebanon on Thursday.
In otherwise calm currency markets, the softening Japanese yen continued to flirt with the 160-per-dollar level, even in the face of warnings from BOJ sources that an interest rate rise is likely this month - unless a sharp escalation in the Middle East conflict upends markets.
And while investors await a wave of mega IPOs this summer, there have been renewed jitters in private equity and credit markets. Swiss asset manager Partners Group is facing heavy redemption requests from some of its funds and will cap withdrawals from its $16 billion U.S.-based fund after they exceeded the 5% quarterly limit.
Moving into Thursday's open, U.S. stock index futures were in the red while oil prices and Treasury yields slipped back slightly from Wednesday’s highs. And with regular tech stocks now recording extraordinary short-term moves that once seemed the preserve of frothier crypto markets, bitcoin seems almost forgotten. It's shed almost 20% since mid-May and fell to its lowest level since February on Wednesday.
Chart of the day
Even though a ceasefire deal between Israel and Lebanon encouraged hopes for a broader agreement to end the U.S.-Israeli war with Iran, fighting continued both there and in the Gulf region.
Global crude prices remain about 35% higher than before the war and concerns about dwindling reserves are rising. U.S. crude stockpiles fell by 8 million barrels to 434 million barrels in the week ended May 29, the Energy Information Administration said - twice the draw analysts had expected.
Today's events to watch
• U.S. weekly jobless claims (8:30 a.m. EDT), Q1 productivity and costs (8:30 a.m. EDT)
• Fed’s Michelle Bowman, Richmond Fed’s Thomas Barkin, Kansas Fed’s Jeffrey Schmid and San Francisco Fed’s Mary Daly all speak
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(By Mike Dolan)
