Tentative AI Trade Setback; Housing Market Strength
2023.06.28 11:26
- Wall Street awaits Fed Chair Powell and counterparts at ECB forum
- Mortgage demand rises for a 3rd straight week
- down 1.9 bps to 3.745%
The artificial intelligence trade had a major setback after the Wall Street Journal reported that the Biden administration could unveil new restrictions on the exports of AI chips to China. Nvidia (NASDAQ:), a pivotal mega cap tech trade, gets about 20% of its revenue from China. In Asia, AI related stocks were under significant selling pressure.
Despite a potential headwind for the AI trade, the NASDAQ 100 will likely have a record first half. BlackRock (NYSE:), the world’s largest asset manager is also betting big on AI, coming out with a new overweight call. BlackRock sees a mild recession happening later this year but anticipates a mega force like AI could still help equities outperform, given a weakening macroenvironment.
We should get some volatility going into quarter close as so many traders are starting to become bullish stocks and as so many stocks are near critical option levels. The FOMO trade might be here, but the economy is clearly feeling the effects of the Fed’s tightening cycle and the consumer is weakening but has no trouble getting a job, so it will be interesting how the stock market’s back gets broken.
US Data
mortgage applications in the US rose for a third straight week, despite surging rates as housing demand remains healthy. The effects of the tightening of lending conditions are being reflected in the data, as the credit jumbo rate(expensive homes) rose to 6.91%, which is well above the Average 30 year fixed rate of 6.75%.
The housing market isn’t weakening yet despite rising costs because demand is still growing and supplies remain tight.
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