Volatility stormed back into the markets, shaking things up in a week where inflation defiantly outstripped estimates for the third straight month in March, leading investors to substantially slash their expectations for Federal Reserve interest rate cuts.
Geopolitical tensions in the Middle East are fueling a surge in commodities like oil and gold.
The start of the earnings season saw major banks slightly surpassing estimates, yet the overall negative sentiment has still triggered a negative response from stocks.
Rate cut expectations delayed
Following recent hotter-than-expected inflation data, the likelihood of a June rate cut has plummeted from 60% to 20%. Some Wall Street analysts now expect only one rate cut in December.
Mortgage rates surge
U.S. mortgage rates are on the rise, with the 30-year fixed rate hitting 6.88%, as recent inflationary pressures raised long-term Treasury yields and weakened expectations for Federal Reserve rate cuts. This surge raises affordability concerns for homebuyers, exacerbating the housing market’s challenges with high prices and low inventory.
Consumer sentiment drops
The sentiment among U.S. consumers fell in April, missing economist forecasts, per the University of Michigan. The report underscores the increased economic anxiety that comes with rising inflation expectations.
Confidence in Musk fades
Wall Street’s confidence in Tesla CEO Elon Musk is declining, as highlighted by CNBC’s Jim Cramer. Amid a substantial drop in Tesla’s stock, driven by vehicle price cuts and strong competition, Musk faces skepticism about his focus due to his other ventures. In contrast, Warren Buffett’s Berkshire Hathaway garners praise for its robust long-term performance.
Ark bets on OpenAI
Cathie Wood’s Ark Invest has taken a stake in OpenAI through its Ark Venture Fund, seeking to capitalize on the growing interest in artificial intelligence technologies. This investment allows Ark’s clients to gain exposure to OpenAI, along with other high-profile companies such as SpaceX and X Holdings.
AI power fears
By 2030, artificial intelligence technologies could account for up to 25% of U.S. energy consumption, according to Arm Holdings CEO Rene Haas. This projection emphasizes the significant increase in electricity demand driven by artificial intelligence data centers that are needed for sophisticated AI models like ChatGPT.
Source: Detroit Free Press
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