Breakfast | Powell: Don't expect a market rescue, Nasdaq once dropped 4.5%

Market Overview

Federal Reserve Chairman Jerome Powell's speech was hawkish, hinting at the dangers of stagflation, with the Nasdaq dropping over 3%. NVIDIA and AMD once plunged 10%, but the decline narrowed by the close. The China concept index fell nearly 3%. The European technology sector dropped 2%, with ASML, which provided disappointing guidance, falling over 5%.

After Powell's speech, U.S. Treasury yields accelerated their decline, hitting a one-week low, marking three consecutive days of decrease; the dollar index fell 1% during the session, approaching a three-year low; the yen rebounded to a six-month high, and the offshore yuan rose 400 points to break 7.30; Bitcoin surged over $2,000 at one point, reaching $85,000.

Gold surged over 3% during the session. Crude oil rebounded nearly 2%.

Federal Reserve

Powell reiterates that the Fed will wait and see before acting, warning of the dual challenges of inflation and the economy, denying the need for a market rescue

Powell reiterated that the impact of tariffs on inflation may be more lasting, emphasizing the need to ensure that one-time price increases do not become a persistent inflation problem, stating that tariff levels even exceed the Fed's upper expectations. Without price stability, a strong labor market cannot be achieved in the long term. This year, the economy is "very likely" to deviate from inflation and employment targets, denying the Fed Put for market rescue, emphasizing that the market operates in an orderly manner and meets expectations, predicting that the market will "continue to fluctuate"; he stated that the Fed will continue to do its job without political influence, and the independence of the Fed is a legal issue.

Powell noted that the Fed may face challenges from conflicting dual targets of employment and inflation. The "New Federal Reserve News Agency" commented that Powell emphasized that the Fed cannot prevent the weakness brought about by the trade war, warning of the difficult trade-offs that may arise between inflation and the economy.

Key points from Powell's speech on April 16:

1. Federal Reserve Chairman Powell hardly mentioned the FOMC's monetary policy outlook, stating that the FOMC is ready and waiting for more certainty.

2. Without price stability, a strong labor market cannot be achieved. Forecast data shows that March PCE inflation rose by 2.3%, with core inflation at 2.6%.

3. The labor market appears to be solid and generally in balance. It is unclear how extensive the layoffs from Musk's efficiency department are. There is currently no conflict between the two policy goals of full employment and price stability.

4. Even in the most optimistic scenarios for the FOMC, President Trump's tariffs exceed expectations.

5. A regulatory framework for stablecoins is needed. It is expected that there will be a relaxation of regulations on the banking industry regarding cryptocurrency issues.

6. The capital status of the banking system is good and quite resilient. Certain small and medium-sized banking institutions have a high concentration in commercial real estate. My personal opinion is that the U.S. should complete the implementation of Basel III.

7. The independence of the Fed is granted by U.S. law. Federal Reserve officials cannot be dismissed without cause. It is feared that U.S. Supreme Court rulings do not apply to the Fed.

Macro

Tariff panic drives a buying spree, U.S. retail in March sees the largest increase in over two years U.S. retail sales surged 1.4% in March, marking the largest month-on-month increase since January 2023; sales rose 4.6% year-on-year, the highest level since December 2023. Auto sales recorded the largest growth in two years, with 11 out of the 13 categories tracked in the report showing increases.

U.S. net capital inflow in February reached $284.7 billion, while China increased its holdings of U.S. Treasury bonds to a one-year high

Data from the U.S. Treasury Department showed that foreign holdings of U.S. government bonds increased by 3.4% in February, with the two largest holders, Japan and China, both increasing their U.S. Treasury bond holdings. The monthly report on U.S. international capital flows (TIC) indicated that the total amount of U.S. government bonds held by foreigners was $8.817 trillion, up from $8.527 trillion in January. Compared to the same period last year, foreign holdings of U.S. Treasury bonds increased by $818 billion, a growth rate of 10.2%. Japan held $1.1259 trillion in U.S. Treasury bonds in February, up from $1.0793 trillion the previous month. China's holdings amounted to $784.3 billion, up from $760.8 billion the previous month.

China's GDP grew by 5.4% year-on-year in the first quarter

By industry, the value added of the primary industry was 1,171.3 billion yuan, a year-on-year increase of 3.5%; the value added of the secondary industry was 11,190.3 billion yuan, an increase of 5.9%; the value added of the tertiary industry was 19,514.2 billion yuan, an increase of 5.3%.

Yu Yuantan published an article titled "Understanding the Driving Force Behind the 5.4% Growth." The article stated that China's external situation has never been smooth sailing. Over the past few years, we have experienced weak external demand due to the financial crisis and the impact of trade frictions initiated by the United States. The number of global trade intervention measures once remained above 4,700. During such times, the "China economic collapse theory" often resurfaces; however, after all these years, it is still the "China economic collapse theory" that ultimately collapses. At the same time, internally, in the face of cyclical and phased issues, our adjustments have always been problem-oriented, deepening supply-side structural reforms and promoting high-quality economic development. The Chinese economy continues to develop in the process of facing difficulties, confronting difficulties, and solving difficulties.

WTO predicts global trade will shift from growth to contraction by 2025, most concerned about U.S.-China decoupling

The World Trade Organization (WTO) significantly downgraded its global goods trade forecast from robust growth to decline, stating that further U.S. tariffs and the resulting spillover effects could lead to the most severe decline in global goods trade since the peak of the COVID-19 pandemic. The WTO expects that this year's goods trade will decline by 0.2%, down from the 3.0% growth predicted in October. WTO Director-General Ngozi Okonjo-Iweala expressed her greatest concern about the economic decoupling between the U.S. and China.

The United Nations Conference on Trade and Development indicated that due to trade tensions and uncertainties driving recessionary trends, global economic growth may slow to 2.3% this year.

Individual Stock News

ASML's performance fell short of expectations, with shares dropping nearly 9% at one point For the market's biggest concerns regarding "tariffs and AI," ASML and Taiwan Semiconductor's financial reports are crucial. The chip industry faces threats from tariffs and worries about market demand for AI. ASML's latest financial report shows that new orders in Q1 plummeted by 44.5% quarter-on-quarter, far below expectations. Taiwan Semiconductor will release its financial report on Thursday, and more analysts predict that its performance will be weak, leading to downgrades or withdrawals of earnings guidance.

Tariffs add uncertainty, with ASML's new orders in Q1 sharply decreasing by 45%, far below expectations, while maintaining its annual sales guidance. ASML's net sales in the first quarter were €7.74 billion, with new orders dropping 45% quarter-on-quarter to €3.94 billion, leading to a 5% drop in U.S. stock night trading after the report. The company maintains its expectation that total net sales in 2025 will be between €30 billion and €35 billion, with second-quarter sales expected to be between €7.2 billion and €7.7 billion.

ASML's Chief Financial Officer (CFO) stated that demand for ASML's chip manufacturing tools in China in 2025 is stronger than expected. ASML had warned in October that sales in the Chinese market would drop to 20% of its system net sales. However, Dassen mentioned in a media conference call that sales in the Chinese market have been better than expected so far. He said the current expectation might be slightly above 25%.

Tesla's market share declines in California

Tesla's position in its U.S. electric vehicle home base, California, has slipped, with market share below 50%. The California New Car Dealers Association stated on Wednesday that Tesla's market share in the state's electric vehicle market has dropped from 55.5% a year ago to 43.9% in the first quarter of this year. As Tesla's registrations fell by 15%, all other electric vehicle brands saw a 35% increase in sales at the beginning of this year.

Internally, Tesla questions the dim prospects for RoboTaxi and hopes for a cheaper Model 2, which Musk ignores. Reports indicate that Musk believes he has already achieved his main goal of advancing the electric vehicle industry. What remains are mostly more trivial matters, such as launching new models and catering to Wall Street analysts' sentiments.

CoreWeave launches the world's first large-scale GB200 servers

"Child of NVIDIA" CoreWeave has launched the GB200 servers on a large scale, making it the world's first. Test results show that compared to the previous generation NVIDIA Hopper GPU, the GB200 NVL72 server can help Cohere achieve up to a 3-fold performance improvement in training 100 billion parameter models. Additionally, IBM and Mistral AI have also become the first users of CoreWeave's GB200 cloud services.

Surge in U.S. wafer orders, rumors of a 30% price increase from Taiwan Semiconductor

Due to the impact of the tariff war initiated by the Trump administration, many U.S. tech giants like Apple, AMD, and NVIDIA are expanding their orders at Taiwan Semiconductor's U.S. wafer plants to avoid upcoming semiconductor tariffs. In response to the supply-demand imbalance, Taiwan Semiconductor may raise prices by 30%. Reports indicate that due to limited 4nm capacity at Taiwan Semiconductor's Arizona wafer plant, a queue for capacity has begun to form as customer orders surge To transfer the high costs of production in the United States, TSMC is rumored to plan a 30% increase in foundry quotes, which is expected to further reduce the risk of losses at its U.S. wafer fabs.

In addition, TSMC will release its financial report today.

Due to tariffs and the impact of the global economic slowdown, JP Morgan has lowered its demand forecast for TSMC's CoWoS. JP Morgan has reduced its consumption expectations for TSMC's CoWoS advanced packaging technology by 7% and 3% for the next two years, citing decreased demand from Amazon's self-developed AI chips and macroeconomic uncertainties. JP Morgan predicts that, influenced by tariffs and the global economic slowdown, TSMC's management may lower its revenue growth guidance for fiscal year 2025 from about 25% to around 20%.

Famous design software company Figma submits IPO application

After failing to sell to Adobe, design software company Figma has submitted an IPO application. Figma was valued at $12.5 billion in its recent funding round, which is significantly lower than Adobe's proposed acquisition price of $20 billion. Figma's business model focuses on collaborative design tools that enable designers and developers to work together in real-time