PPI data eases hawkish Fed concerns, but chip stocks sink

Markets:

• USD was the top performer, while AUD was the weakest.
• WTI crude oil climbed 43 cents to $89.17.
• The 10-year US Treasury yield rose 3.8 basis points to 5.14%.
• The S&P 500 fell 0.4% and the Nasdaq dropped 0.9%.
• Gold gained $4 to trade at $3880.

The PPI figures provided some relief from ongoing inflation concerns, coming in 0.1 pp below estimates. However, persistent Fed commentary on inflation balanced this, with Goolsbee describing the latest CPI reading as 'borderline alarming' and other officials echoing similar views. BofA released a note revising its Fed call to three consecutive rate hikes in Dec, Jan and March. This backdrop kept the dollar supported, and it ended the session at its strongest level of the day. Meanwhile, the euro continued to test the lows seen on Liberation Day.

The headline equity indexes masked a heavy sell-off in AI and semiconductor stocks. AMD fell 8%, leading a reassessment, while Nvidia's pre-market gains were erased. Market participants believe the US will enforce strict limits on sales to China and on remote usage, restricting the market and potentially enabling China to develop its own chip industry. Excluding tech, market breadth was positive, with Meta rising 2.8% as a standout. The upcoming week includes a busy schedule of retail earnings, which will provide insight into consumer spending.

Reports from Iran were largely subdued, though there were discussions about an attack on US radar installations in Bahrain. Iran says its facilities were struck, while the US maintains that the drones were intercepted. With no progress on negotiations, the situation appears deadlocked, and oil prices saw limited movement.