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Good Morning!
Happy Thursday! It is almost Friday:
👉 Vanguard sends warning
👉 Taiwan Semiconductor earnings are in
👉Google makes cuts
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VANGUARD: Warns of Danger Zone
The Treasury market is nearing a point that could trigger a significant sell-off, with 10-year bond yields potentially reaching 5%, according to Vanguard. Originally, investors had moved into Treasuries expecting the Federal Reserve to lower interest rates quickly, but persistent strength in the U.S. economy has undermined these bets. Ales Koutny, Vanguard's head of international rates, highlighted the risk, stating, "We are in a danger zone right now." He explained that if yields rise just above 4.75%, it could prompt a wave of selling that might push yields to levels not seen since 2007.
Source: Bloomberg
Recent data indicating stubbornly high inflation caused the 10-year yield to spike to nearly 4.7%, though it later settled back to 4.57%. Market expectations have adjusted, now foreseeing a Federal Reserve rate cut in September rather than the earlier predicted June.
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EARNINGS: Taiwan Semiconductor
On Thursday, Taiwan Semiconductor Manufacturing Company (TSMC) reported better-than-expected revenue and profits for the first quarter due to strong demand for advanced AI chips. The company’s revenue rose 16.5% from last year to NT$592.64 billion, and net income increased by 8.9% to NT$225.49 billion. TSMC forecasts revenues between $18 billion and $18.8 billion for the first quarter.
Source: Reuters
As the world’s top maker of advanced processors, TSMC counts major tech companies like Nvidia and Apple among its clients. It expects second-quarter revenues to be between $19.6 billion and $20.4 billion. It dominates the global market, holding 61% of the foundry revenue in the last quarter of the previous year. TSMC's shares have jumped 56% in the past year, driven by high demand for AI chips used in technologies like ChatGPT.
GOOGLE: Job Cuts
Alphabet's Chief Financial Officer Ruth Porat announced on Wednesday that Google is reorganizing its finance department, which will include job cuts and relocations to focus more on artificial intelligence investments.
Source: ABC
This move is part of Google's larger strategy to realign its workforce and resources toward emerging technologies like AI as advertising revenues decline. CEO Sundar Pichai had already indicated in January that more layoffs were expected in 2024, although he didn't specify which departments would be affected.
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