Rates Little-Changed While Nvidia Falls Despite Strong Revenue

FOMC minutes do little to sway rates while equities fall. Long-awaited FOMC minutes were largely a reiteration of recent Fed sentiment, as officials noted economic resilience, progress in labor supply-demand balancing, and slowing but still elevated inflation. Chicago manufacturing activity and existing home sales were larger contributors to the 2-4bp decline across the yield curve, as both came in below estimates. Meanwhile, equities declined amid the OpenAI saga and Nvidia earnings call, where the latter pointed to concerns regarding export restrictions to China, though they “believe the decline will be more than offset by strong growth in other regions.”

FOMC minutes suggest that inflation risks are geared toward the upside. Today’s FOMC minutes were another illustration of the Fed’s cautious and data-driven approach towards incremental rate hikes, where officials have consistently voiced the need for further evidence towards 2% inflation. Though the market has priced out future hikes, participants noted that risks around the inflation forecast were seen as skewed to the upside and cited the conflict in the Middle East as a potential culprit. On the other hand, officials noted that higher long-term Treasury yields have driven tighter financial conditions, an argument against further hikes. At the time of the FOMC meeting, long-term yields had risen 80+ bps since the beginning of September, though they have dropped ~50bps since then.  

OpenAI, Altman reunion on the table. Sam Altman and OpenAI continue to stir equity markets, as negotiations for a potential return were the headline of today’s session. Though Microsoft rose to a fresh all-time high after hiring Altman, they and other investors voiced support for a reunion, though there are conditions: OpenAI’s board would be eradicated and their governance changed, measures to prevent a repeat of this saga. Much of the support has also come from Thrive Capital, who planned an offer to buy shares that would value the company at $86B. However, those plans are now in jeopardy and may be contingent on Altman’s return to OpenAI.