AI darlings SMCI, AMD, NVDA roar back as Fed fund futures suggest rates the Fed could cut rates 3 times or 4

Jessica Amir joined discussion · May 15 20:39

It seems the risk on trade is back and optimism has returned with the AI and chip leader stocks that sold off since March, clawing up, Nvidia $NVIDIA(NVDA.US)$ rose 3.6%. SMCI $Super Micro Computer(SMCI.US)$ rose 15.8%. AMD $Advanced Micro Devices(AMD.US)$ rose 4.25%.

This comes for good reason, US core CPI eased in April for the first time in six months, to 0.3%, and retail sales stagnated. But it ain't over till the fat lady sings - remember PCE is later this month ahead of the Fed's meeting.

All in all, last night's data from the US is a good cooling combo that gives the Fed potentially room to cut rates soon and this supports equities at a time when earnings have not been as strong in a decade.

So now traders are betting the Fed could cut rates 3 times this year, maybe 4. And this brought on a risk-on trade and saw invetors buy back into stocks, pushing the S&P 500 notched its 23rd record close of the year on the data.

Now, the Fed fund futures suggest US rates could be cut 3 times maybe 4.

This comes after US core CPI eased in April for the first time in six months, to 0.3%. Don't get carried away, PCE is ahead of Fed's meeting and PPI indicated prices are a little sticky.

Here are the numbers right now, for expecations of Fed rate cuts

- Chance of a September cut is brought back to the table (not full priced), there is a 99% chance

- Traders bet there's a 100% chance of a cut in November

- A 200% chance of a cut in December and January

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Jessica Amir

Moomoo Official Market Strategist

Investment strategist, featured on TV, radio, newspapers. Follow on Twitter @JessicaDAmir

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