NVIDIA Leads Tech Lower

MACRO FRAME

Resilient growth and persistent inflation are keeping further rate hikes in focus, while Nvidia’s leadership uncertainty is renewing pressure on an AI trade already sensitive to financing costs.

STOCK INDEX FUTURES

Equity index futures fell overnight as reports that Nvidia’s Jensen Huang was stepping down unsettled the AI sector. Nvidia fell approximately 7.7% in premarket trading, leading front month Nasdaq futures to decline 1.2% and S&P futures to lose 0.65%. Dow futures are also in the red. The uncertainty around succession, customer relationships and the company’s technology roadmap ahead of its November 17 earnings release has pressured the tech sector. Nvidia’s suppliers and financing-linked customers: Intel, Marvell and Micron are down between 2.7% and 3.5%, while CoreWeave declined approximately 7%, threatening to reverse part of Wednesday’s earnings-led recovery. AMD and Broadcom outperformed, gaining 2.3% and 1.4%, respectively, as investors assessed potential competitive opportunities. A management transition does not weaken immediate demand for Nvidia’s chips, but the uncertainty affects confidence across the broader AI ecosystem. Thursday’s results from Applied Materials, Cisco and Nebius will provide additional tests of the AI spending cycle, while Friday’s PPI report will help determine whether inflation concerns continue to offset improving corporate sentiment.

CURRENCIES

US DOLLAR: The USD index held near 102.956, after hitting 103.080, its highest level since April 2025, as Fed tightening expectations support the currency. The dollar’s strong move upwards as of recent reflects economic data that has shifted the debate from whether the Fed raises rates in December toward how much further rates will move in 2027. Markets predominantly expect a quarter-point December hike, while retaining a smaller probability of a half-point move. New York Fed President John Williams’ comments later Thursday will be closely watched for indications of whether support is broadening for a larger increase or a faster sequence of quarter-point hikes. Either outcome could reinforce the dollar’s interest-rate advantage.

EURO: The euro is little changed at $1.1084, its lowest level since May 2025, pressured by dollar strength. ECB Chief Economist Philip Lane indicated that a December increase would be prudent unless the data changed meaningfully. The key question is therefore the policy path beyond that meeting. Lower energy prices could ease European inflation pressure, while resilient US growth and persistent underlying inflation could sustain Fed tightening. French fiscal concerns and limited progress toward a Russia–Ukraine agreement provided additional headwinds. Markets assign roughly a 80% probability to a December hike and are fully priced for a rate hike in February. The ECB’s hawkish hold and forward guidance has all but guaranteed a rate hike at the bank’s meeting in December. The euro’s upside, however, is likely to be contained by the prospect that December’s rate hike will be followed by a pause.

BRITISH POUND: Sterling fell 0.18% to $1.3254. Stronger UK growth failed to offset broad dollar support. Third-quarter GDP rose 0.7%, up from 0.5% in the second quarter and the fastest quarterly expansion since early 2024. September output increased 0.2%, exceeding expectations for no growth, with computer programming and related services among the principal contributors. The figures reinforced the case for further Bank of England tightening, with markets assigning roughly a 73%–75% probability to another increase in December. However, business investment rose only 0.4%, below expectations, while higher energy bills and borrowing costs remain potential constraints on future activity. Sterling edged firmer against the euro to approximately 83.57 pence, reflecting a more supportive relative UK growth and rate backdrop. With markets already anticipating nearly four quarter-point increases next year, sterling remains sensitive to any guidance that tempers those expectations. While the UK economy has shown resilience, the bank will likely remain cautious against future rate hikes to avoid slowing its fragile growth backdrop.

JAPANESE YEN: The yen is little changed at 159.73 yen per dollar. Approaching the 160 level has renewed intervention warnings; Japan’s top currency diplomat, Atsushi Mimura, cautioned that markets should not disregard the authorities’ intervention earlier this year. Domestic policy signals remained mixed. BOJ board member Toichiro Asada warned against premature tightening, while wholesale inflation accelerated to 7.1% from 6.8%, reinforcing concerns about pipeline price pressure. Many banks expect another BOJ hike in December, but the prospect of continued Fed tightening remains a counterweight to yen support.

AUSTRALIAN DOLLAR: The Aussie is down 0.35% to $0.6823, trading near a seven-month low. Broad dollar strength and renewed technology-sector weakness weighed on the growth-sensitive currency. The combination of softer Australian activity indicators and expectations for further US tightening continues to offer downside pressures. Consumer confidence fell to a four-year low, while business conditions remained negative following five RBA hikes this year. The domestic data points to signs that rate hikes from the RBA are working and could set up conditions for inflation to begin to moderate. Markets expect that Australian rates have peaked, with a quarter-point cut fully priced by the end of 2027.

TREASURY FUTURES

Yields moved higher across the curve in a flattening move. The two-year yield is trading at 4.80%, reflecting a 25 bps increase since the start of the week. That has lead the 2/10 spread to fall to 22.90 bps, its lowest level since mid-September. Recent CPI data has reflects a firming of price pressures outside of energy, suggesting that higher energy costs are finding their way into freight and shipping costs. Markets fully price a December increase, with approximately a 10% probability of a half-point move. Waller’s willingness to consider a larger hike has increased attention on that outcome, but it is not the prevailing expectation. New York Fed President John Williams’ comments later today will be closely watched for indications of whether support is broadening for a larger increase or a faster sequence of quarter-point hikes.

Business surveys remain useful tests of whether activity is slowing enough to challenge the higher-rate outlook. October’s manufacturing PMI strengthened to 55.5, while services moderated to 54.5 but continued to indicate expansion. Those readings provide little evidence of any downturn that would strengthen the case for a sustained growth-led Treasury rally. New orders, employment and prices-paid components will be particularly important in subsequent releases. Friday’s PPI report is the next inflation test. The combination of resilient employment, persistent price pressures, and strong economic growth continue to support subsequent tightening beyond December.

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