CNBC Daily Open: Another AI gem

This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

Modest moves
U.S. markets rose Monday, with all three major indexes registering modest gains. Shares of Macy’s surged 19.44% on news the U.S. retailer had received a buyout offer of $5.8 billion. Europe’s Stoxx 600 index added 0.3%, led by media stocks’ increase of 1.2%, though mining stocks continued slumping and shed 0.9% yesterday.

‘Somebody has it wrong’
Falling oil prices and rising gold prices signal an economic slowdown. On the other hand, better-than-expected U.S. jobs data and inflation figures point to an economy that remains strong with price increases moderating. But both scenarios can’t be true at the same time — so “somebody has it wrong here,” said David Neuhauser, CIO of Livermore Partners.

Central bank super week
This week’s stacked with central bank meetings. The U.S. Federal Reserve meets Wednesday, followed by a “Super Thursday” when the European Central Bank, Bank of England, Swiss National Bank and Norway’s Norges Bank will all meet. Analysts and investors mostly expect the Fed and the ECB to keep rates unchanged, but will keep an eye out for hints on when they might start cutting.

Bitcoin’s volatility
After bitcoin broke the $44,000 barrier last week for the first time since April 2022, the cryptocurrency fell around 6% to $41,147.25, hitting a low of $40,300 at one point during Sunday night. Ether, Solana’s SOL and Ripple’s XRP also dropped around 7%. Despite its recent slide, analysts expect bitcoin to have plenty of juice in the tank because a spot bitcoin exchange-traded fund seems to be on its way.

[PRO] S&P breakout?
On Friday, the S&P 500 hit 4,604.37, a new high for 2023. What’s more, according to one technical analyst, there’s a “very good chance” that the S&P will break past its resistance level. That means the broad-based index could start trending higher as more investors, convinced that the S&P’s riding a wave of positive momentum, jump in.

Major U.S. indexes closed slightly higher Monday. The S&P 500 advanced 0.39%, the Nasdaq Composite climbed 0.2% and the Dow Jones Industrial Average rose 0.43%. Statistically, however, those are impressive moves: The S&P and Nasdaq are continuing a six-week winning streak, while the Dow closed at its highest level since January 2022.

Investors have (the hype over) artificial intelligence to thank — in part, at least. While AI-frontrunner Nvidia slumped more than 2% Monday, Broadcom shares popped 9% after Citi resumed coverage on the semiconductor maker, rating it a “buy.”

“We believe its AI business will offset the correction in the semi business,” Citi analyst Christopher Danely wrote about Broadcom.

That glowing review helped boost other semiconductor stocks as well. AMD advanced 4.26%, while the iShares Semiconductor ETF added 3.41% and the VanEck Semiconductor ETF rose 2.4%.

Another factor helping stocks is moderating inflation expectations. A New York Federal Reserve survey showed respondents, on average, expect inflation to drop to 3.4% in a year, the lowest since April 2021. That optimism echoes the University of Michigan’s Consumer Sentiment reading.

Still, anticipating inflation to fall in a year doesn’t mean the U.S. Federal Reserve will cut rates as hastily as investors hope. Market watchers think the Fed will almost certainly keep rates unchanged at its Wednesday meeting — and there’s only a 43.2% chance the central bank will cut rates by a quarter percentage point in March, according to the CME FedWatch Tool.

With the consumer and producer price reports coming out later this week, that assessment’s subject to change too.

“No one expects a hike, but hotter-than-expected inflation readings could throw cold water on the idea that rate cuts are coming sooner rather than later,” said Chris Larkin, head of trading and investing at E-Trade.

In such a busy week, perhaps it’s better to adopt a wait-and-watch approach, despite the recent rally in stocks.