[New York Market Watch]Tech Stocks Rebound on Google AI Momentum—Stocks, Bonds, Dollar All Rise

(Seoul=Yonhap Infomax) International Economics Department = On the 24th (U.S. Eastern Time), all three major New York stock indexes closed higher, led by strong buying in technology shares.

Google's launch of its Gemini 3.0 artificial intelligence (AI) service set a new direction for the AI industry, fueling a broad rally in tech stocks.

U.S. Secretary of Commerce Howard Lutnick confirmed that the Trump administration may allow some Nvidia GPU sales to China.

Nvidia Corp. (NASDAQ: NVDA) recently refuted so-called "AI bubble" concerns in a detailed shareholder letter.

U.S. Treasury prices rose for a third consecutive session, with mid- and long-term maturities seeing the largest gains. Dovish comments from Federal Reserve officials supporting a rate cut next month pushed the probability of a December cut above 80% in futures markets.

The U.S. dollar held firm. The greenback traded in a narrow range ahead of the Thanksgiving holiday, with low trading volumes and expectations of a Fed rate cut.

New York oil prices rose for the first time in four sessions, buoyed by increased risk appetite on hopes of a Fed rate cut next month.

Former President Donald Trump said on his social media platform Truth Social that he had a "very good call" with Chinese President Xi Jinping, discussing a range of topics including the Ukraine-Russia situation, fentanyl, soybeans, and other agricultural products. Trump added that Xi invited him to visit Beijing in April next year, and he reciprocated by inviting Xi for a state visit to the U.S. later in the year.

Federal Reserve Governor Christopher Waller stated, "Inflation is not a major concern in a weak labor market," and added, "I still do not expect the job market to rebound in the coming weeks."

Mary Daly, President of the Federal Reserve Bank of San Francisco, told foreign media that fears of having to reverse a rate cut later should not delay the decision to lower rates.

The Dallas Fed's November Texas Manufacturing Outlook Survey general activity index fell 5.4 points to -10.4, the lowest in five months since June.

The U.S. Bureau of Economic Analysis (BEA) announced it would reschedule the release of September's Personal Consumption Expenditures (PCE) data from October 31 to December 5.

Stock Market

On the 24th (U.S. Eastern Time), the Dow Jones Industrial Average closed up 202.86 points (0.44%) at 46,448.27 on the New York Stock Exchange (NYSE).

The S&P 500 index jumped 102.13 points (1.55%) to 6,705.12, while the Nasdaq Composite surged 598.92 points (2.69%) to 22,872.01.

Despite typically thin trading ahead of Thanksgiving, optimism sparked by Google proved hard for investors to ignore.

Positive reviews of Gemini 3.0 spread enthusiasm across the tech sector. Notably, competitors in the AI industry praised Gemini's performance, boosting shares of Google's parent company Alphabet Inc.

OpenAI CEO Sam Altman, after experiencing Gemini 3.0, admitted, "Now we're the ones playing catch-up," and predicted a challenging period ahead. Tesla CEO Elon Musk unusually congratulated Google on X, acknowledging Gemini's achievements.

Gemini 3.0's success is seen as opening new possibilities for the AI industry. Previously, AI tools centered on OpenAI were heavily dependent on Nvidia GPUs, raising concerns over high acquisition, maintenance, and depreciation costs.

In contrast, Google built its Gemini system around its proprietary Tensor Processing Unit (TPU) AI chips, significantly reducing external spending. With major AI services' training phases largely complete, expectations are rising that TPUs—strong in inference—will play a bigger role.

Google is now regarded as the only Big Tech firm to vertically integrate both AI hardware and software. Having outpaced OpenAI with its own chips rather than relying on Nvidia, expectations are high that Google will reshape the AI industry landscape.

Salesforce founder Marc Benioff said, "I've used ChatGPT daily for three years, but only spent two hours with Gemini 3.0—and everything is sharper and faster, from reasoning to speed, images, and video. It's a remarkable leap, and I don't see myself going back to ChatGPT."

Alphabet shares soared more than 6% on this optimism, bringing its two-day gain close to 10%. Its market capitalization surpassed $3.83 trillion, overtaking Microsoft ($3.51 trillion) for third place on the U.S. stock market.

The tech rally lifted Nvidia and Microsoft by 2.05% and 0.40%, respectively. However, in early trading, exposure to Nvidia and OpenAI weighed on Microsoft amid Gemini's rise.

The Philadelphia Semiconductor Index surged 4.63%, led by Broadcom's 11.10% jump, which pushed it past TSMC for second place in the index by market cap. TSMC rose 3.48%, ASML gained 2.20%, AMD climbed 5.53%, and Micron Technology advanced 7.99%.

Broadcom is a key Google partner in TPU manufacturing, and its rally signals potential shifts in the AI chip market.

However, Melissa Brown, Director of Applied Research at SimCorp, cautioned, "It's good news for Alphabet and its investors, but when only one stock is driving the market higher, that's a concern. I don't think it will sustain the rally for days to come."

By sector, communication services jumped 3.94%, technology rose 2.49%, consumer discretionary gained 1.86%, and utilities added 1.12%. Consumer staples fell 1.32%.

Eli Lilly rose 0.99%, pausing after surpassing a $1 trillion market cap last week.

Buoyed by tech buying, Tesla surged 6.82% and Meta Platforms climbed 3.16%.

Conversely, Walmart fell 1.20% as investors favored growth stocks. Costco dropped 1.43% and Home Depot lost 1.96%.

According to CME FedWatch Tool, the federal funds futures market priced in an 85.1% chance of a 25bp rate cut in December, up from 71.0% the previous day, following dovish comments from Fed Governor Christopher Waller and San Francisco Fed President Mary Daly.

The CBOE Volatility Index (VIX) fell 2.91 points (12.4%) to 20.52.

Bond Market

According to Yonhap Infomax's overseas rates screen (screen no. 6532), as of 15:00 on the 24th (U.S. Eastern Time), the 10-year U.S. Treasury yield was down 2.60bp from the previous session at 4.0370%, the lowest since late last month.

The policy-sensitive 2-year yield fell 0.90bp to 3.5050% over the same period. The 30-year yield dropped 3.80bp to 4.6770%.

The 10-2 year yield spread narrowed slightly from 54.90bp to 53.20bp (bull flattening). Bond yields and prices move inversely.

After New York Fed President John Williams dramatically raised expectations for a December rate cut late last week, Governor Waller joined in. Williams is the Fed's de facto No. 3, while Waller is a leading candidate for the next Fed chair and wields significant market influence.

In a Fox Business interview early in the New York morning, Waller said, "My main concern regarding our dual mandate (price stability and full employment) is the labor market," adding, "I support a rate cut at the next meeting." He noted, "Most of the private and anecdotal data we've received since the October meeting show virtually nothing has changed. The labor market is weak and continues to weaken."

However, Waller cautioned that the January meeting could be "tricky" due to a flood of data, and that a sudden rebound in inflation, jobs, or the economy could raise concerns about further cuts.

Andrew Brenner, Head of International Fixed Income at NatAlliance, said, "Despite employment data being released only after the Fed meeting, the market is comforted by senior Fed members still wanting a December rate cut."

While Waller's comments fueled a strong rally in U.S. equities, Treasury yields continued to fall, with the 2-year holding above 3.50%.

Shortly before 15:00, foreign media reported that San Francisco Fed President Mary Daly also supported a rate cut next month, warning that the labor market is "sufficiently fragile to risk nonlinear changes," and that inflation is unlikely to spike.

The 2-year Treasury auction in the afternoon saw solid demand, with yields set in line with market expectations.

According to the U.S. Treasury, the $69 billion 2-year note was issued at a yield of 3.489%, down 1.5bp from last month's auction and the lowest since August 2022. The bid-to-cover ratio rose to 2.68 from 2.59 last month, exceeding the six-month average (2.59).

The auction yield matched the when-issued yield, indicating results in line with expectations.

According to CME FedWatch, as of 15:47 in New York, the federal funds futures market priced in an 85.1% chance of a 25bp rate cut in December, up from 71.0% the previous session. The probability of a hold fell from 29.0% to 14.9%.

Foreign Exchange Market

According to Yonhap Infomax (screen no. 6411), as of 16:00 on the 24th (U.S. Eastern Time), the dollar-yen rate stood at 156.832 yen, up 0.442 yen (0.283%) from the previous New York close of 156.390 yen.

The dollar-yen briefly topped 157 during the session, but quickly retreated to the 156 range amid concerns over possible Japanese government intervention.

Akira Moroga, Chief Strategist at Aozora Bank, said, "With no clear catalyst for yen buying, yen weakness remains a risk. Expectations for a Bank of Japan rate hike have become excessively low, but if new factors revive those expectations, the yen could rebound quickly."

The euro-dollar rate edged up 0.00038 (0.033%) to 1.15223.

Joachim Nagel, President of Germany's Bundesbank, noted that the recent surge in inflation has not fully dissipated, highlighting continued high consumer prices.

The dollar index (DXY), which measures the greenback against six major currencies, rose 0.027 points (0.027%) to 100.184.

The index climbed as high as 100.279 early in the session, tracking higher Treasury yields and risk-on sentiment, but later faced downward pressure as Fed rate cut expectations grew and yields fell.

Fed Governor Christopher Waller, in a Fox News interview, highlighted labor market weakness and supported a December rate cut. San Francisco Fed President Mary Daly also warned of a potential sharp deterioration in the labor market, backing a December cut.

Overall, the dollar traded in a narrow range without a clear directional bias.

Marc Chandler, Chief Market Strategist at Bannockburn Global Forex, said, "The probability of a rate cut next month has increased slightly today, but the impact on the dollar appears minimal. It's still an uncertain issue."

Eugene Epstein, Head of Trading and Structured Products at Moneycorp, noted divisions within the Fed, saying, "If the Fed is entering a rate-cutting phase, the dollar should fall, but there have been times when it moved contrary to expectations."

According to CME FedWatch, as of 15:56 in New York, the federal funds futures market priced in an 84.9% chance of a 25bp rate cut in December, up 13.9 percentage points from 71.0% the previous day.

Former President Donald Trump said he had a good phone call with Chinese President Xi Jinping and would visit China in April next year.

The pound-dollar rate rose 0.00033 (0.025%) to 1.31084. Market participants are watching the UK's Autumn Budget due on the 26th.

The Guardian reported that the UK's Office for Budget Responsibility (OBR) is set to lower its five-year growth forecast compared to previous projections.

Nick Rees, Head of Macro at Monex, said, "The direction of the pound will depend on what downside risks the budget poses for the UK economy. The market's focus is on the government's overall economic outlook, which could trigger an immediate reaction in the pound."

The offshore dollar-yuan (CNH) rate was unchanged at 7.1047.

Oil Market

On the 24th (U.S. Eastern Time), January West Texas Intermediate (WTI) crude futures on the New York Mercantile Exchange settled up $0.78 (1.34%) at $58.84 per barrel, the first gain since the 18th.

WTI briefly dipped more than 1% but reversed higher as risk appetite returned amid a broad equity rally. The previous session's close was the lowest since October 21.

Fed Governor Christopher Waller told Fox Business, "My main concern regarding our dual mandate (price stability and full employment) is the labor market. I support a rate cut at the next meeting." Waller is considered a leading candidate for the next Fed chair and wields significant market influence.

He added, "The labor market remains weak, and there is no evidence of a rebound." However, he cautioned that the January meeting could be "tricky" due to a flood of data.

On the 21st, New York Fed President John Williams, the Fed's de facto No. 3, also voiced support for additional rate cuts. The probability of a December cut reflected in futures markets now exceeds 70%.

Some analysts suggested a wait-and-see approach regarding U.S.-led efforts to end the Russia-Ukraine war.

Energy consultancy Ritterbusch & Associates said in a report that recent oil price weakness is mainly related to progress in Ukraine peace talks, but argued that a risk premium reduction of more than 5% is excessive. The report noted that a prolonged war could see geopolitical risk priced back into oil futures.

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Bond market quotes are based on local time as of 15:00 and may differ from closing prices. For official New York bond market closing prices, refer to the '[US Treasury Yield Electronic Closing Prices]' article released at 07:30.