What Powell Said, Plus Updating Taiwan Semiconductor
Why the Taiwan earthquake is a catalyst for the CHIPs Act.
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* Powell delivered the Inflation and Rate Cut message we expected
* No major disruptions expected at TSM, but Taiwan's earthquake is a catalyst for the CHIPs Act
Following today’s March Employment Report from ADP and the mixed inflation signals we found in the March Service PMI reports, Fed Chair Powell delivered the message we expected – “We do not expect that it will be appropriate to lower our policy rate until we have greater confidence that inflation is moving sustainably down toward 2%.”
In other words, more “good data” is needed to support the market’s continued expectation for a rate cut in June. Because of what we saw in the aggregate data so far this week, it’s likely next week’s March CPI and PPI data will not fall into that “good data” camp and the market pressure we saw earlier this week could return as rate cut timing and the number of cuts are rethought by the herd.
No Major Disruptions Expected at TSM
As we wait for that data and Friday’s March Employment Report, the latest out of Taiwan Semiconductor TSM after the very recent earthquake is there was no damage to its critical tools even though some facilities saw some tool damage.
This lessens the odds of any material impact for Apple AAPL, Nvidia NVDA, Qualcomm QCOM, and Marvell MRVL. To get a clearer picture, we will collect and factor in company comments in the coming weeks as the March quarter earnings season gets underway.
Still, the event is a solid reminder of the chip industry's concentration in Taiwan. Said another way, it’s a reminder of the whys behind the CHIPs Act in the US and similar efforts in the eurozone and Japan. We continue to see Applied Materials AMAT participating in those stimulus efforts.
