Today's markets: Shares rebound after AI panic

The Trump administration renaming the Gulf of Mexico as the Gulf of America could also be an analogy for US stock performance versus the rest of the world. Or AI performance for that matter...but maybe DeepSeek is changing that? Investors have been rattled, but is it all being overdone? 

All this American exceptionalism is not a given: that is the point, I guess. And it goes to the heart of the Trumpian claim that this is the start of a golden era for the US. That's hardly going to be the case with China undercutting its technological lead. If OpenAI can show the White House enough evidence that DeepSeek stole its IP, as it claimed overnight, it's going to be grist to the mill for Trump's trade-tariff war agenda with China.

Why does this matter for investors right now? SocGen notes that Nvidia and its main four customers – Microsoft, Alphabet, Amazon and Meta – have added approximately 700 points to the S&P 500 over the last 2 years, prior to Monday’s sell-off. “In other words, the S&P 500 excluding the Mag-5s would be 12 per cent lower today. Nvidia alone has contributed 4 per cent…this is what we find to be the ‘American exceptionalism’ premium on the S&P 500.”

Back in the world of central banks today, the Fed decision should be a non-event to an extent. We see a confident prediction from the floor that the Fed will leave interest rates unchanged in the 4.25-4.50 per cent range. 

There is no summary of economic projections (SEP), so no dot plot to contend with. The press conference with Jay Powell could be more of an event - but I think he waits and sees what is coming from the White House before doing anything. Sometimes it's best to do nothing.

As detailed on Monday, it’s less about policy per se, and more around how the US central bank contends with the rapidly changing situation in Washington, the impact of tariffs and trade on the economy and a president demanding policymakers cut rates “immediately”. It’s generally considered unhelpful for politicians to meddle in central bank decisions – however did we poor Brits manage in all the years before 1997? 

The backdrop to the meeting is of course the tech-Nvidia meltdown on Monday. That saw risk off moves, pushing down on Treasury yields and the dollar. The 10-year Treasury yield has since come back up to north of 4.5 per cent and DXY dollar index has regained 108 this morning after flirting with the 106 handle on Monday.

Europe has started Wednesday with a bit of a mixed bag. London is flat, Frankfurt up a touch, Paris down a touch as luxury took a hit on soft results from LVMH. Amsterdam has rallied over 1 per cent on strong earnings from ASML.  

Having reeled from the DeepSeek fallout on Monday, ASML shares surged 11 per cent as it posted better-than-expected bookings of €7.1bn in its fiscal fourth quarter thanks to strong demand for its most advanced chip-building tools. It easily exceeded the €4bn expected by analysts and the €2.6bn reported in the third quarter. 

US futures are a bit firmer having recovered around half of Monday's losses yesterday, as Nvidia rallied well to close up almost 9 per cent. Boeing also rallied strongly after CEO Kelly Ortberg detailed plans for a turnaround following its sixth straight annual loss, the largest since 2020.

Notably, data shows no tech concerns on the sell side, with analysts reiterating bullish positions on Nvidia. In fact Tigress Financial came out with a buy and raised its price target from $170 to $220.

A lot of earnings today, with Tesla, Microsoft and Meta being the highlights, all reporting after the US market close this evening.

By Neil Wilson, an analyst at TipRanks