CNBC Daily Open: Wall Street extends winning run

This report is from today’s CNBC Daily Open, our 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.

Winning run
The S&P 500 and the Nasdaq Composite rose for the eighth straight session, up 0.97% and 1.39%, respectively, marking their longest winning streak so far this year. The Dow Jones Industrial Average jumped 0.58%. Meanwhile, the yield on the 10-year Treasury was little changed as investors await minutes of the Federal Reserve’s meeting and Chair Jerome Powell’s speech at Jackson Hole on Friday. U.S. oil prices fell almost 3% as the U.S. pushes for a Middle East ceasefire deal.

AMD deal
Advanced Micro Devices is acquiring server maker ZT Systems for $4.9 billion to strengthen its AI chip and hardware portfolio. The move allows AMD to roll out AI chips at the scale customers such as Microsoft require and to compete more effectively with Nvidia. AMD, which had $5.34 billion in cash and short-term investments as of the second quarter, plans to finance 75% of the acquisition with cash and the rest with stocks. The company also plans to split and sell its server manufacturing business as it does not wish to compete with the likes of Super Micro Computer, CEO Lisa Su said. 

GM layoffs 
General Motors is laying off over 1,000 salaried employees globally in its software and services division, following a review to streamline operations, CNBC has learned. The cuts include about 600 jobs at its tech campus near Detroit. The layoffs, representing 1.3% of GM’s global salaried workforce, come as automakers, including GM, focus on reducing costs amid industry challenges while investing heavily in electric and so-called software-defined vehicles.

Boeing grounds 777X
Boeing has paused 777X flight tests after discovering damage to a structural part. Three 777-9 test aircraft have also been grounded due to damage. Boeing has informed the Federal Aviation Administration and its customers, which have ordered 481 units of the 777X. The impact on certification and delivery is unclear, but this issue could further delay the already behind-schedule 777X program. The news comes as new CEO Kelly Ortberg tries to move the company past its safety crisis. 

Asia markets mostly rise
Markets in the Asia-Pacific region were mostly higher, led by Japan’s Nikkei 225, which climbed 2%, powered by utilities and healthcare stocks. Australia’s S&P/ASX 200 edged up 0.17%, while the Reserve Bank of Australia signaled it was “unlikely” that rates would be reduced in the short term as inflation remained “above target” and was “proving persistent.” Hong Kong’s Hang Seng index shed 0.36% after real estate firm Kaisa announced a debt restructuring agreement. Mainland China’s CSI 300 dropped 0.7% as the central bank left benchmark lending rates unchanged. South Korea’s Kospi rose 0.89%.

[PRO] Metric to watch
Veteran investor Mark Mobius is focused on a metric he deems “historically significant” and potentially detrimental to U.S. stocks at a time when markets have been marred with volatility. 

AMD estimates the AI chip market will reach $400 billion by 2027. CEO Lisa Su is on a mission to capture a significant share of that market. However, it has to compete with Nvidia, the industry leader. Analysts predict Nvidia’s AI revenue from data centers will hit $105.9 billion this year, while AMD lags with $4.5 billion.

It’s like Microsoft’s Bing challenging Google’s search business. However, AMD is winning customers including Microsoft and Meta Platform. And its striving to strengthen its offerings with the acquisition of ZK Servers to better compete with Nvidia. 

“I don’t think it changes anything for the next 1 to 2 years,” said Doug Clinton, managing partner at Deepwater Asset Management, on CNBC’s “Closing Bell.” He emphasized that AMD’s focus is on becoming more competitive in training clusters, supporting hyperscalers in building data centers. However, Nvidia already excels in this area. “It’s not a big threat,” Clinton added.

Nvidia’s dominance is so strong that Bank of America expects its earnings report on Aug. 28 to be a bigger market catalyst than Powell’s speech at Jackson Hole on Aug. 23, CNBC’s Sarah Min has more on bank’s views.  

While investors were concerned about a recession at the start of the month, which contributed to a sell-off, Goldman Sachs has lowered the probability of a recession to 20% after more favourable jobs and retail sales data. 

Jan Hatzius, Goldman Sachs chief economist, told CNBC’s “Squawk on the Street,” that the investment bank could lower the probability further depending on the next jobs report in September. In the meantime, Hatzius doesn’t believe Powell will allow himself to be “nailed down” on what the Fed’s next move will be. 

“I think he’s not going to be specific, in terms of the moves that are coming, I’m sure his comments will be consistent with the idea that the risks are more two-sided, and there are some signs of softening in some areas and more importantly, or as importantly, inflation has come down. I don’t think he’s going let himself be, you know, nailed down one way or the other,” Hatzius said. 

“If the data supports 50 [basis points], they should do 50, and I think they will do 50 but I think it much more likely that things would look good enough for a series of 25 basis point cuts to do the job.”

— CNBC’s Alex Harring, Kevin Breuninger, Samantha Subin, Jenni Reid, Rohan Goswami, Michael Wayland and Spencer Kimball contributed to this report.