Broadcom Earnings Poised to Test AI Rally as PCE Inflation Hits 3.8%
AVGO•Broadcom's upcoming results will test the AI-driven rally fueled by a 10% year-to-date S&P 500 gain, as investors await June 5's payroll report expected to add 96,000 jobs with unemployment at 4.3%. A 3.8% annual rise in the PCE index heightens concerns over Fed policy and interest rates.
1. Macroeconomic Context
U.S. equities have surged this year, with the S&P 500 up over 10% as technology stocks lead on strong profit outlooks from AI demand. However, the Personal Consumption Expenditures index rose 3.8% year-over-year in April, the largest gain since May 2023, driven by higher energy prices tied to geopolitical tensions.
2. Broadcom's Upcoming Earnings
Broadcom reports results next week, a key test for the red-hot AI sector. Investors will focus on guidance for semiconductor demand, profit margins and capital spending to gauge whether the chipmaker can sustain growth amid rising input costs.
3. Employment Report Expectations
The June 5 payroll release is forecast to show a 96,000 increase in nonfarm jobs and a 4.3% unemployment rate. Analysts warn that a stronger-than-expected print could stoke fears of an overheating economy, pushing Treasury yields higher.
4. Market Implications
A hot jobs report alongside persistent 3.8% inflation could prompt the Federal Reserve to maintain or tighten its interest rate stance, threatening equity valuations. Conversely, weaker labor data might ease rate-hike concerns and support further gains in high-growth tech names.
