| US House lawmakers pass the debt-limit legislation, Federal Reserve officials signal they plan to hold interest rates in June and a rally driven by bets on artificial intelligence takes a breather. The US House of Representatives passed debt-limit legislation forged by President Joe Biden and Speaker Kevin McCarthy that would impose restraints on government spending through the 2024 election and avert a default. Lawmakers from both parties joined to approve the bill 314-117 Wednesday evening. The agreement won the backing of two-thirds of House Republicans, an important show of confidence for McCarthy. But the bill ultimately received more votes from the Democratic minority than the GOP majority, a fact conservative critics will use to argue the speaker made a bad deal. Federal Reserve officials are signaling they plan to keep interest rates steady in June while retaining the option to hike further in coming months, which undercuts the importance of the monthly jobs report due Friday. Governor Philip Jefferson, who's nominated to be vice chair and who often echoes Chair Jerome Powell's views, said Wednesday that skipping an increase would give policymakers time to assess data but not preclude future tightening. After Jefferson's remarks, traders scaled back the odds of a rate hike at the June 13-14 Federal Open Market Committee meeting to about 35%, from nearly 60% a day earlier. "I definitely think this was a signal" and "likely completely in sync with Chair Powell's views," said Rubeela Farooqi, chief US economist at High Frequency Economics. Chipmaker Nvidia's decline of more than 5% on Wednesday, the most since January, signaled its 30% surged powered by artificial intelligence bets in the past three days is now getting a reality check. Adding to the pullback is software firm C3.ai, which fell 20% in US premarket trading on Thursday following a disappointing sales outlook. Nvidia's market cap briefly hit $1 trillion earlier this week, while shares are trading at 23 times estimated sales for the current year, leaving some investors wondering whether the world's most valuable chipmaker is now too pricey. S&P 500 futures rose 0.2% as of 5:18 a.m. in New York, while Nasdaq 100 contracts were little changed. The dollar was flat, leading to mixed trading among Group-of-10 currencies. Treasury yields edged higher, mirroring moves in Europe and the UK. Gold and Bitcoin fell, while oil climbed for the first time in three days. At 8:15 a.m., we'll get a private report on US employment from ADP, followed by jobless claims data 15 minutes later. S&P Global will publish its gauge of US manufacturing at 9:45 a.m., to be followed by a reading on ISM's measure at 10 a.m. Philadelphia Fed President Patrick Harker is due to speak at 1 p.m. Here's what caught our eye over the past 24 hours: The US is obviously investing a ton of money in areas like semiconductors and cleantech, in order to establish itself as a center for advanced manufacturing. The reasons range from economic to national security, with an eye towards countering China's ambitions in these areas. But can we actually be successful? Yesterday, Tracy Alloway and I published the transcript of an interview that we did with last month at the #EconTwitterIRL event, where we talked to Dan Wang, tech industry analyst with Gavekal Dragonomics and Adam Ozimek, the Chief Economist at the Economic Innovation Group. The topic was specifically: how will we know if the CHIPS Act will be successful? Anyway, there's really a ton in there on the state of advanced manufacturing in these areas, and how industrial policy works in China and related ideas. Too much to summarize. But I thought these comments from Dan were particularly salient in identifying the unique challenges that the US faces right now. I think that what is really strange when it comes to something like clean tech is that I think the US is in a very strange position where it is trying to engage in technological catch up with a lower wage competitor, which is China, and that China makes solar photovoltaic panels that are both cheaper as well as more efficient than the US. And often the same goes for batteries. And so, you know, usually one of these things is not true, that you know, you are either technologically ahead or you are cheaper, but the US really has a hard time here, which is why I want to echo Adam's point that you really have to focus on bringing down this cost curve. The other slightly novel thing is that, you know China developed technologically by embracing a lot of foreign investment into China. These involved, you know, Apple through Foxconn building enormous electronics factories in China. Tesla has a fully-owned factory in Shanghai that, you know Intel, Dell, whatever, all of these American technology giants invested a lot in China. And Beijing was extremely welcoming in their investment and has not retaliated against them throughout the many years of President Trump's trade war. By contrast, the US has become pretty hostile towards attracting investment from, you know, what is the technology leader in a lot of these spaces. China, when it comes to solar and batteries especially. And so it is pretty hostile towards Chinese battery makers from setting up in Virginia including in Michigan. And so I think, you know, the US is making this bet that it is going to be able to be okay in something like batteries by, you know, mostly working with allies in Japan as well as South Korea. And perhaps that is all very fine, but I would also encourage it not to be, you know, boxing with one hand tied behind its back to be a little bit more like China, and then try to get as much investment as possible, solve and mitigate these national security problems where they exist, but don't really, you know, reject foreign investment from the technology leader.
Here's more from Dan: I would love for US firms to have export discipline, which is the strategy for our firms in Asia to sell to the rich American market, and then you know, that gets them to raise the quality of their products. The challenge for the US is that there is no bigger and more sophisticated markets, so it's hard to figure out who is able to discipline the American firm. And I think to add to the point of, you know, how, you know, the US is in a bit of a tougher position. Again, I would think, you know, slightly politically the challenges here, to go back to the example of CHIPS, whether the Chips Act is working, I think about something like TSMC in Taiwan. And so TSMC is by miles and miles, everyone's favorite employer in Taiwan. Engineers in Taiwan would say, "I would sell my liver to go work for TSMC". You know, it's much more difficult to think that people would say that of any chip firm over here. You know, Taiwan is periodically in a drought. It is an island where they give the fresh water to TSMC and make the citizens drink the treated water in a drought. They park a lot of these firetrucks outside of the facilities of TSMC in order to make sure that TSMC has fresh water to produce the chips powering our iPhones. And so, you know, that is a different sort of thing where politically, is it really easy to imagine that TSMC'S facilities in Arizona, a fairly dry state, is able to park a lot of firetrucks outside of TSMC'S facilities in a drought?
Check out the whole thing here. Follow Bloomberg's Joe Weisenthal on Twitter @TheStalwart. | 
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