A Possible Thaw in Tariff Talks Spurs Hope and Nvidia Appears to Have Its Own Breakthrough
Let's check the latest in negotiations and chart Nvidia after AMD's earnings, as global tensions spark in India-Pakistan and Fed is set to take the stage.
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It had been a down day on Wall Street. In fact, Tuesday, except for gold, which soared, and Treasury debt securities, which rallied, had been a second down day in a row on Wall Street after that nine-day winning streak had culminated on Friday. Suddenly, after the closing bell, well after the closing bell, equity index futures markets came alive. Sure, Advanced Micro Devices AMD had posted a better-than-expected quarter alongside better than expected guidance. It was more than that though. There was some news on trade.
News broke across several outlets that U.S. Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer will meet with Chinese Vice Premier He Lifeng in Switzerland, potentially from this Friday through next Tuesday. This meeting would be the first official trade talks between the planet's two largest economies since the implementation of Pres. Trump's trade war left tariffs of 145% on Chinese imports and Chinese tariffs of 125% on U.S. imports.
Both nations confirmed that this meeting is scheduled. Sec. Bessent in an interview at Fox News said that those elevated tariff levels are not sustainable and were equivalent to an outright embargo. Bessent was optimistic, saying: "We've got to de-escalate before we move forward."
Bessent also tempered expectations a bit, "We don't want to decouple, what we want is fair trade."
In other trade news, Canadian Prime Minister Mark Carney's visit to Washington to see Pres. Trump appeared to go well enough, though little seems to have actually been accomplished. Carney did say that the meeting was "constructive." The U.S. and U.K. also appear to be very close to actually signing a trade deal, perhaps as soon as late this week or early next week.
Heightened Geopolitical Risk
Following a terrorist attack in Pahalgam, Jammu and Kashmir, which killed 26 Indian travelers last month, India's Defense Ministry announced the nation's forces had attacked nine sites in Pakistan and Pakistan-administered Kashmir. India states that terrorist camps were targeted. Pakistan's military acknowledged that at least eight individuals were killed and at least 35 were wounded.
Pakistan also claimed to have shot down two Indian fighter jets and at least one Indian drone and announced that it would respond "to this act of war." The world watches now to see what comes next as both of these nations are nuclear powers and they both share borders with a third nuclear power, China, in that disputed region. Indian and Chinese troops have clashed at that border in the recent past and tensions there always remain high.
Fed Day
Expect trading volume to be light this morning into this afternoon. At 2:00 p.m. ET this afternoon, the Federal Open Market Committee will publish its current policy statement to be followed a half hour later by Fed Chair Jerome Powell's press conference. The group is not expected to adjust short-term interest rates and will leave the target range for the Fed Funds Rate at 4.25% to 4.5%.
Traders and investors will be watching though for comments or clues concerning the central bank's ideas on where the economy itself and monetary policy may be headed. We know that several Fed officials have already expressed their own expectations that any inflationary impact felt due to the administration's trade war would be temporary or dare I say "transitory."
Whether or not we've heard that word before and whether or not you and I agree, these thoughts are what will influence policy. Expect Powell to steer the financial media away from policy where he is likely to be directionally uncertain to preserve as much optionality as possible. I would think that Powell, if he's smart, will guide the press toward questions concerning central banking independence, where he has and would be expected to have solid opinions.
Currently, futures markets trading in Chicago are pricing in (75% probability) a next quarter point rate cut for July 30. These markets are also pricing in (74% probability) three-quarter points worth of rate cuts in 2025. An additional half percentage point worth of rate cuts are being priced in for the first half of 2026.
Stellar 10-Year Note Auction
On Tuesday afternoon, the U.S. Treasury Department auctioned off $42 billion worth of new 10-Year Notes at a high yield of 4.342%, which stopped through the 4.354% yield where the "when issued" had been trading going into the auction. This was the third straight "stop-through" for the series. Demand from abroad was strong again, with Indirect Bidders taking down 71.2% of the issuance, while Direct Bidders (domestic accounts) took home 19.9% of the auction. For domestic buyers, this was an impressive rebound in demand from what had been an anemic April auction as far as domestic demand was concerned. Dealers were stuck with just 8.9% of the issuance, which may not even be enough to cover their needs. The Treasury Department will auction off $25 billion worth of Thirty-Year long bonds on Thursday afternoon.
Trading: Semiconductors
Readers well know that the above-mentioned Advanced Micro Devices reported last night. I'll be back with a full piece concerning that name. What I found on Tuesday was that both AMD and Nvidia NVDA were trying to break out of downward sloping patterns, and both were flirting with taking back their respective 50-day simple moving averages, which is crucial to gaining increased portfolio allocation share.
Here, we see that NVDA is breaking out from the upper trendline of an Andrews' Pitchfork model, which is running alongside that 50-day SMA. Is this "the" breakout for Nvidia and for the semis? Maybe, maybe not. This is, however, the first step that must be taken in in order to end up with a breakout. I have re-initiated long positions in both AMD and NVDA. For now, they are small in size and will be held to my 8% rule.
Economics (All Times Eastern)
07:00 - MBA 30 Year Mortgage Rate (Weekly): Last 6.89%.
07:00 - MBA Mortgage Applications (Weekly): Last -4.2% w/w.
10:30 - Oil Inventories (Weekly): Last -2.696M.
10:30 - Gasoline Stocks (Weekly): Last -4.002M.
3:00 p.m. - Consumer Credit (Mar): Last $-0.81B.
The Fed (All Times Eastern)
2:00 - FOMC Policy Decision.
2:30 p.m. - FOMC Press Conference.
Today's Earnings Highlights (Consensus EPS Expectations)
Before the Open: SHOP (.26), UBER (.70), DIS (1.21)
After the Close: APP (1.96), CVNA (.75), CLF (-.83), DASH (.98)
At the time of publication, DePorre was long NVDA, AMD equity.
