Good morning investors,
Markets are cautiously higher this morning as investors digest Nvidia’s workaround on China chip restrictions and brace for critical US-China trade talks in Geneva this weekend. The S&P 500 is attempting a third straight day of gains, supported by easing oil prices and continued strength in tech. After a constructive move above 5,750, we now watch the 5,785 level as key resistance.
Before the Bell
Stock futures edged up Friday, following a strong session driven by optimism around the US-UK trade deal and hopes that talks with China could yield further de-escalation. Dow futures were flat, S&P 500 futures rose 0.3%, and Nasdaq 100 futures led with a 0.4% gain. European markets extended gains, with Germany’s DAX hitting a record high. In Asia, Japan rallied but China lagged, despite an 8.1% jump in April exports that beat expectations.
Oil prices are tracking for a weekly gain, while gold rose as the dollar slipped modestly. The tone is firm, but fragile, as attention turns to potential tariff headlines from Geneva.
Nvidia's China Pivot: H20 Chip Downgrade Incoming
In response to tightened US export controls, Nvidia will reportedly release a modified H20 AI chip for China in July. The revised version includes downgraded memory capacity and performance thresholds to comply with Washington’s rules while preserving access to a $17 billion Chinese market. Nvidia accumulated $18 billion in H20 orders earlier this year, and this move signals its intent to keep that demand on tap.
It’s a strategic compromise: compliance without full retreat. The chip redesign follows CEO Jensen Huang’s visit to Beijing, underscoring China’s continued commercial importance despite geopolitical headwinds.
Trade Watch: Geneva Talks in Focus
After this week’s “tremendous” US-UK deal, the next test comes from Switzerland, where Treasury Secretary Scott Bessent meets with Chinese officials. Trump suggested in a Truth Social post that an 80% tariff “seems right,” but markets are hoping this is posturing ahead of a broader reset. Bloomberg previously reported that a rollback below 60% was under consideration.
The stakes are clear: China accounted for a significant share of recent export growth, and any easing in trade barriers could boost risk assets into summer. Equities are already pricing in some optimism.
Earnings Highlights: Pinterest Pops, Expedia Drops
Pinterest jumped in premarket trade after guiding above consensus on Q2 revenue, showing strong ad resilience. Coinbase missed on earnings as costs jumped. Expedia disappointed on US travel weakness, reinforcing concerns about discretionary spend under tariff pressure.
Insulet impressed with strong insulin pump sales and Lyft extended its buyback program. Akamai raised full-year guidance. Monster Beverage missed on revenue as energy drink demand slipped, and McKesson forecast a solid FY26 while spinning off its med-surg unit.
Crypto Rebound: BTC Breaks $100K
Bitcoin topped $101,500 on Thursday, supported by an improving regulatory tone and risk appetite. Coinbase’s business mix is evolving, but broader crypto sentiment has clearly turned. The rally reinforces that digital assets remain a high-beta proxy for macro easing and innovation optimism.
The Fed: Patience with a Side of Frustration
Markets continue to digest Powell’s cautious tone. While the Fed held rates steady, Powell warned of stagflation risks if tariffs persist. Investors have pushed back rate cut expectations into late Q3, but the outlook remains fluid. Trump, for his part, dismissed Powell’s approach: “It’s like talking to a wall.”
Retail investor sentiment jumped this week, with AAII bullish readings hitting a 3-month high. That kind of mood shift—paired with supportive earnings and easing trade noise—could drive a retest of the March highs.
Final Thought
After two losing days, equity markets have snapped back with strength—led by trade optimism, chip relief, and a Fed on hold. But we’re still in a data-reactive environment. Tariff chatter over the weekend will dictate direction next week. If Geneva brings even a modest step back from brinkmanship, the risk rally could have further to run.
Dan Sheehan
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This newsletter is for informational purposes only and should not be considered as investment advice. Please consult with your financial advisor about your specific situation.