- US equities remained cautious ahead of the Fed’s key rate decision on Wednesday.
- Nvidia captured attention as President Trump permitted chip exports to China.
- Rising yields and Japan’s earthquake capped the gains, deteriorating risk sentiment.
US equities remained steady on Monday as investors treaded cautiously ahead of Wednesday’s Fed rate decision. Nvidia saw a rare spike during after-hours trading. From major indices, Dow stayed flat, while S&P 500 and Nasdaq 100 futures gained around 0.1%.
Nvidia climbed more than 2% after President Trump approved the company to resume selling H200 chips to approved customers in China. The agreement is unusual, as it requires 25% of sales to be paid directly to the US government. According to Truth Social, Chinese President Xi Jinping positively responded to the deal, offering relief to Nvidia after months of uncertainty surrounding AI chip export restrictions.
During the regular session on Monday, the tech stocks were the only ones to finish in green. Semiconductor names led the rally, with Broadcom surging by around 3% and Microsoft and Nvidia each up by 2%. Despite the tech strength, the major indices closed the day lower. The S&P 500 slipped 0.3%, the Dow fell 215 points, and the Nasdaq dipped 0.1%. The rising yields continue to pressure the broader risk sentiment.
The markets remain primarily focused on the Fed’s final meeting on Wednesday. Fed funds futures imply a 90% probability of a 25 bps rate cut, sharply up from 31% during mid-November. The softer PCE inflation report and softening labor markets have intensified the case for another rate cut. Still, analysts warn that Powell’s tone and the Fed’s economic projections could surprise the markets.
Stocks stayed under mild pressure due to a rise in 10-year Treasury yields, which edged higher after an earthquake in Japan that triggered a wave of global risk aversion. If we analyze sector-wise, communication services lagged, with Alphabet losing more than 2% and Meta also experiencing a dip. Meanwhile, Discovery gained 4.4% after receiving $108 billion takeover bid from Paramount.
Corporate catalysts continue the week, with earnings due from Oracle, Costco, Broadcom, and Lululemon. Meanwhile, AI-linked stocks will be under further scrutiny after President Trump said he will sign an executive order unifying national AI regulations. The move was welcomed mainly by large tech firms, which had been frustrated by state-level fragmentation.
Despite the Monday dip, the indices remain firm, with year-to-date gains of 16.4% for the S&P 500, 12.2% for the Dow, and nearly 22% for the Nasdaq. Markets now keenly await key labor market data and the Fed’s next move to determine whether the rally can regain momentum by year-end.