Morning preview: what traders should expect
Markets start the day with a mix of optimism and unease. A recent set of corporate results and fresh signals about U.S. policy direction have created a market narrative that is likely to guide order flow during the session. Equity futures held steady after a record close for the S&P 500, but one of the market’s most watched names posted a modest setback and the bond market reacted to renewed political pressure on the Federal Reserve. The interplay between tech earnings, Beijing-related export constraints and questions about central bank independence will make for an active trading day.
Tech focus: Nvidia’s results and the China question
Nvidia once again reported a strong earnings beat but shares traded lower after the report. The company issued an outlook for roughly $54 billion in third quarter sales. That number is impressive on its face, yet investors focused on signs of slowing growth in some of Nvidia’s core businesses and uncertainty over the firm’s China opportunity. Management said its guidance assumes no shipments of H20 chips to China even though some licenses have been received. If geopolitical conditions allow more orders, Nvidia suggested H20 revenue could rise by $2 billion to $5 billion in the quarter. The shares were down about 2% in after-hours trading, trimming roughly $110 billion from an otherwise massive market capitalization near $4.4 trillion.
That uneven reaction underscores two dynamics. First, the market is being selective about which parts of the AI boom it prizes. Second, any signs of Chinese demand constraints will quickly weigh on expectations for data center spending. While the ripple effects across the chip sector were contained initially, traders will watch cloud provider commentary and related earnings this week for confirmation of cautious or aggressive buying patterns.
Rates and the dollar: political pressure reshapes expectations
Political developments in Washington have moved onto the front page for fixed income traders. A high profile dispute over a Fed board member and ongoing attempts to influence reappointments have led investors to reassess the institution’s independence. Fed futures have pushed back in favor of a sizable probability of a rate cut next month, and two-year Treasury yields slipped to about 3.61%, the lowest in roughly four months. At the same time, two-year inflation-linked swaps moved toward 3% for the first time in three months. Yields across the curve eased after a well received five-year note auction.
Market strategists have warned that sustained politicization of monetary policy could erode confidence in the Fed’s impartiality. That outcome would be likely to lift long-term inflation expectations and place upward pressure on yields. The 2-to-30-year yield curve has been steepening markedly, reaching levels not seen since early 2022. That steepening reflects a market pricing for sharp cuts next year coupled with rising long-term inflation expectations. For the greenback the combination has been unfavorable. The dollar has lost almost 10% this year against a basket of currencies and stands vulnerable if the political narrative around the central bank continues to undermine investor confidence.
Global cross-currents: China, currency moves and French politics
External flows are adding further nuance. China’s offshore yuan has strengthened to the highest levels of the year while Chinese stocks rallied. Those moves have contributed to renewed pressure on the dollar and have been interpreted by some investors as evidence of improving sentiment toward Chinese demand. At the same time, Europe’s political scene deserves attention. A budget dispute that could lead to a collapse of the French government next month appears to have cooled slightly, with French and euro zone equities rallying and yields on long-dated French government debt retreating from 13-year highs.
The simultaneous easing in French yields and moves in Chinese markets set up a session in which both region-specific headlines and cross-border capital flows can influence risk appetite. Traders should be ready for headline-driven spikes in volatility even as primary global themes such as AI adoption and U.S. monetary policy continue to provide the main directional biases.
Events and data to watch during the session
The economic calendar includes a U.S. second-quarter GDP revision and the accompanying corporate profits readout at 8:30 AM Eastern. Weekly jobless claims will print at the same time and could affect short-term rate expectations if they deviate meaningfully from forecasts. Pending home sales for July and the Kansas City Fed’s August business surveys will be released later in the morning.
On the corporate front several retailers and technology firms report results that could influence sector rotations. Named reports to watch include Best Buy, Dollar General, Dell, Autodesk, Hormel Foods, Ulta Beauty and Brown-Forman. The Treasury will auction $44 billion of seven-year notes during the trading day. Market participants should monitor that sale for signs of demand strength or weakness which could move yields and risk assets.
Trading implications and positioning
Short-term positioning should balance enthusiasm for AI related growth against growing sensitivity to geopolitical constraints on supply and demand. Technology names with China exposure could see outsized moves if additional licensing news or trade commentary emerges. Fixed income traders will remain focused on political developments affecting the Fed and on the day’s Treasury supply. A softer dollar narrative may continue to support overseas equities and commodities while raising concerns for dollar-based investors and importers.
In practical terms, expect a market that rewards active monitoring of headlines and scheduled releases. Earnings from major retailers will provide fresh clues about consumer resilience. Bond auctions, weekly labor data and the Fed governor’s speech are likely to determine intraday swings in yields and the dollar. Traders who watch cross-asset flows and remain nimble on news should find opportunities as the session unfolds.
Closing thought
Today presents a convergence of high-profile corporate reports, monetary policy friction and regional political developments. Each can move markets on its own and all are likely to interact during the session. Risk managers and traders should keep an eye on updates to Nvidia-related demand signals, the tone of Fed commentary and the results of the Treasury auction to calibrate positioning for the coming days.
