U.S. may expand Nvidia and AMD’s 15% China chips deal to other companies
Today is a pivotal day for the market, with the CPI report due and a large Treasury settlement—the first of three this week. The CPI swaps market may prove most important, as inflation expectations have risen sharply since the start of the year and are climbing again. An in-line CPI reading would likely keep those expectations trending higher, while a miss or beat could shift them.
Currently, CPI swaps are pricing July at 2.8% y/y, rising to 3.0% in August, and 3.2% by October. On Monday, the 1-year CPI swap reached 3.32%, while the 2-year moved back to 2.9%.
The 5-year CPI swap moved back above 2.6%. The technical patterns in CPI swap pricing appear bullish, suggesting expectations are likely to continue rising. Based on those patterns, today’s report would need to come in at or above expectations for that trend to continue.
Even the 5-year/5-year forward looks fairly bullish as it approaches the upper end of its trading range.
The same goes for the 10/2 spread on the yield curve—at some point, it has to move.
In the meantime, don’t tell the software names how bullish the market is. Stocks like ServiceNow (NYSE:NOW), Workday (NASDAQ:WDAY), Salesforce (NYSE:CRM), and Intuit (NASDAQ:INTU) have been getting absolutely slammed recently, reminding us that not all tech is created equal.
ServiceNow has broken support and is now in the process of filling the gap from its April earnings report. The stock has essentially gone straight down since reporting results a couple of weeks ago.
Workday is about 10 points away from key support at $203—a major level that has held on multiple occasions in the past. A break below that support could send the shares down into the $170s.
It’s not much different for Intuit, which has been hammered, closing below its 2021 and 2024 highs. There’s also a large open gap near $670 that could be at risk of being filled.