Looking to the Futures

The U.S. administration announced it has barred Nvidia Corp. (NVDA) from selling its H20 chip in China. Nvidia stated it will write down $5.5 billion this quarter for inventory and commitments for that chip. Bloomberg intelligence estimates that the total write down for this year could be $14 billion to $18 billion based on the size of the first write off. Shares of Nvidia fell nearly 7% yesterday, leading the selloff in technology and semiconductors. Nvidia originally designed this chip to be compliant with previous export controls placed by the previous administration.

Advanced Micro Devices Inc. (AMD) will face the same controls for their MI308 products. The company anticipates writing off $800 million due to the new regulation. AMD fell over 7% Wednesday.

The US Commerce Department is using export controls to address concerns that the products may be used in a supercomputer in China. The controls apply to “the Nvidia H20, AMD MI308 and their equivalents,” according to a spokesman for the department.

ASML Holding NV reported earnings Wednesday morning that fell short of market expectations for earnings and Q2 revenues. ASML shares closed down 7% yesterday.

Tesla shares also saw significant losses yesterday after the company announced it is no longer selling the majority of new electric cars in California. Shares fell 4.9% Wednesday.

An equal-weighted gauge of the mega cap tech stocks, the Bloomberg Magnificent 7 Index, has fallen 20% this year. The constituents of this index were the main driver of the most recent bull market.

Equities faced additional headwinds during Fed Chair Powell’s talk at the Economic Club of Chicago on Wednesday. Powell reinforced comments by other Fed officials recently that the central bank is concerned about persistent inflation. The possibility that a temporary burst of inflation from tariffs must not become entrenched in the economy or expectations for consumers and businesses. The Fed Chair emphasized they see no reason to rush to cut interest rates. Powell did not forget the other side of the Fed’s dual mandate, but mentioned “keeping in mind that, without price stability, we cannot achieve the long periods of strong labor market conditions that benefit all Americans.”

The Nasdaq-100 futures (/NQ) failed to break the trend of lower-lows and lower-high during its most recent rally, keeping the downtrend intact. The 15% trading range on April 9th is the largest intraday move in over two decades. Engulfing candles, which are a two-candle chart pattern in which one chart candle is being completely absorbed by the next candle, can often mark a top or bottom to a price move. The previous low at 16,500 will need to hold to break the downtrend. This price level also marks the first level of support – 2,000 points lower. The tech-heavy index will need to break above the 20,000 resistance level to negate the current market downtrend.

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