Nvidia Ignites Nasdaq Surge as AI Optimism Overwhelms Breadth Collapse
The Nasdaq ripped higher on Tuesday, closing at 20,755.58 with a +115-point gain, but the rally’s internals were hollow. Decliners outnumbered gainers by a ratio of more than 2-to-1, with just a handful of mega-cap tech names dragging the index higher. Nvidia (NVDA) led the charge, jumping +4.36% to $171.23, after announcing it expects to soon resume shipments of its H20 AI chips to China. The move follows U.S. government reassurances that export licenses will be granted, marking a pivotal shift in the company’s stalled China revenue.
The rally was tightly packed into AI-linked semis. AMD (AMD) gained over +8%, while Super Micro Computer (SMCI) climbed around +5%, confirming that the entire semiconductor complex is once again in vertical mode. Despite weak breadth, index-heavy names like Nvidia and AMD carried the Nasdaq to new intraday highs, revealing the dangerous imbalance between index gains and underlying participation.
S&P 500 Flatlines Below Record as CPI Confirms Inflation Is Creeping Up Again
The S&P 500 hovered just under its all-time high, closing nearly unchanged at 6,268.42. Investors were laser-focused on the June CPI report, which showed inflation accelerating again. The headline number rose +0.3% month over month and +2.7% year over year, up from 2.4% in May and 2.3% in April, confirming a two-month trend of re-acceleration.
Core CPI, which strips out food and energy, increased +0.2% on the month and +2.9% year over year, right in line with estimates. While the figures met forecasts, the upward trend is undeniable. Pricing pressures are returning, particularly in core goods, where early signs of tariff-related inflation are emerging. Investors are now looking ahead to the July and August inflation prints, which will determine whether the Federal Reserve sticks to its cautious stance or leans into a late-year rate cut.
Dow Drops as Banks Buckle Under Weak Guidance Despite Earnings Beats
The Dow Jones Industrial Average sold off sharply, falling -242.43 points to 44,217.22, despite setting up for a golden cross. The weakness was concentrated in financials, where several high-profile names disappointed on forward guidance.
Wells Fargo (WFC) collapsed -5.17% to $79.12 after cutting its 2025 net interest income forecast, wiping out optimism from a headline earnings beat. That guidance reduction was interpreted as a structural slowdown in profitability, triggering aggressive selling. JPMorgan Chase (JPM) initially rose after beating expectations with $4.78 EPS, driven by strong performance in trading and investment banking. But the gains reversed, and shares fell -0.54% to $287.14 as investors questioned whether the strength was sustainable.
Only Citigroup (C) managed to escape the financial wreckage. Shares rose +1% after the bank posted $1.96 EPS and $21.67 billion in revenue, both handily above expectations. Markets revenue jumped +16% year over year, and banking revenue surged +18%, positioning Citi as the standout among peers.
Trump Trade War Threats Add Fuel to Inflation Pressures as Fed Eyes September
President Trump reignited trade war risks with his renewed push for aggressive tariffs. He reiterated plans for a 30% tariff on the EU and Mexico, and 32% on Indonesia, both effective August 1. At the same time, he demanded a 3 percentage point rate cut from the Federal Reserve, claiming it would save the U.S. $1 trillion annually.
Despite Trump’s pressure campaign, Fed Funds Futures are pricing a 97.4% probability of no cut in July, and about a 60% chance of a 25bps cut in September. Traders remain skeptical that the central bank will act prematurely. Economists highlighted that while June’s CPI didn’t spike, core goods inflation has picked up in tariff-sensitive categories like home furnishings and apparel.
The Fed now faces the growing possibility that trade policy—not wage pressure—becomes the dominant driver of price growth into Q3. With CPI creeping higher and the White House stoking inflation risk, a July rate cut is nearly off the table, and even September is no longer guaranteed.
MP Materials Explodes Higher on Rare Earth Pact with Apple as Pentagon Buys Stake
MP Materials (MP) surged +25% after unveiling a $500 million contract with Apple (AAPL) to supply rare-earth magnets made from recycled materials. The magnets will be manufactured at MP’s Fort Worth, Texas facility, and used in Apple’s haptic engines, speakers, and microphone systems. This marks a significant milestone in Apple’s push to reorient its supply chain away from China.
The rally extended MP’s explosive run following last week’s news that the Pentagon acquired a direct equity stake in the company. Shares had already spiked +50%, and the latest Apple deal added another leg higher. MP is positioning itself as the cornerstone of the U.S. rare earth ecosystem—at a moment when the White House is pushing for critical mineral independence. This is no longer a speculative materials stock; it's a national security asset with OEM validation.
Big Tech’s AI Capex Wave Reshapes Sector Rotation as Claude Enters the Game
Big Tech ramped up its AI investments across the board. Alphabet (GOOGL) announced a $25 billion AI infrastructure build-out on the PJM grid—America’s largest power market—plus an additional $3 billion to modernize two hydroelectric plants in Pennsylvania. These moves signal a decisive shift into long-duration, high-energy AI architecture.
Amazon-backed Anthropic launched its “Claude for Financials” product, integrating real-time tools via PitchBook, Databricks, and S&P Global. This represents a direct threat to traditional financial analytics platforms, giving Amazon a powerful wedge into institutional research workflows.
Nvidia (NVDA) is now back in motion, with expectations for billions in deferred H20 chip sales to China to start converting again. The White House greenlight adds a geopolitical premium to the company’s already dominant AI position. The AI build cycle is no longer just a narrative—it’s a hard CapEx commitment from the world’s largest corporations, and it’s reshaping every equity allocation model.
Treasury Yields Edge Higher as Fed Chair Search Begins and Buybacks Expand
Yields pushed higher across the curve. The 10-year Treasury rose to 4.478%, while the 30-year bond hit 5.007%, as markets priced in stickier inflation and growing deficit concerns. Treasury Secretary Scott Bessent confirmed the White House is formally beginning the process to replace Jerome Powell as Fed Chair, injecting added policy uncertainty into bond markets.
Meanwhile, Barclays analysts expect Treasury buybacks to expand to $50 billion per quarter, up from $30 billion currently. The longest-dated maturities will be targeted, with 10- to 20-year repurchases rising from $4 billion to $10 billion. While designed to support long-duration bonds, the move could drain liquidity from risk assets and flatten the yield curve further—tightening financial conditions at the margin.
Market Internals Signal Fragility Beneath Record Highs as AI Holds It All Up
Despite the S&P 500 and Nasdaq hovering near all-time highs, market breadth is deteriorating fast. On Tuesday, the majority of stocks fell while indexes rose, powered solely by the gravitational pull of Nvidia, AMD, and a few other names. SPY and QQQ are holding gains, but only because of the top 5 stocks—Apple, Microsoft, Nvidia, Amazon, and Alphabet.
This setup is unsustainable. The S&P 500 has not meaningfully rotated beyond tech. Financials are cracking, consumer cyclicals are under pressure from tariff-driven cost increases, and even defensives are losing ground as rates creep up again. Investors crowding into megacap AI risk exposure to a sharp drawdown if even a single earnings report falters.
