Dow Jones & Nasdaq 100 Hold Gains on Nvidia News, Fed Bets

Reports of Nvidia planning H200 shipments to China lifted sentiment in early trading on Tuesday, December 23. The latest developments in the US-China trade reboot highlighted easing trade tensions, lifting risk sentiment.

The Nvidia news coincided with rising bets on a March Fed rate cut, boosting demand for high-capex tech stocks. US stock futures were steady during the Asian session, consolidating overnight gains.

Meanwhile, 10-year Japanese Government Bond (JGB) and US Treasury yields pulled back, bolstering demand for risk assets. However, the yen was on intervention watch. USD/JPY dropped 0.46% to 156.301, capping gains for the Nikkei 225.

Improving US-China trade relations and rising bets on a Fed rate cut support a constructive bias for US equity futures.

Below, I’ll outline the key market drivers, the medium-term outlook, and the key technical levels traders should watch.

Nvidia H200 Chip Shipments to China Set to Resume

A shift in US trade policy lifted risk sentiment on Tuesday, December 23, as reports circulated of the Trump administration allowing Nvidia to resume H200 shipments to China. CN Wire reported:

“Nvidia has told Chinese clients it plans to ship H200 AI chips to China before the mid-February Lunar New Year, sources said. […] It follows a Trump administration policy shift allowing H200 sales to China with a 25% fee, reversing an earlier ban.”

The latest trade developments followed upward revisions to China’s GDP growth projections. Goldman Sachs raised China’s 2025 GDP growth forecast from 4.5% to 5.0%, matching Beijing’s GDP growth target.

March Fed Rate Cut Bets Hold Above 50%

Positive trade developments coincided with renewed hopes for a March Fed rate cut. Lower borrowing costs would increase company earnings and share prices. Cooling US inflation and a softer labor market have fueled speculation about a more dovish Fed rate path.

US unemployment rose from 4.4% in October to 4.6% in November, while headline inflation unexpectedly dropped from 3.0% in September to 2.7% in November. (There was no October CPI report because of the government shutdown.)

According to the CME FedWatch Tool, the chances of a March cut increased from 51% on December 15 to 52.9% on December 22.

Crucially, expectations of a more dovish incoming Fed Chair have raised expectations of further Fed policy easing, in contrast with the Dot Plot’s one-rate cut projection.

US GDP and Labor Market in Focus

US futures were steady during the Asian morning session on Tuesday, December 23. The Nasdaq 100 E-mini and the S&P 500 E-mini advanced 28 points and 5 points, respectively, while the Dow Jones E-mini was flat.

Later on Tuesday, US economic data will influence demand for US stock futures, with GDP and labor market figures in focus.

According to first-estimate data, the US economy expanded by 3.2% quarter-on-quarter (Q3) in Q3, cooling from 3.8% GDP growth in Q2. A lower GDP reading would likely raise expectations of a March Fed rate cut, reinforcing the bullish short- to medium-term outlook for US equity futures.

Meanwhile, the ADP will report weekly employment figures, following last week’s jobs report. The Kobeissi Letter commented on a weakening US labor market, stating:

“The US economy lost 983,000 full-time jobs in October and November, bringing the total down to 134.2 million, the lowest since December 2021. As a result, just 78.2% of the labor force is now employed full-time, the lowest since June 2021. This percentage has now declined 2.5 points since the June 2023 peak. In the past, such a trend has usually been seen during recessions. […] The labor market needs more rate cuts.”

Key Technical Levels for Dow Jones, Nasdaq 100, and S&P 500

Despite a steady Asian-session performance on Tuesday morning, the Dow Jones E-mini, the Nasdaq 100 E-mini, and the S&P 500 E-mini remained above their 50-day and 200-day EMAs. The EMAs indicated a positive medium-term bias.

Near-term trends will hinge on US data, Fed rhetoric, and Bank of Japan chatter. Key levels to monitor include:

Dow Jones

• Resistance: The December 12 record high of 48,917, and then 49,000.
• Support: 48,500 and then the 50-day EMA (47,484).

Nasdaq 100

• Resistance: 26,000 and then the October 30 record high of 26,399.
• Support: the 50-day EMA (25,225) and then 24,500.

S&P 500

• Resistance: the October 30 record high of 6,954, and then 7,000.
• Support: the 50-day EMA (6,790) and then 6,500.

Bullish Medium-Term Outlook Hinges on US Data and the Fed

In my opinion, the short-term outlook remains bullish given the alignment of technical indicators and fundamentals. Higher expectations of a March Fed rate cut reinforce the positive medium-term outlook.

Nevertheless, several scenarios may invalidate the constructive medium-term outlook, including:

• Bank of Japan signals a neutral interest rate of between 1.5 and 2%, triggering a yen carry trade unwind.
• Better-than-expected US data dampen bets on a Fed rate cut.

Conclusion: Outlook Bullish

In summary, recent US economic data and a dovish BoJ rate hike support a bullish short- to medium-term outlook for US stock futures.

However, over the next 72 hours, traders should monitor USD/JPY trends, intervention warnings, and the Nikkei 225. A BoJ threat to raise interest rates to strengthen the yen could weigh on sentiment.

Key levels include a USD/JPY drop below 150 and 10-year JGBs sustainably at the December 22 high of 2.2%, an important level to watch. These levels would likely send Nikkei 225 sharply lower, weighing on broader risk sentiment.

Follow our live coverage and consult the economic calendar for real-time market updates.