Nvidia rallies after selloff, lifts S&P 500 and Nasdaq

This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Do you like what you see? You can subscribe here.

Nvidia sparks a rally
The S&P 500 and Nasdaq Composite posted a three-day slide as Nvidia bounced back from a selloff. The Dow Jones Industrial Average fell almost 300 points as Boeing, Goldman Sachs and Home Depot all fell. The 10-year Treasury yield was unchanged ahead of key inflation data on Friday. US oil prices fell 1% as investors monitored tensions in the Middle East and summer gasoline demand.

Rivian pin
Volkswagen will invest up to $5 billion in electric vehicle startup Rivian, which has been under pressure due to losses and cash burn. VW will initially invest $1 billion and the remainder over the next few years as Rivian prepares to launch updated models. Volkswagen is the second older automaker after Ford to invest in Rivian — the Detroit automaker sold most of its stake in 2023 after deciding not to build vehicles with the startup. Rivian shares rose 40% in after-hours trading.

Trump’s inflation warning
Sixteen Nobel Prize-winning economists signed a joint letter on Tuesday warning of what they see as economic risks if former President Donald Trump were to serve a second term, including ‘rekindling’ inflation. “While each of us has different views on the specifics of various economic policies, we all agree that Joe Biden’s economic agenda is far superior to that of Donald Trump,” the economists wrote. “There is legitimate concern that Donald Trump will reignite this inflation, with his irresponsible fiscal budgets,” they said.

Rate hike?
Federal Reserve Governor Michelle Bowman said she was ready to raise interest rates if inflation fails to fall or even worsens. While acknowledging the possibility of a future rate cut if inflation moves steadily toward the Fed’s 2% target, she stressed the need for more evidence before easing monetary policy. Bowman’s tough stance matches the prevailing sentiment among Fed policymakers, who are looking for stronger confirmation of falling inflation.

Abusive links
The European Union has accused Microsoft of violating antitrust rules by stockpiling “abuses” of its Teams and Office products, claiming the practice stifles competition. Despite Microsoft’s recent move to separate Teams from Microsoft 365, the EU deemed the changes insufficient. The investigation, launched after a complaint by Salesforce-owned Slack, is ongoing, and Microsoft could face a hefty fine if found guilty. Microsoft has expressed its willingness to cooperate and find solutions to address the EU’s concerns.

[PRO] Dogs of the Dow
Even as Nvidia’s AI-fueled growth dazzles investors, don’t overlook the “Dogs of the Dow.” This dividend-focused strategy is outperforming the broader market, with seven out of nine stocks beating the Dow Jones Industrial Average this year. A “dog”, Goldman Sachs, has even returned over 20%.

As China’s Chang’e 6 probe returned to Earth with samples from the far side of the moon – a world first – Boeing’s Starliner has been stuck in space with helium leaks and propellant failures.

In space, in the air and on the ground, Boeing’s problems in aircraft safety also appear to have had a negative effect on its main European rival. Just when Airbus thought it had a clear runway to increase deliveries to customers, it was hit with supply chain problems.

According to Reuters, these issues stem from engine maker CFM’s reluctance to increase engine supplies to Airbus due to ongoing problems with Boeing. Separately, Boeing has offered to buy Spirit AeroSystems, which builds planes for Boeing and Airbus, for about $35 a share, Bloomberg reported. Airbus has threatened to block the deal because it did not want Boeing involved in its new planes. The Toulouse, France-based aircraft manufacturer wants greater control over its supply chain. Those concerns sent Airbus shares down nearly 10% on Tuesday.

After wiping more than $540 billion off the market over three trading sessions, Nvidia shares rose almost 7%. Nvidia’s recent decline hasn’t scared off investors who are willing to take bets on continued growth. The GraniteShares 2x Long NVDA Daily ETF (NVDL) has added assets over the past three trading days, with a total net inflow of $1 billion, according to FactSet.

Still, hedge funds have moved out of tech stocks for four of the past five weeks after strong gains, dragging down the tech-focused Nasdaq and supporting the Dow Jones Industrial Average, according to Goldman Sachs. The Dow, however, pared those gains.

Piper Sandler’s Craig W. Johnson believes the broader market is expected to pull back and more time is needed to see if the rotation is sustainable or if the consolidation he predicts will be broad-based. He predicts the S&P 500 could end the year at 5,050, down 7% from Monday’s close.

“We believe the broader market is overdue for some consolidation/pullback as we head into the summer months,” Johnson wrote on Tuesday. “Our breadth indicators should improve significantly to confirm sustainable sector rotations. The coming weeks will reveal whether current trends continue or evolve into a broader market pullback.”

— CNBC’s Hakyung Kim, Samantha Subin, Jeff Cox, Yun Li, Michael Wayland, Sophie Kiderlin, Spencer Kimball, Katrina Bishop, Jesse Pound and Sara Min contributed to this report.