Nvidia's New Chip Boosts Tech Early as War Flares

By Joe Mazzola

New clashes in the Middle East and rising oil prices didn't initially thwart Wall Street's rally. Instead, major indexes began June on a higher note, focused on Nvidia's (NVDA) 2% jump after it announced a new chip aimed at the PC market that, according to CEO Jensen Huang, would bring these decades-old machines into the age of AI.

Jobs data dominate the coming days, building up to Friday's May nonfarm payrolls. As numbers arrive starting tomorrow with job openings, Federal Reserve policy comes into focus. "The labor market is likely taking a backseat to inflation in terms of Fed policymaking decisions, but we'll be looking for signs of strength or weakness," said Collin Martin, head of fixed income research and strategy at the Schwab Center for Financial Research (SCFR). "A strengthening market could raise the odds of a rate hike if the Fed thinks the economy can handle tighter monetary policy."

On Friday, nine of 11 S&P sectors fell even while the S&P 500 Index posted new highs and rose for the ninth straight week, reinforcing the surging tech sector's prominence. Last week's rally hinged on booming earnings from closely watched tech firms—along with falling crude and yields. Several critical tech earnings loom, notably Broadcom (AVGO) late Wednesday and Palo Alto Networks (PANW) tomorrow. "We're entering June, which historically is not a bullish month for stocks," said Nathan Peterson, director of derivatives research and strategy at SCFR. "But the bullish momentum and animal spirits in stocks have been so strong over the past several weeks that seasonality may not matter this time around."

Three things to watch

Can manufacturing keep improving? Today's May ISM Manufacturing PMI^®, due at 10 a.m. ET, is expected to come in at 52.6%, well above the 50% level needed for expansion. "These manufacturing readings have actually been improving," said Liz Ann Sonders, chief investment strategist at SCFR, in Friday's Schwab On Investing podcast. "In fact, four months ago, we saw a move out of what would be considered recession territory for manufacturing back into expansion territory." One driver for manufacturing growth is supplier deliveries, a sub-factor to check in today's report. Usually, an improvement in supplier deliveries is seen as positive, meaning demand is outstripping supply. The category's recent performance, however, might reflect supply constraints stemming from the closure of the Strait of Hormuz.
Start your engines for jobs week: Nonfarm payrolls are expected to rise by around 96,000 jobs in May, down from 115,000 in April. That number almost doubled analysts' average estimate, while unemployment remained at 4.3%. The unemployment rate has been between 4% and 4.5% for 22 months in a row. Consensus for May jobs growth and unemployment of 4.3% could change over the course of the week depending on reports like tomorrow's April Job Openings and Labor Turnover Survey, or JOLTS, and Wednesday's ADP employment data. Layoffs data Thursday could hint whether recent job cut announcements from large tech firms started to build last month. Recent weak consumer sentiment didn't correspond with any sign of rising jobless claims, but does suggest, among other things, that people may feel less certain about their job status and prospects.
Earnings growth could also hinge on supplies: Dell's (DELL) massive earnings beat last week helped cap a reporting season that featured S&P 500 firms reporting almost 29% annual earnings per share growth. That's the highest in more than four years and more than double what analysts had expected back on March 31. Profit growth momentum could last, judging from Wall Street's estimates for 20% year-over-year earnings this quarter and in the second half of 2026, per FactSet. If most investors were asked the main potential impediment, they'd likely point to chances of slowing demand—whether it's from inflation-weary consumers or from technology firms with thin pocketbooks after all their AI spending. That's one possible stumbling block. The other is on the supply side, especially if the war continues. Several prominent CEOs in various industries have mentioned difficulty obtaining raw materials, a factor that could slow earnings growth amid supply shortages. Companies can't sell and make profit from goods they're unable to manufacture.

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