Cramer says call between Trump and Xi 'could change everything you see' in market

The stock market dipped Thursday amid anticipation of trade updates following reports of a potential call between Presidents Trump and Xi Jinping, with concerns centering on China's rare earth materials dominance and its impact on companies like Nvidia. Costco shares are down over 3% after May sales growth missed expectations, though the CNBC Investing Club remains supportive. Broadcom reports earnings after the bell, with expectations of strong AI customer demand potentially offset by Chinese headwinds.

Analysis

The broader market exhibited a cautious tone, declining amidst investor anticipation of updates on US-China trade relations, particularly following unconfirmed reports of a presidential phone call. A key concern highlighted is China's leverage with rare earth materials, which could impact technology firms such as Nvidia if these resources become bargaining chips in trade negotiations, as speculated by Jim Cramer. Concurrently, subdued interest rates persist after a weak ADP employment report, with the forthcoming official jobs data poised to influence Federal Reserve policy decisions, potentially increasing pressure for rate adjustments if labor market softness is corroborated. On the corporate front, Costco shares fell over 3% as its May sales growth of 4.3% year-over-year (6.0% excluding FX and gas) undershot analysts' expectations of 4.7% (6.2% ex-FX/gas). Despite this, the retailer's stock is still up 11.6% year-to-date, and the CNBC Investing Club is reportedly holding its position. Broadcom is scheduled to report earnings with its stock having rallied significantly, up over 7% this week, fueled by expectations of strong demand from its AI customers like Google and Meta. However, the Investing Club expressed a lack of enthusiasm for the setup into earnings, and potential risks from its Bytedance business due to China-related issues are noted. Broadcom also recently announced the shipment of its new Tomahawk 6 switch.

Key Decisions for Investors

• Investors should closely track US-China trade negotiations, particularly concerning rare earth materials, given the potential direct implications for semiconductor companies like Nvidia.
• Evaluate Costco's recent sales miss against its sustained year-to-date performance and the Investing Club's decision to maintain its position, considering if the slowdown reflects a temporary headwind or an emerging trend in consumer demand.
• Approach Broadcom with caution given its significant pre-earnings stock rally and the Investing Club's unenthusiastic view on the immediate setup, balancing strong AI customer prospects against potential China-related business risks and the recent Tomahawk 6 switch announcement.
• Anticipate market sensitivity to the upcoming jobs report, as its outcome will be a key determinant for near-term Federal Reserve policy and interest rate expectations.