July 1st Market Overview

Happy Tuesday

Market’s really hit the reset button to start Q3 with a classic rotation out of tech/growth and into everything else. Senate Republicans squeezed Trump's mega bill through on a 51-50 vote.

Let's dig in...

Executive Summary

1. Senate passes Trump’s tax-and-spending megabill 51-50 with VP Vance breaking the tie. Three Republicans defected but the package heads to the House with a July 4 deadline.
   

2. Major sector rotation unfolds as investors dump tech leaders and pile into healthcare. The Dow climbed over 450 points while the Nasdaq retreated.
   

3. Tesla tumbles on Trump threat to review government subsidies for Musk’s companies after the CEO called the spending bill “utterly insane.”
   

4. Powell confirms tariffs are keeping rates elevated, stating at ECB forum that cuts would have happened already without trade war inflation.

Market Overview

Key Market Drivers

1. The AI trade roatation: After Tech Select Sector SPDR Fund $XLK gained massively in Q2, money managers are rotating into value plays. United Health Group $UNH ( ▲ 0.32% ) , Merck, and Amgen drove the Dow higher as Ameriprise’s Anthony Saglimbene noted “we’ve exhausted that trade.”
   

2. July 9 becomes the new Fed date: Powell’s direct link between tariffs and monetary policy puts trade negotiations front and center. His admission that “we went on hold when we saw the size of the tariffs” means any deals or escalation will immediately impact rate expectations.
   

3. Manufacturing stabilization: ISM index at 49.0 beat the 48.6 estimate, showing the sector is contracting less severely than feared. This adds complexity to the Fed’s decision as the economy shows strength.
   

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Stock Spotlight

Tesla $TSLA ( ▼ 0.1% )  dropped after Trump threatened to review government subsidies for Musk’s companies following Musk’s criticism of the spending bill. Wedbush maintains $500 target, JPMorgan stays underweight at $115.

Wynn Resorts $WYNN ( ▲ 0.91% ) , Las Vegas Sands $LVS ( ▲ 0.77% ) , and MGM Resorts $MGM ( ▼ 0.21% )  gained on Macau gaming revenue beating estimates by 7-9% and reaching pre-pandemic levels.

Tandem Diabetes Care $TNDM ( ▼ 1.76% )  and Dexcom $DXCM ( ▼ 0.78% )  fell on proposed Medicare rule changes affecting glucose monitor reimbursements.

Robinhood $HOOD ( ▼ 3.65% )  got a KeyBanc target raise to $110 from $60.

Big Name Updates

Amazon $AMZN ( ▲ 1.59% )  CEO called AI “the most transformative technology of our lifetime” and updated on sub-hour drone delivery progress.

Google $GOOGL ( ▲ 0.5% )  signed a deal to acquire Commonwealth Fusion Systems. OpenAI clarified no active plans to use Google’s TPUs at scale.

Microsoft $MSFT ( ▲ 1.58% )  claims its new AI diagnostic system achieves four times better accuracy than human doctors in testing.

Apple $AAPL ( ▲ 0.52% )  is in early talks to power future Siri with Anthropic’s Claude or OpenAI’s ChatGPT models for 2026.

Other Notable Company News

Sweetgreen $SG ( ▲ 2.01% )  dropped after TD Cowen downgraded to hold, citing double-digit same-store sales declines at urban locations.

Nike $NKE ( 0.0% )  got an Argus upgrade to buy with $85 target. Oshkosh Corporation $OSK ( ▲ 1.41% )  gained on Goldman Sachs upgrade to buy with $131 target.

GE Vernova $GEV ( ▲ 2.37% )  fell on reports it’s considering selling its Proficy software business.

Sector Watch

Bond Market

The 10-year Treasury yield climbed to 4.253% as the spending bill's passage became likely. Goldman Sachs pulled forward its rate cut forecast to September from December, now penciling in three quarter-point cuts through year-end.

Policy Watch

The Senate's 51-50 passage of Trump's megabill marks a major legislative victory despite three GOP defections. The package includes:

• Extended tax cuts and new senior deductions

• $6,000 senior bonus deduction (up from House's $4,000)

• Border enforcement and defense spending increases

The July 9 tariff deadline approaches as Trump's 90-day reprieve expires. Japan remains resistant while the White House signals renewed Canada talks and potential crop exemptions. These negotiations will directly impact Fed policy given Powell's explicit tariff-rate link.

The narrow Senate margin highlights GOP tensions over fiscal policy that could affect future legislative priorities.

What to Watch

1. House vote on megabill: Must pass before Friday's July 4 deadline. Any changes require another Senate vote.

2. Japan trade talks: Watch for breakthrough or escalation before July 9 deadline affecting global supply chains.

3. June jobs report Thursday: Employment data ahead of Independence Day holiday.

4. Tesla-Trump dynamics: Monitor if the feud escalates, potentially affecting government contracts and EV incentives.

5. Q2 earnings season: Focus on guidance revisions and tariff impact commentary.
   
   
   Thanks for reading 🙂
   
   - John