June 11th Market Overview

Happy Wednesday.

Mixed signals today as the market couldn’t decide if good news was actually good news. Inflation came in lower than expected and we got a China trade framework, but stocks still gave back recent gains. Classic case of “buy the rumor, sell the news” - or maybe traders are just getting picky about their victories.

The CPI print should’ve been a home run in combo with China trade deal, but here we are with the market slightly down for the day.

Let's dig in...

Executive Summary

1. Inflation data delivers market-friendly surprise - Monthly CPI at 0.1% vs 0.2% estimate confirms companies are successfully managing tariff pressures without widespread price increases, boosting Fed rate cut expectations
   

2. US-China breakthrough on critical materials - Framework agreement secures strategic rare earth mineral access while restoring educational exchanges, providing supply chain stability and reducing trade war escalation risks
   

3. Quantum computing reaches commercial tipping point - Nvidia $NVDA CEO declares sector at "inflection point" with real-world applications within reach, sparking investor interest across quantum names
   

4. Energy markets react to Middle East tensions - Crude oil spikes on US embassy evacuation reports from Iraq, highlighting continued geopolitical premium in oil pricing

Market Overview

Key Market Drivers

1. CPI Data Reveals Tariff Absorption Strategy: The 0.1% monthly reading confirms Goldman Sachs’ theory that businesses are using existing stockpiles to buffer tariff impacts. Core CPI also printed below forecasts, validating the 90-day pause is giving companies time to adjust without immediate price passthrough.
   

2. Fed Rate Cut Odds Climb on Soft Data: Interest rate futures showed chances of three or more cuts rising after the inflation print. Trump renewed calls for a full point reduction while VP Vance labeled current Fed policy “monetary malpractice.”
   

3. Trade Framework Maintains Status Quo: London talks produced consensus but Commerce Secretary Lutnick confirmed tariff levels stay unchanged. China supplies rare earths upfront while US allows student exchanges - a symbolic win without economic substance.
   

4. Energy Markets React to Geopolitical Flash: West Texas Intermediate jumped on reports of US embassy evacuation in Iraq. The move signals continued sensitivity to Middle East developments despite broader market focus on domestic policy.
   

Stock Spotlight

Tesla $TSLA ( ▲ 1.94% ) extended recovery for fourth straight session after CEO Elon Musk acknowledged his Trump attacks “went too far.” Musk also announced Austin robotaxi service will tentatively begin June 22, providing concrete timeline for autonomous vehicle rollout.

Oklo $OKLO ( ▼ 1.27% ) received notice it will likely win award to deploy Aurora reactor at Alaska’s Eielson Air Force Base. Company would design, construct and operate the nuclear plant though final approval remains pending.

Quantum Computing $QUBT ( ▼ 4.74% ) led sector gains after Nvidia CEO Jensen Huang declared quantum computing “reaching an inflection point” during Paris conference. Rigetti Computing $RCOM and IonQ $IONQ also moved on the comments.

Lockheed Martin $LMT ( ▲ 3.66% ) faced pressure after Pentagon reportedly halved F-35 fighter jet request to 24 planes from 48. The cut comes amid Musk’s public criticism of the program and Canada’s purchase review.

Big Name Updates

Nvidia $NVDA ( ▼ 2.09% ) announced Europe’s first industrial AI cloud in Germany with 10,000 GPUs. Company expanded Siemens partnership for AI manufacturing tools and revealed CUDA-Q availability on Grace Blackwell 200 chip.

Microsoft $MSFT ( ▼ 0.82% ) received Citi upgrade with price target raised to $605 from $540. Firm expects strong Q4 earnings driven by AI revenue acceleration from both Microsoft and OpenAI.

General Motors $GM ( ▼ 1.24% ) announced $4 billion investment in US manufacturing over next two years. Strategy focuses on expanding existing capacity rather than new facilities, which analysts favor over greenfield expansion.

Other Notable Company News

GitLab $GTLB ( ▼ 5.67% ) reported mixed Q1 with EPS beat but cautious guidance. Software company guided Q2 revenue at $226-227 million in line with estimates.

Chewy $CHWY ( ▲ 1.12% ) delivered Q1 revenue beat at $3.12 billion but missed on earnings. Pet retailer guided FY25 revenue between $12.3-12.45 billion.

GameStop $GME ( 0.0% ) disappointed with Q1 revenue of $732.4 million, down from $881.8 million year-over-year and missing estimates.

J.M. Smucker $SJM ( ▼ 1.7% ) received Jefferies upgrade to Buy after Tuesday’s decline. Firm believes pullback was overdone following disappointing guidance.

UnitedHealth $UNH ( ▼ 1.56% ) downgraded to Neutral by Baird on OptumHealth concerns. Healthcare giant continues facing cyberattack and cost pressures.

First Solar $FSLR ( ▲ 4.39% ) upgraded to Buy by Jefferies with target raised to $192. Firm expects higher pricing power in 2028 and beyond.

Sector Watch

Bond Market

Treasury yields down following inflation data, with 10-year declining to 4.433%. The day's $39 billion auction showed mixed results:

• Yield came in 7 basis points below when-issued levels

• Direct and indirect bidding controlled 91% of auction

• Bid-to-cover ratio of 2.52 fell below 12-month average of 2.57

BMO called it "strong" despite mixed metrics, reflecting solid demand amid macro uncertainty.

Policy Watch

Federal Appeals Court granted Trump administration request to maintain tariffs through July 31 when oral arguments are scheduled.

Key developments:

• Treasury Secretary Bessent defended "revenge tax" proposal targeting digital services taxes

• Trump declared China deal "done" pending approval from both presidents

• Framework maintains 55% US tariffs versus 10% Chinese tariffs

• Agreement allows Chinese students at US universities while securing rare earth mineral supplies
  

What to Watch

1. Producer Price Index Thursday: May PPI provides final inflation data point. Watch for confirmation input costs remain contained.
   

2. China Deal Timeline: Lutnick expects Trump approval Wednesday or Thursday. Implementation speed signals whether framework reduces trade risks or creates temporary pause.
   

3. Quantum Momentum: Huang’s “inflection point” comment could drive sustained interest. Monitor for concrete partnerships or applications.
   

4. Middle East Developments: Embassy evacuation shows continued geopolitical sensitivity. Further developments could impact energy prices.
   

5. Fed Communication: With rate cut odds higher, watch officials’ comments ahead of next week’s FOMC meeting.
   
   
   Thanks for reading 🙂
   
   - John
   

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