June 25th Market Overview

Happy Wednesday

Mixed day with the S&P 500 sitting just below record highs. Shell wants to buy BP, FedEx is getting hit hard by tariff changes, and Trump called Powell "terrible" while shopping for his replacement. No comment on how the market has reacted to this middle east thing, still trying to digest that myself.

Let's dig in...

Executive Summary

1. Shell $SHEL and BP $BP ( ▼ 1.18% ) are in early talks about a merger that would create an oil giant. The discussions sent BP higher while Shell faced selling pressure.
   

2. FedEx $FDX ( ▲ 0.87% ) quantified the trade war’s impact: $170 million in quarterly costs from tariff rule changes that killed China package volumes and forced capacity cuts.

3. Trump called Fed Chair Powell “terrible” and said he’s already reviewing replacement candidates, adding political heat to an already complex monetary policy environment.

Market Overview

Key Market Drivers

1. Oil majors are thinking bigger: When energy companies start eyeing mega-mergers, it usually means they see either great opportunities or serious challenges ahead. With Middle East tensions cooling, Shell and BP have room to think strategically rather than defensively.
   

2. Defense spending is getting serious: NATO’s new 5% GDP target isn’t just a political promise—it’s a budget reality that will flow to contractors over the next decade. AeroVironment's blockbuster results show this money is already moving.
   

3. Trade policy has real costs: FedEx just handed investors a $170 million lesson in how tariff changes hit actual businesses. As Canada races to cut a deal by July, other companies are likely calculating their own exposure.
   

4. The Fed chair’s job security just evaporated: Trump’s public candidate hunt changes the game for monetary policy. Powell now has to balance economic data against political pressure while maintaining credibility with markets.
   

Stock Spotlight

AeroVironment $AVAV ( ▼ 0.01% ) posted the kind of quarter defense contractors dream about. Adjusted EPS of $1.61 beat expectations of $1.38, with record revenue of $275 million. The real story is their backlog hitting $726.6 million, up from last year. When Jim Cramer calls you the next “Palantir of hardware,” investors listen.

 BP $BP ( ▼ 1.18% ) and Shell are in early talks about a merger that would create an oil supermajor. Nothing’s guaranteed, but the discussions alone sent BP higher while Shell declined on deal costs.

Bumble $BMBL ( ▼ 1.81% ) is cutting 240 jobs, about one-third of its workforce, calling it strategic restructuring.

Nvidia $NVDA ( ▲ 1.33% ) traded within reach of record highs after Loop Capital raised their price target to $250. The firm sees Gen AI compute spending hitting $2 trillion by 2028.

Big Name Updates

Microsoft $MSFT ( ▲ 1.58% ) hit fresh all-time highs as Wedbush bumped their target to $600. The firm pointed to AI monetization through Copilot and Azure finally gaining real traction.

Tesla $TSLA ( ▼ 0.1% ) continues struggling in Europe with May sales down for the fifth straight month.

General Mills $GIS ( ▼ 1.26% ) warned of profit declines worse than analysts expected. Weaker snack demand and rising costs are hitting the cereal maker.

Coinbase $COIN ( ▲ 0.38% ) got a major upgrade from Bernstein to a street-high $510 target. The analyst called it “the most misunderstood name in crypto” and highlighted dominance across institutional services.

Other Notable Company News

Flagstar $FLG ( ▲ 1.92% ) dropped on New York real estate worries after yesterday’s mayoral primary results.

Robinhood $HOOD ( ▼ 3.65% ) hit new record highs with year-to-date gains in triple digits. Retail trading activity and crypto volumes keep driving the platform higher.

Kraft Heinz $KHC ( ▼ 1.48% ) got upgraded by Goldman Sachs on strategic alternatives speculation. With Berkshire board members stepping down, portfolio changes could be coming.

Sector Watch

Bond Market

Treasury yields edged higher with the 10-year reaching 4.316%, up from Tuesday’s close of 4.291%.

• Market expectations continue building that the Trump administration will minimize long-term Treasury issuance

• U.S. regulators took initial steps toward bank deregulation that could reshape Treasury market dynamics

• Mild inflation data supports the case for rate cuts by fall, though tariff concerns create uncertainty

Policy Watch

The political pressure on Fed Chair Powell intensified as Trump publicly stated he has replacement candidates under review. During Senate testimony, Powell maintained his cautious stance on rate cuts, emphasizing inflation risks from potential tariffs.

• Senator Bernie Moreno accused Powell of “costing this government $400 billion a year” by keeping rates elevated

• New home sales dropped to their slowest pace since October 2024, reflecting continued mortgage rate pressures

• Canada’s negotiators scheduled three meetings this week ahead of July 22 trade deadline

• NATO members agreed to raise defense spending targets to 5% of GDP by 2035, up from 2%

What to Watch

1. Shell-BP Merger Timeline: Early-stage talks could evolve quickly. Watch for formal announcement timing and regulatory approval processes across multiple jurisdictions that would determine deal feasibility.
   

2. Defense Spending Acceleration: NATO’s 5% GDP target creates a decade-long growth trajectory. Monitor specific country implementation plans and budget allocations that could drive contract awards for defense contractors.
   

3. Fed Chair Succession Drama: Trump’s candidate review process will intensify speculation about monetary policy direction. Watch for names floated and their historical positions on inflation targeting and financial regulation.
   

4. Canada Trade Negotiations: Three scheduled meetings this week determine whether tariff threats become reality. Failure could trigger volatility in the Canadian dollar and cross-border trade-dependent sectors.
   

5. China Package Volume Recovery: FedEx's capacity cuts create supply-demand imbalances in Asia-to-U.S. shipping. Monitor whether competitors capture displaced volume and pricing power implications for logistics.
   
   
   Thanks for reading 🙂
   
   - John
   

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