June 27th Market Overview

Happy Friday

Market records at the open, retreat by the close. China agreed to let rare earth exports flow again, which had everyone feeling good until Trump ended the Canada trade talks with an afternoon tweet.

This week was a great reminder of the mantra "sometimes what we worry about just doesn't happen" (most thought oil was going to rip but it did the exact opposite).

Let's dig in...

Executive Summary

1. S&P 500 and Nasdaq hit new all-time highs at the open before dropping on Canada trade news
   

2. Commerce Secretary Lutnick confirmed a signed U.S.-China trade deal including Beijing's commitment to approve rare earth exports
   

3. Trump terminated all Canada trade talks over digital services taxes, setting a seven-day tariff deadline
   

4. Core PCE inflation rose to 2.7% year-over-year, above estimates but mild enough to keep rate cut hopes alive

Market Overview

Key Market Drivers

1. Trade developments moved markets: China's commerce ministry confirmed it will approve rare earth export applications. Trump terminated Canada talks over digital services taxes, setting a seven-day tariff deadline.
   

2. Oil collapsed on ceasefire: The Israel-Iran ceasefire removed supply fears, sending crude down for its biggest weekly drop since 2023.
   

3. Inflation data kept Fed options open: Core PCE rose to 2.7% but showed no tariff acceleration. Consumer sentiment improved as inflation expectations fell to 5% from 6.6%.
   

4. Rate cut odds increased: Futures now price higher odds of a Fed cut by the next meeting.
   

Stock Spotlight

Nike $NKE ( ▲ 0.18% ) beat earnings estimates despite revenue declining to $11.1B. The company faces $1B in tariff costs but has pricing power and sourcing flexibility to offset impacts.

Coinbase $COIN ( ▲ 0.37% ) remains the month's biggest S&P 500 winner. Today's selling suggests profit-taking before month-end.

Tesla $TSLA ( ▼ 6.79% ) gained after its Austin robotaxi launch. Musk called the rollout "successful" as the company competes with Waymo on the west coast.

Core Scientific $CORZ ( ▼ 17.61% ) became an acquisition target for CoreWeave $CRWV ( ▼ 3.33% ). Wall Street Journal reported a deal could finalize within weeks.

Big Name Updates

Meta $META ( ▼ 0.09% ) received a favorable ruling as a judge determined AI training on copyrighted books qualifies as fair use. The "exceedingly transformative" language provides legal precedent.

Apple $AAPL ( ▼ 1.69% ) lagged while Microsoft and Nvidia hit new highs. The stock remains down year-to-date.

Fair Isaac $FICO ( ▲ 0.78% ) , Equifax , and TransUnion declined after Federal Housing Finance Agency director Bill Pulte announced a "full scale review" of credit bureaus.

Other Notable Company News

Uber $UBER ( ▲ 3.26% ) and Lyft $LYFT ( ▼ 0.5% ) were downgraded by Canaccord to hold from buy over robotaxi disruption concerns.

Boeing $BA ( ▲ 1.26% ) received an upgrade from Redburn Atlantic to buy based on improving production metrics.

AeroVironment $AVAV ( ▼ 2.23% ) completed key Wildcat VTOL drone milestones under DARPA's program, validating systems ahead of schedule.

Li Auto $LI ( ▲ 3.06% ) cut Q2 delivery guidance to around 108,000 vehicles from the previous 123,000-128,000 forecast.

Sector Watch

Bond Market

The 10-year Treasury held steady around 4.285% despite the equity volatility. Interest rate futures now show higher odds of a Fed cut by the next meeting.

• bond market seems comfortable that current inflation trends won't derail potential easing

• Rate cut probability increased to 21% from 15% a week ago

Policy Watch

Trade deadlines are fluid. 

White House Press Secretary Leavitt called the July 9 tariff deadline "not critical," while Treasury Secretary Bessent suggested deals with 18 countries could wrap by Labor Day.

AI infrastructure support is coming through executive orders to boost power generation. The administration wants to expedite grid connections and provide federal land for data centers.

• Fed discord may emerge at the July meeting as two Trump-appointed Fed governors favor rate cuts

• Debt limit deadline could arrive sooner if courts force tariff revenue rebates
  

What to Watch

1. Weekend trade developments: Monitor Trump's social media and Canada's response. The seven-day tariff timeline means potential news by next Friday.
   

2. June jobs report Thursday: Nonfarm payrolls will shape Fed policy expectations and could shift rate cut probabilities significantly.
   

3. China rare earth follow-through: Watch whether Beijing actually approves export applications or if this becomes another sticking point.
   

4. Fed Governor statements: Any public comments from Trump-appointed governors could signal policy direction before the July meeting.
   

5. Oil market stability: Monitor crude for any Middle East developments that could reverse this week's collapse, given the fragile ceasefire.
   
   
   Thanks for reading 🙂
   
   - John
   

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