June 4th Market Overview

Happy Wednesday.

Jobs market delivered a rough miss today - ADP's 37,000 versus 115,000 expected(yuck.)

Trump wasted zero time blasting Powell as "Too Late" and demanding rate cuts. Mixed tape today as tech holds up but everyone's positioning for what could be a make-or-break jobs report on Friday. Russian and Ukraine tension sure didn’t help. A big week of headlines is unfolding.

Let's dig in...

Executive Summary

1. Jobs market: delivered the worst private sector hiring miss in over two year. Friday’s nonfarm payrolls now under scrutiny.
   

2. Services sector: ISM services crashed below 50 to 49.9, first contraction since April.
   

3. Trump vs. Powell: President immediately blasted Fed Chair as “Too Late” after weak data, demanding rate cuts while simultaneously doubling steel tariffs to 50% overnight.
   

4. Tech rotation: Communication services and technology drive market gains while energy goes down.

Market Overview

Key Market Drivers

1. Labor market warning signals: The ADP National Employment Report showed private employers added just 37,000 jobs in May, missing estimates by 78,000 and marking the weakest reading in over two years. ADP’s Chief Economist noted “hiring is losing momentum” despite robust pay growth.

2. Services sector stalls: The ISM services index fell below 50 to 49.9, indicating contraction for the first time since April. Internal components showed declines across new orders, production, and inventories, with respondents citing tariff policies as key concerns.

3. Presidential intervention: Trump’s immediate response to weak data calling Fed Chair Powell “Too Late” represents the administration’s most direct pressure for monetary accommodation following disappointing economic reports.

4. Trade tensions escalate: Steel and aluminum tariffs officially doubled to 50%, while the Commerce Department moved to block Enterprise Products Partners $EPD ( ▲ 1.29% ) ethane shipments to China, expanding restrictions beyond metals.

Stock Spotlight

Wells Fargo $WFC ( ▲ 1.91% ) gained after the Federal Reserve lifted the seven-year asset cap restriction. Morgan Stanley raised its price target to $87 while Bank of America boosted it to $90, citing potential for multi-year growth and market share recovery.

CrowdStrike $CRWD ( ▲ 1.18% ) fell after guiding Q2 revenue between $1.14-$1.15 billion versus $1.16 billion consensus. Despite posting Q1 revenue of $1.10 billion with strong retention rates, the company received downgrades from Canaccord and Evercore.

Dollar Tree $DLTR ( ▼ 2.25% ) warned tariff pressures could slash quarterly profits, expecting earnings to be “meaningfully lower” due to $70 million in extra costs from Chinese goods levies.

Broadcom $AVGO ( ▼ 5.0% ) built on Tuesday’s record high ahead of Thursday earnings as semiconductor momentum continues.

Redwire $RDW ( ▲ 4.36% ) cleared a key NASA milestone for its Mason technology designed to build lunar and Martian infrastructure using local materials in the $12.9 million project.

Big Name Updates

Nvidia $NVDA ( ▲ 1.24% ) reclaimed the title of world’s most valuable company, surpassing Microsoft $MSFT.

Tesla $TSLA ( ▲ 3.67% ) received mixed signals as Morgan Stanley highlighted drone potential worth $1,000 per share by 2040, while China-made EV sales dropped year-over-year. Elon Musk criticized government overspending as driving America toward “debt slavery.”

Other Notable Company News

Snowflake $SNOW ( ▲ 0.35% ) gained an UBS upgrade to Buy with a $265 target as customer checks showed increased data stack spending driven by AI applications.

Old Dominion Freight Line $ODFL ( ▲ 0.41% ) reported May LTL revenue per day fell year-over-year as volumes dropped due to weak freight demand and lighter loads.

Boeing $BA ( ▲ 0.85% ) faces competitive pressure as China considers ordering hundreds of Airbus jets in a major deal.

Reddit $RDDT ( ▲ 8.06% ) sued Anthropic, alleging unauthorized use of site data for AI model training after continued access despite being told to stop.

Sector Watch

Bond Market

Ten-year yields dropped to 4.364% from 4.459% - the largest single-day decline since April 14. The sell-off started immediately after ADP’s jobs miss and accelerated when ISM services crashed below 50.

Ray Dalio warned against artificial rate cuts, saying “you don’t get richer by lower interest rates or printing money.”

Policy Watch

Steel and aluminum tariffs doubled to 50% overnight. The UK keeps preferential 25% treatment while trade deal details get sorted. Trade Rep Greer called EU talks a “credible starting point” despite tariffs complicating negotiations.

• Strategic Petroleum Reserve refill complete at 401.8 million barrels - still 29% below pre-Ukraine levels

• Senate racing toward July 4 deadline for Trump’s megabill. CBO estimates 11 million could lose insurance coverage

• Labor Department staffing issues raise questions about inflation data accuracy, potentially complicating Fed decisions

What to Watch

1. Friday’s Nonfarm Payrolls: Government jobs data becomes critical after today’s weak ADP reading. Economists expect 125,000 jobs added, but today’s miss raises doubt about labor market health and could intensify Fed pressure.
   

2. Broadcom Earnings Thursday: $AVGO ( ▼ 5.0% ) results will signal chip demand health amid trade tensions. Commentary on AI demand and China restrictions will be key for semiconductor sector direction.
   

3. Trade Escalation Signals: Trump’s comments about Xi being “extremely hard to make a deal with” and expanding restrictions beyond metals suggest further tensions ahead, impacting market sentiment.
   

4. Services Sector Follow-Through: Today’s unexpected services contraction warrants monitoring for economic softening confirmation, given services represent the largest U.S. economic portion.
   
   
   Thanks for reading 🙂
   
   - John
   

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