June 5th Market Overview

Happy Thursday.

Some political drama got into the markets today as the Trump-Musk relationship seemed to become unhinged in real time, sending Tesla into free fall. Trade data showed tariff disruption is real → businesses stopped importing after stockpiling in March, causing the deficit to dip to $61.6 billion as economic activity shifted.

In April:

• US imported $351 billion worth of goods

• US exported $289 billion worth of goods

• Deficit = $351B - $289B = $62 billion (we bought $62B more from other countries than they bought from us)
  
  Let's dig in...

Executive Summary

1. Tesla $TSLA ( ▲ 3.67% ) became the day’s casualty as Trump threatened to eliminate government contracts for Musk’s companies following their public feud over the GOP budget bill
   

2. Trade deficit collapsed to $61.6 billion in April, the steepest monthly decline on record, as imports crashed following tariff implementations
   

3. Labor market cracks widened with jobless claims jumping to 247,000, the highest since October, setting up tomorrow’s payrolls as a critical test
   

4. Circle Internet Group $CRCL ( ▲ 29.4% ) delivered a spectacular IPO debut while silver hit 13-year highs on industrial demand
   

Market Overview

Key Market Drivers

1. Political Earthquake Triggers Tesla Selloff: Trump called Musk “CRAZY” and threatened to terminate government subsidies and contracts. Musk fired back claiming Trump “would have lost the election” without his support. The feud stems from Musk’s criticism of GOP budget provisions ending EV tax credits. Tesla $TSLA options showed the highest put-call ratio since April as traders piled into protective positions.
   

2. Trade Data Reveals Tariff Impact: Imports plunged a record while exports rose, creating the smallest deficit since September 2023. Businesses stopped stockpiling after Trump’s tariff announcements, with pharmaceuticals, consumer goods, and auto imports leading the decline. Cracker Barrel $CBRL and PVH $PVH highlighted direct hits from tariff costs.
   

3. Labor Market Warning Signs Flash: Initial claims exceeded estimates and hit the highest level since October. Continuing claims four-week average reached the highest since November 2021. Unit labor costs spiked while productivity fell, creating an inflation-employment squeeze ahead of Friday’s crucial payrolls data.
   

4. China Communication Opens Door: Trump’s 90-minute call with Xi Jinping yielded a “very positive conclusion” with follow-up meetings planned for trade teams. Discussion included rare earth minerals, while Trump simultaneously removed Defense Production Act restrictions to boost domestic production.
   

Stock Spotlight

Tesla $TSLA ( ▲ 3.67% ) : Trump’s contract threats sent shares down as political risk materialized. The stock has shed $267 billion in market value since Musk left his government role. Put-call ratio hit highest since April.

Circle Internet Group $CRCL ( ▲ 29.4% ) : The stablecoin issuer opened at $69.50 after pricing at $31, raising nearly $1.1 billion and exceeding initial expectations by wide margins.

MongoDB $MDB ( ▼ 2.33% ) : Beat earnings estimates and raised fiscal 2026 guidance on strong

Big Name Updates

Apple $AAPL ( ▲ 1.64% ) : Morgan Stanley maintained Overweight at $235, noting App Store revenue accelerated to 10% growth in May from 8% in April. Partnered with Tata for iPhone and MacBook repairs in India.

Amazon $AMZN ( ▲ 2.72% ) : Barclays held Overweight at $240, stating Project Kuiper delays were priced in. Launched “Humanoid Park” at San Francisco office to test delivery robots.

Nvidia $NVDA ( ▲ 1.24% ) : Bank of America reiterated Buy at $180, calling the company best positioned for AI transformation.

Other Notable Company News

Five Below $FIVE: Beat estimates while announcing CFO Kristy Chipman’s departure.

Palantir $PLTR ( ▲ 6.51% ) : Partnered with Bolt for AI-powered personalized checkouts.

Dollar Tree $DLTR ( ▼ 2.25% ) : JPMorgan upgraded to Overweight with target raised to $111.

Micron $MU ( ▲ 2.14% ) : Mizuho raised target to $130 ahead of earnings, projecting strong HBM revenue growth.

PVH $PVH ( ▼ 1.36% ) : Cut profit outlook citing $65 million tariff impact.

Broadcom $AVGO ( ▼ 5.0% ) : Reports earnings after close, key for AI chip demand insight.

Sector Watch

Bond Market

The 10-year Treasury yield held at 4.402% as markets processed mixed signals. European divergence widened after the ECB delivered its eighth rate cut, bringing the deposit facility to its lowest since early 2023.

• Mortgage rates declined to 6.85% from 6.89% last week according to Freddie Mac
• Fed Governor Kugler reinforced hawkish stance, citing tariff-driven inflation risks
• ECB projects inflation hitting 2% target this year before dropping to 1.6% in 2026

Policy Watch

Government Contract Risk: Trump’s explicit threats to eliminate subsidies for Musk’s companies creates uncertainty for SpaceX and Tesla $TSLA operations. The dispute centers on Musk’s criticism of GOP budget provisions ending EV tax credits.

Trade Relations: The Trump-Xi call focused on rare earth minerals with follow-up meetings planned for trade teams. Trump removed Defense Production Act restrictions to boost domestic rare earth production.

• German Chancellor Merz meets with Trump today as EU leaders push for favorable trade arrangements
• BlackRock CEO Fink warned current tariffs could generate “very elevated inflation” over the next five months
• Fed maintains hawkish stance while ECB continues easing cycle

Healthcare Policy: Humana $HUM openness to discussing Medicare Advantage payment cuts signals potential reimbursement shifts under congressional review.

What to Watch Out For

1. Friday’s Nonfarm Payrolls: Economists expect 125,000 jobs added in May down from 177,000 in April. Given weak ADP data showing only 37,000 private jobs and rising claims, a significant miss could accelerate dovish Fed expectations.
   

2. Broadcom Earnings Impact: reports tonight, providing crucial insight into AI chip demand and semiconductor spending. Results could drive broader chip sector movement Friday given recent volatility.
   

3. Tesla Government Contract Exposure: Monitor specific subsidies and contracts facing elimination. SpaceX holds billions in NASA and Defense contracts while Tesla benefits from various EV incentives.
   

4. China Trade Follow-Up: Watch for timing and scope announcements of U.S.-China trade meetings. Rare earth discussions could impact MP Materials $MP ( ▼ 0.89% ) and critical mineral companies.
   

5. Silver Technical Breakout: With futures hitting 13-year highs above $35, monitor momentum above key resistance. Industrial demand from solar manufacturers and safe-haven flows could drive further gains in precious metals miners.
   
   Thanks for reading 🙂
   
   - John
   

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