Happy Tuesday.

A split personality in the markets today. The headline CPI number coming in lower then expected signals inflation IS down, continuing the positive sentiment from the China tariff thaw.

Tech seemed to love that combo, but the Dow took a hit, largely thanks to UnitedHealth having a rough session.

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Let's dig in...

Executive Summary

• April inflation cooled to 2.3%, the lowest reading since early 2021, boosting market sentiment
  

• Coinbase $COIN ( ▲ 24.59% ) will join the S&P 500 on May 19, a landmark moment for the cryptocurrency industry
  

• President Trump secured a $600B Saudi investment commitment during his Middle East visit
  

• The US-China 90-day tariff truce continues to support market stability, with reduced tariffs on small packages

Market Overview

Key Market Drivers

1. Inflation Data Surprise: April’s CPI came in below expectations at 2.3% annually, with core inflation steady at 2.8%. Energy prices fell 3.7%. Economists note this report doesn’t yet capture potential tariff impacts.
   

2. Tariff Relief Progress: The administration reduced “de minimis” tariffs on Chinese packages under $800 from 120% to 54%, effective tomorrow. The effective US tariff rate now sits between 13-39% according to various analysts – significantly lower than feared but still elevated compared to 2024 levels.
   

3. Goldman’s Improved Outlook: Goldman Sachs cut recession probability to 35% (from 45%) and raised year-end S&P target to 6,100 following trade developments, signaling growing confidence in economic stability.
   

4. Middle East Diplomacy: Saudi Arabia committed $600B in US investments across tech, defense and other sectors during Trump’s visit to Riyadh, marking a significant foreign policy achievement.
   

Stock Spotlight

Nvidia $NVDA ( ▲ 5.7% ) secured a deal to supply 18,000 GB300 Blackwell AI chips to Saudi firm Humain. This pushed Nvidia back above $3 trillion market cap, making it the world’s second most valuable company.

Coinbase $COIN ( ▲ 24.59% ) will join the S&P 500 on May 19, replacing Discover Financial. Bernstein called this “a watershed moment for the crypto industry” after Coinbase’s recent SEC litigation was dropped. The stock erased its YTD losses.

UnitedHealth $UNH ( ▼ 17.86% ) suspended its 2025 outlook as CEO Andrew Witty exits for “personal reasons.” Stephen Hemsley returns as chief executive. Rising Medicare Advantage costs cited, though growth expected to resume in 2026.

Boeing $BA ( ▲ 2.63% ) gained as China lifted its ban on airlines taking delivery of Boeing planes, reopening a critical market for the aircraft manufacturer.

On Holding $ONON ( ▲ 12.75% ) beat Q1 expectations across all metrics. The Swiss footwear company saw 130% growth in Asia-Pacific and raised its full-year outlook with improved gross margin to 59.9%.

Big Name Updates

Google $GOOGL ( ▲ 0.6% ) is developing a Pinterest-like feature for AI-curated images per The Information. The company also faces €12B in potential civil claims across Europe.

Netflix $NFLX ( ▲ 2.48% ) outperformed the S&P 500 by 15% since post-tariff lows due to its “defensive subscription nature,” though analysts expect some reversion as investors shift to tariff-benefiting names.

Amazon $AMZN ( ▲ 1.71% ) partnered with FedEx for deliveries, their first collaboration since 2019. This gives Amazon cheaper shipping for bulky items.

Microsoft $MSFT ( ▲ 0.02% ) is reportedly cutting about 6,000 jobs, roughly 3% of its global workforce.

Johnson & Johnson $JNJ ( ▼ 3.12% ) downgraded by Leerink Partners on concerns about CMS rules affecting Darzalex Faspro. The drug may face price controls in 2029 instead of 2034.

Other Notable Company News

Robinhood $HOOD ( ▲ 8.93% ) acquiring Canada’s WonderFi for C$250M (41% premium), gaining control of crypto platforms Bitbuy and Coinsquare.

AST SpaceMobile $ASTS ( ▼ 2.06% ) expects $50-75M revenue in H2 2025 from early network deployments and is ramping production to six satellites monthly.

Under Armour $UAA ( ▲ 1.61% ) projects 4-5% revenue decline for FY26, citing “macro uncertainty and tariffs” despite beating Q4 estimates. North America down 11%, international down 13%.

AMC Entertainment $AMC ( ▲ 0.92% ) cutting ticket prices 50% every Wednesday starting July 9 for loyalty members, including IMAX formats.

Harley-Davidson $HOG ( ▲ 1.25% ) revised tariff outlook, now expects $45M in savings reducing its China tariff exposure to $30-55M, potentially dropping to $10-35M.

First Solar $FSLR ( ▲ 22.69% ) upgraded by Wolfe Research to Outperform with $221 target on IRA benefits and anti-China sentiment.

Enphase Energy $ENPH ( ▼ 5.03% ) downgraded by BMO Capital to Underperform with $39 target due to potential 25D tax credit elimination impact.

Sector Watch

Bond Market

Treasury yields showed minimal reaction to inflation data:

• 10-year yield settled at 4.498%

• 2-year yield edged lower to around 4.029%

Markets remain in wait-and-see mode as investors assess how temporary tariff adjustments might impact inflation and growth

• The yield curve remains inverted

Policy Watch

House GOP tax bill proposal:

• Would raise the debt ceiling by $4 trillion

• Would implement several fiscal measures:

  • Ending the electric vehicle tax credit

  • Adding a $10,000 auto loan interest deduction

  • Boosting deductions for seniors

  • Exempting tips and overtime pay from taxes through 2028

• Notably omits President Trump's previously discussed millionaire tax bracket

Chinese rare-earth exporters status:

• Remain in limbo regarding sales to the US following the trade truce

• Export controls implemented by Beijing on April 4 have not been explicitly lifted

Capital Economics identified key "potential flashpoints" that could disrupt trade stability:

• Original pause expiring July 8

• China-specific pause ending August 12

• Challenges in negotiating with 180+ nations in two months

• Unaddressed issues with China regarding exchange rates and market access
  

What to Watch

1. Tariff Impact Timeline: While April’s inflation data looked good, it doesn’t capture potential tariff effects. Watch the next inflation reports (June 11, July 15, August 12) for signs of how prices respond to trade policy shifts.

   • Fed’s Goolsbee warned tariffs will still have a “stagflationary impulse”

2. 90-Day Window Strategy: The temporary US-China agreement creates a limited timeline for business decisions. Watch for:

   • Accelerated shipping activity as importers rush to move goods during reduced tariff period

   • Inventory building ahead of the August 12 deadline
     

3. Market Rotation: Trade stabilization could trigger significant movement between defensive and cyclical stocks.

   • Netflix ($NFLX) outperformed by 30% during uncertainty but may see relative weakness as investors shift to tariff-impacted names

   • Banking, manufacturing, and consumer stocks hit hardest by tariff fears may see renewed interest
     

4. Additional Trade Agreements: With parallel negotiations underway, further announcements could drive market sentiment.

   • India trade talks happening today according to USTR Greer

   • Unresolved EU negotiations complicated by trade surplus and consensus governance

   • Specific commodity flows like rare earths remain restricted despite broader agreement

   
   
   Thanks for reading 🙂
   
   - John
   

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