May 15th Market Overview

Happy Thursday.

Cooling wholesale prices (-0.5% vs +0.3% expected) are easing stagflation concerns. Trump's Middle East tour is keeping the market very happy. Qatar promised $1.2T after the Saudi deals this week. . The reality is tariff policy hasn't affected this earnings quarter for most companies. We hear some shaky guidance and outlook here and there but the “bottom line” effects will not start to show up until the next two earnings seasons.

Something I’m keeping in mind.

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Let's dig in...

Executive Summary

1. Inflation relief shapes market sentiment: April PPI dropped unexpectedly, posting the largest services price decline since records began in 2009, even as retail sales growth moderated to 0.1%.
   

2. Middle East deal flow accelerates: Qatar commits $1.2T across aviation, defense, tech and energy sectors, highlighted by a record $96B Boeing order that supports some 400,000 U.S. jobs.
   

3. Retail sector braces for price hikes: Walmart warns tariff impacts will hit shelves by month’s end despite the U.S.-China trade truce, while containership bookings from China jump over 50% as importers rush shipments.
   

4. Corporate volatility intensifies: Dick’s Sporting Goods acquires Foot Locker for $2.4B, UnitedHealth tumbles on DOJ investigation reports, and Trump publicly pressures Apple to reduce Indian manufacturing.

Market Overview

Key Market Drivers

• Economic signals turn mixed: April retail sales rose just 0.1% after March’s robust 1.7% gain, while producer prices unexpectedly fell, with the largest services price drop in 15 years. U.S. Philly Fed Business Conditions hit their second-best level in four years, contradicting still-negative Empire State readings.
  

• Middle East opportunities expand: Trump’s meetings with Qatari officials secured massive commitments in defense, tech, quantum computing, and LNG. Qualcomm agreed to partner with Saudi Arabia to expand AI capacity, while Elon Musk met with the Qatari wealth fund chairman.
  

• Trade realignment disrupts supply chains: Despite temporary U.S.-China tariff reductions, shipping volumes have already surged as companies front-load imports. The U.S. is now pursuing revised agreements with Japan, while Trump claims India has offered “literally no tariffs” on U.S. goods.
  

• Oil markets react to geopolitics: Crude prices fell on Trump’s statement of “very serious negotiations with Iran” that could result in a nuclear deal, potentially increasing global supply if sanctions ease..
  

Stock Spotlight

Foot Locker $FL ( ▼ 1.03% ) : Jumps after Dick’s Sporting Goods $DKS announced a $2.4 billion acquisition at $24 per share. The deal is expected to close in the second half of this year, with shareholders offered both all-cash and stock options.

UnitedHealth Group $UNH ( ▲ 1.53% ) : Falls sharply after Wall Street Journal reported a potential Justice Department investigation into Medicare fraud allegations. The company disputes the report, stating it hasn’t been notified of any investigation.

Walmart $WMT ( ▼ 0.49% ) : Beats earnings expectations but warns tariff-driven price increases are coming by month’s end. CFO John David Rainey stated “the magnitude of these increases is more than any retailer can absorb.”

Alibaba $BABA ( ▲ 0.08% ) : Reports substantial free cash flow miss of $514M versus $3.7B expected, an 86% shortfall that overshadowed otherwise acceptable results.

Big Name Updates

Apple $AAPL ( ▼ 0.59% ) : Faces pushback as Trump told CEO Tim Cook “I don’t want you building in India,” pressuring for increased U.S. production despite the company’s strategy to diversify manufacturing.

Boeing $BA ( ▲ 0.33% ) : Secures historic $96B order from Qatar Airways for up to 210 aircraft, the largest widebody order in Boeing’s history, supporting approximately 400,000 U.S. jobs.

Cisco Systems $CSCO ( ▼ 1.18% ) : Tops quarterly expectations with adjusted EPS at $0.96 and revenue at $14.15B. Announces CFO Scott Herren will retire in July.

Alphabet $GOOGL ( ▲ 1.45% ) : YouTube launches “Peak Points,” a Gemini AI-powered tool that strategically places ads after the most engaging parts of videos.

Other Notable Company News

Deere & Co $DE ( ▼ 1.31% ): Trims fiscal year profit forecast, citing $500M in expected tariff costs, with 40% affecting its construction and forestry equipment line.

Pinterest $PINS ( ▼ 1.06% ): Receives upgrade from Wolfe Research to Outperform with a $40 price target, citing product improvements, third-party opportunities, and reasonable valuation.

Super Micro Computer $SMCI ( ▼ 2.22% ): Extends momentum after announcing $20B+ partnership with Saudi data center firm DataVolt during the recent Saudi-U.S. Investment Forum.

Sector Watch

Bond Market

Treasury yields down today with the 10-year dropping to 4.45%, ending five consecutive sessions of increases.

• The 2-year yield also fell to 3.97%, steepening the yield curve slightly
• JPMorgan’s credit card charge-off rate improved to 1.67% from 1.85% in March

Policy Watch

Fed Chair Powell warned of “more frequent and potentially more persistent supply shocks” during his framework review speech, suggesting monetary policy faces increasing challenges balancing growth and price stability.

• Trade negotiations expanding to Japan and EU, with agricultural tariffs and digital trade as key focus areas

• Trump says India has offered a deal with “basically no tariffs” on U.S. goods

• Defense spending looks to increase with Trump confirming 2026 budget will include “substantial pay raises” for service members

What to Watch

1. Tariff Price Hikes: Walmart signals May/June increases as the first wave hits retail. Watch other retailers for similar warnings and track containership booking data for front-loading activity.
   

2. Middle East Deals: Monitor concrete implementation steps from Qatar's $1.2T and Saudi's commitments. Key areas: AI chips (Qualcomm), defense contracts, and energy projects as Trump meets with UAE officials.
   

3. UnitedHealth Fallout: Potential DOJ investigation could spread scrutiny across Medicare Advantage providers. Watch for sector-wide compliance costs and guidance adjustments in healthcare insurance.
   

4. Consumer Spending Shift: Retail sales moderating (+0.1%) while restaurants gaining (+1.2%). Track credit metrics and retailer commentary on price sensitivity as tariff effects begin materializing.
   
   Thanks for reading 🙂
   
   - John
   

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