May 15th Market Overview

Happy Friday

Weird day. Stocks took a hit but the real story continues with bonds. A week or two ago the bet was the Fed could cut rates this year. Today the bet is they hike. That's a heck of a swing.

Trump and Xi wrapped up Beijing with a Boeing order half the size Wall Street wanted and not much else. Sometimes a govt summit is just a summit.

Let’s dig in...

Today's Big Picture

The 30-Year Just Cracked 5.1

The 30-year Treasury yield closed above 5.1, the highest in nearly twenty years. The bigger tell was the inflation-adjusted yield on the 10-year (basically the real cost of borrowing after stripping inflation out), which jumped to 2.05. When that number rises, two things happen. Companies pay more to finance everything from buybacks to new factories. And stocks priced on years of future growth lose their math advantage against safer bonds. Today wasn't an inflation panic. It was traders accepting that money is going to cost more for a while.

The Summit Was A Dud

Two days, sixteen US executives in the room, and what came out was a 200-jet Boeing order (about half what the market wanted) and a vague promise to keep the Strait of Hormuz open. No tariff cuts. No chip deal for Nvidia. Trump even told reporters the Nvidia sale "didn't come up." Wall Street walked in expecting concrete deals and walked out with photos.

Traders Now Bet The Fed Hikes, Not Cuts

A week ago, the bond market expected the Fed to cut interest rates this year. Today, traders are pricing in a 51 chance the Fed actually raises them at the December meeting. That's a complete reversal in seven days, driven by oil sitting above $100 and four straight days of inflation data coming in too hot. Powell hands the keys to Kevin Warsh on Monday. Warsh has historically pushed for tighter policy, and his first public comments could move the bond market by themselves.

Market Overview

Index Performance

Stock Spotlight

Nike $NKE ( ▼ 0.02% )  
took out its 52-week low and is closing in on $40, the lowest level since LeBron returned to Cleveland in 2014. Anyone who bought five years ago is deep underwater on one of the most iconic American brands.

Brown-Forman $BF.B ( ▲ 1.3% )  
closed higher after rejecting a $15 billion all-cash buyout from Sazerac at $32 a share. The Brown family controls the voting shares, so without their blessing no deal gets done.

Microsoft $MSFT ( ▲ 3.05% )  
was the only megacap that closed green, after Ackman disclosed his Pershing Square stake. He built it in February at 21 times forward earnings, broadly in line with the market multiple.

Big Name Updates

Nvidia $NVDA ( ▼ 4.38% )  
closed lower after Trump told reporters the chip deal didn't come up with Xi. The China revenue story the Street built into the name this week just got walked back.

Boeing $BA ( ▼ 3.8% )  
extended Thursday's slide. The 200-jet order was half the rumored number, and Trump's "up to 750 if they do a good job" is a carrot for Xi's September Washington visit, not booked revenue.

Intel $INTC ( ▼ 6.18% )  
was the worst chip name on the day after running over 200 year to date through Thursday. When the year's biggest winner gives back this hard, every late-cycle AI long is on notice.

Other Notable Company News

DexCom $DXCM ( ▲ 6.56% )  
agreed with Elliott Investment Management to add two new independent directors. Elliott getting board seats almost always means a strategic review is coming.

LVMH $LVMUY ( ▼ 1.49% )  
sold Marc Jacobs to WHP Global and G-III Apparel for $850 million in cash. Arnault keeps trimming the long tail of the portfolio.

Stellantis $STLA ( ▼ 4.53% )  
struck a deal with Dongfeng to build electric Peugeot and Jeep models in China. Western automakers can't compete in the Chinese EV market alone anymore.

Coinbase $COIN ( ▼ 7.75% )  
closed sharply lower as Bitcoin slipped under $80,000. Strategy and Circle went with it.

Applied Materials $AMAT ( ▼ 0.89% )  
beat and raised but still closed red. When good prints get sold, the cycle has changed.

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Sector Watch

Bond Market

The 30-year closed at its highest since 2007. The 10-year topped 4.58. Real yields on the 10-year hit 2.05, the biggest single-day move of the week.

Global bonds sold with us. UK gilts hit 5.14, the highest since 2008. Japan's 10-year hit a level not seen since 1997 after producer prices ran hot.

Next week's Treasury auctions tell us if foreign buyers are still showing up.

Policy Watch

Fed

Powell is out. Warsh in Monday. The data on his desk:

• 51 chance of a December hike priced in (was zero a week ago)

• 60 chance by January, 71 by March

• April CPI hottest since 2023

• Empire State prices paid at four-year highs

Warsh has historically leaned hawkish, and the data gives him cover to stay there. His first public comments set the tone for rates through year-end.

Trade

The Beijing summit delivered less than hoped. China agreed to buy 200 Boeing jets (rumored at 750), billions in soybeans, and US oil shipments. What didn't happen mattered more:

• No tariff cuts discussed

• Nvidia chip sale never came up

• Rare earths truce expires this fall with no extension
  

What to Watch

The AI company quietly automating every Walmart distribution center already has 23 billion in orders on the book

It's just one of seven names in this free MarketBeat report.

SpaceX IPO Filing

Prospectus expected next week per Bloomberg, targeting a June 12 debut. Likely the largest US IPO in history. How it prices tells us how much risk appetite is left after this week's bond move.

Retail Earnings Week

Home Depot, Target, Walmart, TJX, BJ's and Ralph Lauren all report. The Retail ETF is down sharply on the week. Retail sales growth already slowed in April. This is the cleanest read on whether the consumer is finally cracking under higher prices.

Warsh's First Public Comments

Whatever he says first sets the tone. Hawkish extends the bond rout. Dovish despite the data and the dollar gives back this week's gain.

Thanks for reading - you are now the more informed 🙂

- John

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