May 1st Market Overview

Happy Thursday.

Starting off May strong and continuing the current market theme with solid green across all major indices. To put it in perspective we are up +13% on $QQQ ( ▲ 1.85% ) since last Monday (the 21st). The market keeps shaking off these tariff headlines and its worth noting. This week is the first glance we have had at stability in awhile and I’m all for it.

Bring on the summer!

Let's dig in...

Executive Summary

• Microsoft and Meta delivered strong quarterly results, keeping the AI narrative in the limelight despite economic headwinds
  

• The Nasdaq has fully recovered its losses from Trump’s Liberation Day tariff announcement
  

• Weekly jobless claims jumped to 241,000 (vs 225,000 expected), highest since February
  

• General Motors quantified tariff impact at $4-5 billion, slashing annual guidance
  

• Market rotation underway from defensive sectors to previously beaten-down growth names as rally carries into the 2 week mark with force

Market Overview

Key Market Drivers

1. Tech Earnings Resilience: Microsoft Microsoft's Azure cloud business showed strong growth, while the company committed to expanding data center capacity for AI. Meta maintained confident outlook despite macro uncertainty.
   

2. Economic Warning Signs: Jobless claims rose to 241,000 vs 225,000 expected. This follows Q1 GDP contraction of 0.3%. Continuing claims reached 1.92 million, highest since November 2021. ISM Manufacturing remained in contraction at 48.7.
   

3. Sector Rotation: CFRA's Sam Stovall noted a shift from defensive sectors to previously beaten-down growth areas. "The worst is probably behind us, at least for this correction," Stovall remarked.
   

4. Tariff Impact Quantification: GM projected a $4-5B tariff hit and cut guidance. Harley-Davidson withdrew its forecast entirely. The "de minimis" exemption for Chinese imports ends tomorrow, already affecting e-commerce prices.
   

5. US-China Trade Signals: Beijing-backed social media accounts reported U.S. officials reaching out through multiple channels to discuss trade. One state media-affiliated account stated, "The U.S. is seeking contact with China ahead of formal negotiations—something China sees little downside in exploring at this stage."
   

Stock Spotlight

Eli Lilly $LLY ( ▼ 10.36% ): Cut full-year guidance to $20.78-22.28 per share despite Q1 beat. CEO urged tariff relief, preferring tax incentives for U.S. manufacturing.

General Motors $GM ( ▼ 0.03% ): Slashed guidance, projecting $4-5B tariff impact. Adjusted EBIT forecast lowered to $10-12.5B from $13.7-15.7B.

Meta Platforms $META ( ▲ 4.97% ): Exceeded Q1 expectations. Increased capital expenditure range to $64-72B for AI data centers. CFO noted reduced Asia e-commerce ad spending ahead of tariff changes.

CVS Health $CVS ( ▲ 4.08% ): Beat Q1 estimates and raised full-year forecast to $6.00-6.20 per share.

Microsoft $MSFT ( ▲ 8.73% ): Beat earnings with strong Azure cloud performance. Raised Xbox Series X price to $599.99 and Series S to $379.99.

Big Name Updates

Tesla $TSLA ( ▲ 0.37% ): Chair denied WSJ report about CEO search, calling it “absolutely false.”

McDonald’s $MCD ( ▼ 1.88% ): Reported Q1 revenue miss with U.S. same-store sales down 3.6%, largest decline since Q2 2020.

Nvidia $NVDA ( ▲ 3.66% ): Gained amid renewed AI optimism following Microsoft and Meta results.

Amazon $AMZN ( ▲ 2.97% ): Rose on $4B last-mile delivery investment news. Reports earnings after close.

Netflix $NFLX ( ▲ 0.49% ): Reached new all-time highs, among seven S&P 500 stocks at new 52-week highs.

Other Notable Company News

Vaccine Manufacturers ($MRK, $PFE ( ▼ 1.62% ), $BNTX, $GSK, $NVAX ( ▼ 3.9% ), $MRNA): Declined on FDA placebo-control trial requirements.

Wayfair $W ( ▲ 3.68% ): Beat Q1 expectations. CEO: furniture suppliers hesitant to raise prices despite tariffs.

Kohl’s $KSS ( ▲ 9.55% ): Rose after CEO fired over business deal involving romantic relationship.

Harley-Davidson $HOG ( ▲ 2.86% ): Withdrew 2025 forecast as motorcycle shipments fell one-third.

Estée Lauder $EL ( ▼ 1.99% ): Noted tariffs impacting Chinese consumer confidence.

Hershey $HSY ( ▼ 0.43% ): Seeking cocoa tariff exemption.

Kimberly-Clark $KMB ( ▼ 1.02% ): Announced $2B, 5-year U.S. manufacturing investment creating 900 jobs.

ServiceNow $NOW ( ▲ 1.35% ): Upgraded to buy by Truist.

Sector Watch

Bond Market

• 10-year Treasury yield: 4.230% (up from Wednesday’s 4.173%)

• Treasury Secretary Bessent signaled potential Fed rate cuts, noting:

  • Shorter-dated Treasury yields have fallen below fed-funds rates

  • This represents “a market signal that they think the Fed should be cutting”

Policy Watch

• US-China Trade:

  • Beijing-backed social media reported U.S. officials initiating trade discussions

  • NEC Director Hassett noted China’s recent tariff reductions as “perhaps a show of good faith”

  • JPMorgan: Tariff uncertainty created “sixth largest divergence” in sentiment vs. growth in 40 years

  • Piper Sandler: Upcoming “deals” likely limited to establishing discussion topics
    

• Tariff Implementation:

  • “De minimis” exemption ends tomorrow for Chinese imports ($800 or less)

  • E-commerce platforms (Temu, Shein) already showing 40-100% price increases

  • Citigroup $C hired former Trade Rep Robert Lighthizer as senior adviser
    
    

What to Watch

1. April Jobs Report (Friday): Critical data following weak GDP and rising jobless claims.

   • Any significant miss could accelerate expectations for Fed rate cuts

   • Wage growth data will provide inflation insights
     

2. Apple and Amazon Earnings (After Close): Two more Magnificent Seven tech giants report.

   • Apple $AAPL results will reveal consumer spending patterns and China exposure

   • Amazon $AMZN’s AWS cloud business will be measured against Microsoft’s strong Azure performance
     

3. De Minimis Exemption End (Friday): The expiration of this tariff loophole for Chinese imports.

   • E-commerce platforms already seeing 40-100% price increases

   • Early indicator of broader tariff impact on consumer behavior
     

4. Trade Negotiation Developments: Following today’s hints of U.S.-China outreach.

   • Focus on sectors most vulnerable to tariffs (autos, electronics, apparel)

   • Watch for policy statements from administration officials
     

5. Fed Response to Mixed Signals: Market pricing of potential rate actions.

   • Treasury yield movements as key indicators

   • Fed officials’ commentary interpreting recent economic data

P.S. 

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Thanks for reading 🙂

- John