May 22nd Market Overview

Happy Thursday.

Some green again as Treasury yields cooled off. House passed the tax bill which removes some uncertainty, but now everyone's debating whether adding $4 trillion to the deficit is actually good news or not.

Two value names I’m looking at right now are $RKT ( ▲ 1.36% ) and $UNH ( ▼ 1.15% ).

Also worth noting AMD and Google lagging behind there peers on this month long bounce while still being incredible companies with large moats around them. Just spitballing some thoughts here before diving into today’s news.

Let's dig in...

Executive Summary

1. Legislative clarity emerged as the House passed Trump’s tax package after marathon negotiations, eliminating uncertainty but raising long-term deficit concerns with the Congressional Budget Office estimating nearly $4 trillion in additional debt over a decade.
   

2. Bond markets stabilized with Treasury yields retreating from multi-year highs after Wednesday’s violent selloff, providing relief as the 10-year pulled back to 4.541% and the 30-year stepped down from above 5.10%.
   

3. Sector rotation with tech and communication services leading gains while solar stocks faced devastating losses from tax credit elimination.
   

4. Earnings strength emerged in select names with Snowflake and Urban Outfitters delivering exceptional beats, while Fed Governor Waller opened the door for second-half rate cuts contingent on tariff stabilization.
   

Market Overview

Key Market Drivers

1. Fiscal Policy Resolution: House passage of Trump’s revised tax-and-spending package removed legislative uncertainty but intensified deficit concerns. The bill raises the SALT deduction cap from $10,000 to $40,000 and eliminates the 30% rooftop solar credit while making 2017 tax cuts permanent.
   

2. Treasury Market Relief: Bond yields retreated from recent highs as the 10-year settled at 4.541% and the 30-year pulled back from levels not seen since October 2023, providing relief following Wednesday’s bond auction-driven selloff.
   

3. Economic Data Divergence: May PMI readings beat expectations at 52.3 for both services and manufacturing with 15-month high new orders, but price pressures hit August 2022 levels due to tariff impacts while existing home sales fell to the slowest April since 2009.
   

4. Federal Reserve Positioning: Governor Waller indicated potential rate cuts in the second half if tariff uncertainty diminishes, noting companies can manage 10% tariffs but struggle with higher interest rates.
   

Stock Spotlight

Sunrun $RUN ( ▲ 15.97% ) and solar sector fell on House tax bill eliminating the 30% rooftop solar credit. Invesco Solar ETF $TAN ( ▲ 3.99% ) posted worst day since November.

Hims & Hers Health $HIMS ( ▼ 3.59% ) declined after Cigna’s Evernorth launched Wegovy and Zepbound at $200/month, undercutting HIMS’s $399/month compounded semaglutide.

Stellantis $STLA ( ▲ 1.23% ) postponed 2026 electric Dodge Charger production at Windsor plant due to tariff policy uncertainty and weak EV demand.

Big Name Updates

Amazon $AMZN ( ▼ 0.46% ) rose after Bill Ackman’s Pershing Square disclosed building a position during April. Nike $NKE ( ▲ 1.3% ) reportedly returned to Amazon’s marketplace after six-year absence.

Nvidia $NVDA ( ▲ 2.8% ) received KeyBanc price target citing China AI chip restrictions and GB200 constraints. Also partnering with Navitas Semiconductor $NVTS ( ▲ 7.61% ) on next-generation data center power infrastructure.

Alphabet $GOOGL ( ▼ 1.69% ) testing sponsored product listings in AI Mode search results and expanding desktop AI Overview ads.

Walmart $WMT ( ▲ 0.21% ) laid off 1,500 corporate employees across technology, e-commerce fulfillment, and advertising divisions.

Other Notable Company News

Hinge Health $HNGE ( ▼ 0.27% ) opened at $39.25 after pricing IPO at $32, raising $273 million.

Seagate Technology $STX ( ▲ 3.42% ) announced $5 billion share buyback program through fiscal 2028.

Lumen Technologies $LUMN ( ▲ 6.75% ) up after AT&T $T ( ▲ 0.11% ) agreed to acquire its mass markets fiber internet business.

GE Vernova $GEV ( ▲ 1.61% ) hit all-time highs while Conagra Brands $CAG ( ▼ 0.35% ) , Campbell Soup $CPB ( ▲ 0.03% ) , General Mills $GIS ( ▲ 0.33% ) , hit 52-week lows.

Sector Watch

Bond Market

Treasury yields down from recent peaks after Wednesday’s selloff. The 10-year yield settled at 4.541% while the 30-year pulled back from October 2023 levels.

• Mortgage rates hit three-month high at 6.86% per Freddie Mac

• Wolfe Research expects “bond vigilantes” to pressure long-term yields on fiscal concerns

• Yield curve flattening as short-term rates held steady while long-duration bonds found buyers

Policy Watch

House Speaker Mike Johnson passed Trump’s tax package after 21 hours of negotiations. SALT deduction cap raised to $40,000 to secure moderate Republican votes.

Bill advances to Senate with uncertain prospects given narrow Republican majority. Johnson targets July 4 for presidential signature.

• Centers for Medicare and Medicaid Services expanding Medicare Advantage audits

• G-7 finance ministers finalizing communique with trade compromises

• EU’s Valdis Dombrovskis met Treasury Secretary Scott Bessent on trade issues

• Senate stablecoin regulation bill contributed to Bitcoin rally above $111,000

Fed Governor Waller signaled possible second-half rate cuts if tariff uncertainty clears, noting market expected more fiscal restraint.

What to Watch

1. Senate Tax Bill Dynamics: Monitor key swing votes as Republicans navigate narrow majority with potential defections from deficit hawks concerned about the $4 trillion price tag.
   

2. Treasury Auction Calendar: Next week’s bond auctions will test investor appetite amid deficit concerns, with focus on longer-duration securities following this week’s weak 20-year sale.
   

3. Tariff Policy Clarification: Watch for Trump administration guidance on implementation timelines, as Waller’s rate cut signal depends on policy certainty.
   

4. Solar Sector Fallout: Track potential M&A activity as companies face tax credit elimination, with weaker players becoming acquisition targets.
   

5. Medicare Advantage Impact: Monitor health insurer earnings for commentary on CMS’s expanded auditing program affecting profit margins and growth projections.
   
   Thanks for reading 🙂
   
   - John
   

Today’s Sponsor

The key to a $1.3T opportunity

A new trend in real estate is making the most expensive properties obtainable. It’s called co-ownership, and it’s revolutionizing the $1.3T vacation home market.

The company leading the trend? Pacaso. Created by the founder of Zillow, Pacaso turns underutilized luxury properties into fully-managed assets and makes them accessible to the broadest possible market.

The result? More than $1b in transactions, 2,000+ happy homeowners, and over $110m in gross profits for Pacaso.

With rapid international growth and 41% gross profit growth last year, Pacaso is ready for what’s next. They even recently reserved the Nasdaq ticker PCSO.

But the real opportunity is now, before public markets. Until 5/29, you can join leading investors like SoftBank and Maveron for just $2.80/share.

Invest in Pacaso today.

_{This is a paid advertisement for Pacaso’s Regulation A offering. Please read the offering circular at invest.pacaso.com. Reserving a ticker symbol is not a guarantee that the company will go public. Listing on the NASDAQ is subject to approvals. Under Regulation A+, a company has the ability to change its share price by up to 20%, without requalifying the offering with the SEC.}