May 28th Market Overview

Happy Wednesday.

The market was in a bit of a holding pattern today, with most eyes glued to what Nvidia will report after the closing bell – that's a real litmus test for the AI boom and broader tech sentiment. Fed minutes highlighted that policymakers are still concerned about tariffs potentially pushing inflation higher. Meanwhile Zillow’s co-founder has a “big new idea”.


Let's dig in...

Executive Summary:

1. Markets pause ahead of the year's most important earnings call as Nvidia's results will signal whether AI investment boom continues or cools

2. Fed reveals growing tariff anxiety while bond markets flash warning signs from overseas, creating policy complexity

3. Retail earnings show mixed tariff adaptation strategies as companies navigate the new trade landscape

4. Defensive positioning evident across sectors as uncertainty dominates despite recent rally momentum
   

Market Overview

Key Market Drivers

1. Nvidia Earnings Catalyst: $NVDA ( ▲ 2.8% ) reports after close with Wall Street focused on AI demand sustainability and China restriction impacts. Suppliers resolved Blackwell server technical issues, clearing path for GB200 shipments, but $5.5 billion inventory charge looms large.
   

2. Fed Minutes Reveal Tariff Anxiety: May 6-7 meeting notes show policymakers worry trade disputes could fuel inflation beyond their control. Officials agreed on wait-and-see stance but flagged potential "difficult tradeoffs" ahead.
   

3. Global Bond Market Strain: Japan's failed 40-year auction sent JGB yields up 10 basis points, pushing U.S. 30-year Treasury above 5% threshold. Carry trade unwind risks being monitored as international debt markets show stress.
   

4. Trade Timeline Pressure: Trump delayed EU tariffs to July 9 after weekend talks with von der Leyen. Canada's Carney confirms intensive bilateral negotiations while White House signals multiple deals could emerge within weeks.
   

Stock Spotlight

Nvidia $NVDA ( ▲ 2.8% ) gained ahead of its highly anticipated earnings report. The company previously warned of a $5.5 billion charge for unusable inventory due to U.S. restrictions on H20 chip sales to China. t.

Abercrombie & Fitch $ANF ( ▼ 1.9% ) climbed after lifting its annual sales forecast following first-quarter earnings and revenue that surpassed estimates, led by results at Hollister. The positive outlook came despite cutting profit guidance and operating margin forecast, expecting a $50 million hit from tariffs.

GameStop $GME ( ▼ 1.76% ) fell even as the video game retailer announced it purchased 4,710 bitcoins worth over half a billion dollars using its substantial cash reserves.

Big Name Updates

Apple $AAPL ( ▲ 0.78% ) is testing 200MP camera sensors for future iPhones, aiming to close the imaging gap with competitors like Samsung. iPhone shipments from India to the U.S. jumped 76% in April while shipments from China dropped 76%.

Microsoft $MSFT ( ▲ 0.22% ) partner OpenAI may roll out a “Sign in with ChatGPT” option for third-party apps according to new developer documentation, expanding ChatGPT’s integration across platforms.

General Motors $GM ( ▲ 2.87% ) CEO Mary Barra commented that tariffs “level the playing field” for U.S. automakers. She mentioned regular communication with the White House on industry challenges.

ExxonMobil $XOM ( ▲ 0.73% ) entered exclusive talks to sell most of its French business, offloading its 83% stake in Esso SAF to North Atlantic France SAS.

Eli Lilly $LLY ( ▲ 0.49% ) is acquiring SiteOne Therapeutics for $1 billion to expand capabilities in non-opioid pain treatment.

Other Notable Company News

Macy’s $M ( ▲ 1.5% ) beat Q1 earnings estimates but slashed its full-year profit outlook due to higher tariffs and more aggressive promotions.

Fair Isaac Corp. $FICO ( ▼ 0.38% ) faces criticism from FHFA director William Pulte over recent credit score price increases, stating they lacked a “legitimate basis.” Shares have seen steep selloffs recently.

Robinhood $HOOD ( ▲ 5.5% ) is rolling out its desktop trading platform, Robinhood Legend, to UK users starting Wednesday.

Sector Watch

Bond Market

U.S. Treasury yields continued climbing with the 10-year note reaching 4.484% and the 30-year bond surpassing 5% during Wednesday’s session.

• Global bond market interconnection creates spillover effects from Japanese debt volatility
• Potential carry trade unwind implications being monitored, though immediate widespread impact not yet evident
• Rising yields add complexity to Federal Reserve monetary policy decisions

Policy Watch

Trade Developments:

• Trump delayed threatened 50% EU tariffs until July 9 after weekend discussions with European Commission President Ursula von der Leyen
• Canadian Prime Minister Mark Carney confirmed intensive negotiations with the U.S. for a new bilateral pact
• White House Council of Economic Advisers Chairman Stephen Miran indicated more international trade deals could emerge soon

Regulatory Actions:

Trump defended the “Big Beautiful Bill” Republican tax-and-spending measure after criticism from Elon Musk, who claimed it would increase the budget deficit. The President also stated he is working on taking Fannie Mae and Freddie Mac public while maintaining implicit U.S. guarantees.

What to Watch

1. Nvidia Earnings Analysis: Focus on AI demand sustainability, China restriction impacts, and Blackwell server guidance. The $5.5 billion inventory charge provides insight into export control effectiveness while forward commentary signals corporate AI investment momentum.

2. GDP Data Tomorrow: Morning release will offer insight into U.S. economic health and could influence Fed policy expectations amid ongoing trade uncertainty.

3. Trade Negotiation Progress: Ongoing talks between U.S. and partners (Canada, EU) remain source of potential volatility. Any new tariff announcements or negotiation tone shifts could impact sentiment.

4. Global Bond Dynamics: Japanese government bond situation and influence on global yields warrants monitoring. Significant shifts could affect borrowing costs and investment flows.

5. PCE Inflation Friday: April Personal Consumption Expenditures data, the Fed’s preferred inflation gauge, will be critical for assessing inflation trends and future monetary policy decisions.

   
   
   Thanks for reading 🙂
   
   - John
   

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