May 28th Market Overview

Happy Thursday

Man this week has been blowing by… Stocks got the lift from a report that US and Iran negotiators reached a 60 day deal to extend the ceasefire, which also pulled oil back off its early gains.

The other engine was software, where Snowflake proved AI is driving real revenue instead of killing the sector. I’m holding the party until Trump actually signs, since these headlines have jerked the tape around all week.

Let’s dig in...

Today's Big Picture

1. Iran Deal Lifts Stocks, Cools Oil 

US and Iran negotiators reached a 60 day framework to extend the ceasefire and reopen the Strait of Hormuz to commercial shipping. Oil handed back its morning gains once the report hit. The catch is Trump still has to sign it, and he asked for a few days. I'd want that signature before betting on calm.

2. The Software Trade Is Back 

Wall Street spent months betting AI would gut traditional software companies. Snowflake blew that up with record growth and a $6 billion deal to use Amazon's chips, and the stock had its best day ever. Anthropic, the maker of Claude, capped the mood by closing a funding round at a $965 billion valuation, passing OpenAI for the first time. Money is still pouring into anything tied to AI.

3. Inflation Cooled, Growth Slowed 

The Fed's preferred inflation gauge, the PCE index, rose 0.4 percent in April, a touch under what economists expected, with the core reading softer still. The same morning, first quarter growth got revised down to a 1.6 percent annual pace from 2 percent. So prices are easing while the economy loses a step. That hands the Fed cover to sit still rather than cut or hike.

Market Overview

Index Performance

Stock Spotlight

Unusual Machines $UMAC ( ▲ 59.8% )  
ran higher after the Wall Street Journal reported the Trump administration is in talks to fund US drone makers, with some deals possibly handing the government an equity stake. The rest of the drone group, including Red Cat $RCAT, rode along.

Caesars Entertainment $CZR ( ▲ 0.99% )  
agreed to a buyout from Tilman Fertitta's company for $31 a share in cash, valuing it near $17.6 billion with debt. There is a window through July 11 for a better offer to surface.

Best Buy $BBY ( ▲ 18.14% )  
beat on profit and sales, led by gaming, computers, and phones. People are still spending on electronics, a decent read on the consumer.

Mode Mobile $MODE
took the top spot on Deloitte's list of the fastest growing software companies, built on a phone that pays people to use it instead of charging them. The EarnPhone has already put over a billion dollars back in users' pockets, and with a Nasdaq ticker reserved, the company's share price is set to change 5/29.*

Big Name Updates

Dell $DELL ( ▲ 5.06% )  
won a five year Pentagon deal worth about $9.7 billion to roll out Microsoft software across the US military. Dell reports its own earnings after the close.

Salesforce $CRM ( ▼ 0.25% )  
bought back $27 billion of its own stock, Marc Benioff's loud answer to the fear that AI is making software companies obsolete.

Union Pacific $UNP ( ▼ 4.27% )  
and Norfolk Southern $NSC fell after a federal board paused its review of their $71.5 billion merger and asked for more detail. Berkshire's BNSF, which competes with them and opposes the deal, held about flat.

IBM $IBM ( ▲ 3.55% )  
said it will pour more than $10 billion into quantum computing over the next five years, sticking to its 2029 target for a large fault-tolerant machine.

Other Notable Company News

Marvell $MRVL ( ▲ 2.45% )  
slipped even with a strong outlook, as management pointed to fast growth in its AI interconnect business.

Robinhood $HOOD ( ▲ 9.77% )  
launched AI agents that can place trades and even make credit card purchases on a user's instructions.

Kohl's $KSS ( ▲ 21.08% )  
posted its best same store sales in four years, a sign the turnaround is slowly working.

Tyson Foods $TSN ( ▼ 5.88% )  
fell after naming former Procter and Gamble executive Jeff Schomburger as its next CEO, a pick that surprised Wall Street.

Eli Lilly $LLY ( ▲ 4.66% )  
said it will keep launching drugs worldwide despite US pricing pressure.

FedEx Freight $FDXF ( 0.0% )  
joins the S&P 500 on June 2, taking EPAM Systems' spot.

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_{The Deloitte rankings are based on submitted applications and public company database research, with winners selected based on their fiscal-year revenue growth percentage over a three-year period.}

Sector Watch

Bond Market

The 10 year Treasury yield eased after the cooler inflation print, with the 2 year ticking down too. Mortgage rates went the other way, with the 30 year fixed hitting 6.53 percent, the highest since August. That keeps a lid on what should be the busy spring home selling season.

Policy Watch

Fed 

St. Louis Fed President Alberto Musalem pushed back on the idea that AI will bring inflation down on its own, and said the Fed should stay locked on getting prices to target. He is not the only one talking tough this week.

• Governor Lisa Cook said inflation is moving the wrong way and she is ready to raise rates if it does not cool.

• New Fed Chair Kevin Warsh is the optimist, arguing a productivity boom could let the Fed cut even with inflation high.

The read for us: do not count on rate cuts while inflation sits well above the 2 percent goal.

The Economy 

A Conference Board survey showed CEO confidence dropped back into pessimistic territory this quarter, with bosses saying conditions got worse. Two things stood out: capital spending plans actually rose, while hiring plans softened.

International 

The Iran framework is real, but the shooting has not fully stopped.

• US forces hit an Iranian drone control station near the Strait of Hormuz.

• Iran fired at a US base in Kuwait, which defenses knocked down.

That gap between the talks and the fighting is why the deal is not signed yet.

What to Watch

Trump's Call on Iran 
The framework does not mean much until he signs it. He asked for a few days, so any headline can swing oil and stocks fast.

Costco Earnings Tonight Costco
$COST reports after the close and gives the cleanest read on the shopper after a mixed week of retail. Dell and Gap report too.

FedEx Freight Debut 
The spinoff starts trading June 1 and joins the S&P 500 June 2. Index funds have to add it, so expect some churn around the name.

Thanks for reading - you are now the more informed 🙂

- John

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