May 29th Market Overview

Happy Thursday.

Courts played ping-pong with Trump's tariffs today - first striking them down last evening, then reinstating them hours later. Nvidia reminded everyone why fundamentals still matter with monster earnings that lit up the tech sector.

Worth watching: CEO confidence just hit the floor with 83% expecting recession in the next 18 months. That's a shift from the optimism we've seen recently (CEO confidence index).

Let's dig in...

Executive Summary

1. Federal trade court initially blocked Trump’s tariffs under IEEPA authority, then appeals court quickly reinstated them pending review - legal uncertainty continues but Goldman calls it a “nothing burger”
   

2. Nvidia posted record $44.06 billion quarterly revenue with data center business up 73% year-over-year, demonstrating AI infrastructure demand remains unstoppable despite China restrictions
   

3. CEO confidence collapsed with 83% expecting recession in next 18 months due to trade policy confusion, while jobless claims rose to 240,000 and continuing claims hit highest since November 2021
   

4. Powell met Trump at the White House and reaffirmed Fed independence, emphasizing rate decisions remain data-dependent despite presidential pressure

Market Overview

Key Market Drivers

1. Court Tariff Drama: Trade court ruled Trump exceeded IEEPA authority on sweeping tariffs, creating brief market optimism before appeals court stay reinstated them hours later. Goldman analysts expect Section 122 deployment allowing 15% blanket tariffs for 150 days. White House signals Supreme Court fight if needed.
   

2. AI Infrastructure Boom Continues: Big tech companies are buying Nvidia chips at record pace - 72,000 new chips deployed weekly. Company sees massive demand ahead with nearly 100 new AI data centers under construction, double last year's pace.
   

3. Economic Cracks Showing: Jobless claims jumped to 240,000 vs 230,000 expected, continuing claims at highest since November 2021. Q1 GDP revised to -0.2% contraction, better than -0.4% expected but consumer spending slowed to 1.2% growth.
   

Stock Spotlight

Nvidia $NVDA ( ▲ 2.8% ) delivered blowout results with record $44.06 billion revenue vs $43.31 billion expected. Data center business advanced year-over-year despite $8 billion H20 inventory write-off from China restrictions. Q2 guidance at $45 billion midpoint looks conservative - without inventory impairment would be $53 billion. Blackwell AI chips now in full-scale production with “incredibly strong” global demand. Microsoft deployed tens of thousands of Blackwell GPUs, ramping to hundreds of thousands for OpenAI partnership.

e.l.f. Beauty $ELF ( ▲ 0.89% ) posted best trading day on record following $1 billion Rhode brand acquisition. Deal includes $800 million upfront plus $200 million performance payments.

Salesforce $CRM ( ▲ 1.09% ) beat estimates with $9.83 billion revenue and raised guidance but got punished for $8 billion Informatica acquisition.

Big Name Updates

Tesla $TSLA ( ▲ 0.46% ) got boost from Musk confirming government role exit, addressing investor focus concerns. Company announced first self-driving Model Y deliveries in June with Austin Robotaxi launch June 12.

Boeing $BA ( ▲ 0.93% ) hit 52-week high after CEO announced China deliveries resume next month. Plans to ramp MAX production to 47 monthly by year-end with MAX 7 and MAX 10 certification targeted for end-2025.

General Motors $GM ( ▲ 2.87% ) outlined domestic parts expansion to offset $4-5 billion annual tariff costs. CEO Barra detailed five-year U.S. production increase strategy.

Apple $AAPL ( ▲ 0.83% ) faces iPhone growth headwinds with IDC cutting U.S. shipment forecast due to tariffs. Global growth nearly flat.

Other Notable Company News

Best Buy $BBY ( ▲ 2.3% ) slashed guidance citing tariff impact, cutting comparable sales range. Mixed Q1 results with management assuming current tariff levels persist.

GE Vernova $GEV ( ▲ 1.98% ) got Jefferies downgrade to hold after strong run, though target raised. Firm cites narrowing risk-reward despite power sector strength.

Southwest Airlines $LUV ( ▼ 1.54% ) earned Deutsche Bank upgrade to buy. United $UAL ( ▼ 0.19% ) and JetBlue $JBLU ( ▼ 1.04% ) announced flight and loyalty partnership.

Moderna $MRNA ( ▲ 2.81% ) reported strong immune response for H5 flu vaccine but HHS pulled late-stage funding.

Sector Watch

Bond Market

10-year Treasury settled at 4.434%, down from previous close as tariff uncertainty created volatility before stabilizing.

• Market pricing in continued policy uncertainty

Policy Watch

Tariff Legal Battle: Court of International Trade struck down Trump tariffs under IEEPA authority, but appeals court granted emergency stay hours later. Administration signals Supreme Court fight while exploring alternatives:

Fed Independence: Powell’s White House meeting reinforced data-dependent approach despite Trump pressure for cuts. Fed statement emphasized “non-political analysis” while Trump called current policy a “mistake.”

China Trade: Commerce suspended jet engine export licenses affecting Comac’s C919 reliance on General Electric engines. Trade talks continue with India while UK seeks accelerated deal implementation.

What to Watch

1. Supreme Court Tariff Appeal: Administration threatens emergency petition if appeals court doesn’t maintain stay. Ultimate test of presidential trade authority under competing legal frameworks - could reshape executive power on trade policy.
   

2. AI Infrastructure Arms Race: Nvidia’s tens of gigawatts projection suggests massive capex cycle ahead. Watch hyperscaler guidance and semiconductor supply chain investments as AI buildout accelerates beyond current 4 million GPU annual run-rate.
   

3. CEO Recession Signal: 83% expecting downturn within 18 months represents dramatic confidence collapse. Monitor corporate capex cuts, hiring freezes, and guidance revisions as leading recession indicators.
   

4. Consumer Spending Cliff: Q1 revision showed spending growth slowing to 1.2% while companies stockpile inventory ahead of tariffs. Watch for demand destruction signals as tariff costs hit consumer prices.
   
   Thanks for reading 🙂
   
   - John
   

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