May 2nd Market Overview

Happy Friday.

Wrapping up the week here with an intense run. It's almost as if the market knows these tariffs cannot last that long? Bullish news came out last night from China around 8:30 Eastern: "It's evaluating the possibility of trade talks with the U.S." This is a step in the right direction.

If we can resolve these issues early before they cascade further, we will likely see another green year. A ton of my sentiment and outlook right now hinges on a trade deal with China.

Enjoy your weekend, I'm going to find some Tex-Mex and a margarita.


P.S. Today's sponsor is a news source I read every day. They give opinions from the left, right, and center so you can decide what the heck is going on. See if they're a good fit for you.

Let's dig in...

Executive Summary

• Jobs report beats expectations (177,000 vs 133,000 forecast), easing recession fears
  

• S&P 500 poised for longest winning streak since 2004, fully recovering post-tariff losses
  

• China signals openness to trade talks, potentially starting with fentanyl concerns
  

• Apple warns of $900M tariff impact this quarter despite strong earnings

Market Overview

Key Market Drivers

1. Labor Market Resilience: April’s 177,000 job additions surpassed the 133,000 forecast while unemployment held at 4.2%. Chris Zaccarelli at Northlight Asset Management noted, “Markets breathed a sigh of relief… While recession fears are still simmering… the buy-the-dip dynamic can continue – at least until the tariff pause runs out.”
   

2. US-China Trade Progress: Beijing’s statement about evaluating potential negotiations sparked optimism. WSJ reports indicate Chinese leadership may address fentanyl production concerns as an opening for broader talks, potentially involving high-level meetings, though they continue to demand removal of unilateral tariffs.
   

3. De Minimis Rule Change: Small-value package exemptions from China ended today, directly impacting e-commerce platforms like Temu (which confirmed changing its shipping model). This represents the first consumer-facing consequence of new trade policies.
   

4. Fed Rate Cut Timeline Shift: Following the strong jobs data, traders now anticipate the Federal Reserve’s first rate cut will come in July rather than June. The market remains split between expectations for three or four quarter-point cuts this year.
   

Stock Spotlight

Block $XYZ ( ▼ 20.64% ): Fell after weak Q1 revenue ($5.77B vs $6.20B expected) and cut guidance. Noted "pronounced shift" in consumer spending away from non-essentials.

Duolingo $DUOL ( ▲ 18.56% ): Rose on strong guidance for Q2 ($239-242M vs $234M est.) and full-year ($987-996M vs $977M est.).

Take-Two Interactive $TTWO ( ▼ 5.5% ): Declined after delaying Grand Theft Auto VI release to May 2026 from fall 2025.

Reddit $RDDT ( ▼ 2.64% ): Volatile despite strong Q1 results (EPS $0.13 vs $0.01 est.). Warned of "bumps" in search ecosystem and reported high-teens user growth below expectations.

Big Name Updates

Apple $AAPL ( ▼ 4.41% ): Beat Q2 estimates but Services missed ($26.65B vs $26.72B est.). Cook warned of $900M tariff costs this quarter. Shifting iPhone production to India, other products to Vietnam. Authorized $100B buyback.

Amazon $AMZN ( ▼ 0.05% ): Beat Q1 forecasts but cautious on Q2 guidance ($13.0B-$17.5B vs $17.82B est.), citing "tariffs and trade policies." No demand impact yet due to forward buying.

Berkshire Hathaway $BRK.A ( ▲ 2.01% ): Hit record high before Saturday's annual meeting. Board member Davis called it a "national treasure built to endure."

Chevron $CVX ( ▲ 1.59% ): Q1 income fell to $3.5B from $5.5B year ago. Plans $2.5-3B Q2 buyback, down from $3.9B in Q1.

Other Notable Company News

Delta Air Lines $DAL ( ▲ 7.35% ): Authorized $1B buyback program, targeting $2B+ shareholder returns through 2028.

Airbnb $ABNB ( ▲ 0.1% ): Issued soft Q2 guidance ($3.02B vs $3.04B est.). Higher-income travelers remain resilient while others delay summer bookings. Wedbush downgraded to Neutral.

Twilio $TWLO ( ▲ 1.07% ): Rose on strong earnings. Goldman Sachs raised PT to $145, calling it an "inflection point."

Roku $ROKU ( ▼ 7.72% ): Evercore lowered PT to $80 from $105 after reduced revenue and margin guidance.

DuPont $DD ( ▲ 2.47% ): Faces $500M tariff exposure from shipping intermediate products to its China operations for semiconductor customers.

Sector Watch

Bond Market

• Treasury yields climbed after the jobs report, with the 10-year yield rising to 4.311%

• Fed funds futures now price out a June rate cut, with July becoming the earliest potential easing point

• Traders remain split between expectations for three or four total cuts this year

• Krishna Guha at Evercore ISI noted "the absence of early labor market deterioration makes a June rate cut less likely"

Policy Watch

• Small-value Chinese imports now face duties as the de minimis exemption ($800 or less) ended today, directly impacting retailers like Temu which has already changed its shipping model

• Japan-US trade talks hit roadblock over automotive and metal tariffs, with Japan's Finance Minister Kato explicitly referencing their massive US Treasury holdings as potential leverage in negotiations

• US shows reluctance to exempt Japan from the 10% reciprocal tariff despite Japan being a key strategic ally in Asia

• VP Vance signaled India as priority for early trade deal, potentially creating new supply chain alternatives to China for US businesses

• House Republicans unveiled plan to raise $15B+ through expanded energy and resource leasing to offset Trump's $4.5T tax cut package

• Controversial Arctic National Wildlife Refuge drilling would resume under the plan, along with expanded Petroleum Reserve leasing

What to Watch

1. China Trade Developments: Watch for concrete progress toward formal negotiations. Any confirmation of high-level meetings would likely trigger significant market movement, as would specifics on potential fentanyl control measures Beijing might offer.
   

2. Fed Commentary: Following the strong jobs report, pay close attention to Fed officials’ statements ahead of next week’s policy meeting for hints about rate cut timing. Chair Powell’s press conference will be crucial for rate path expectations.
   

3. Tariff Implementation Effects: Monitor upcoming earnings for detailed assessments of tariff impacts. Focus on companies with exposure to Chinese manufacturing as they reveal supply chain adjustments and pricing strategies.
   

4. Buffett’s Annual Meeting: Berkshire Hathaway’s shareholder gathering happens Saturday. Warren Buffett’s views on tariffs, inflation, and market valuations will provide valuable investment context.
   

5. July 9th Deadline: The current 90-day tariff pause expires around July 9. Watch for administration signals as this date approaches for potential policy shifts that could drive market volatility.

P.S. 

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Thanks for reading 🙂

- John