May 30th Market Overview

Happy Friday.

Ending May with a little drama as Trump accused China of violating trade agreements over rare-earth exports. Markets shrugged it off though - we’re still wrapping up the strong month even w/ today’s chop.

Roughly $20 billion in pension fund selling for month-end rebalancing didn’t help the cause, but the fact we’re holding up this well tells you something about the underlying strength.

Let's dig in...

Executive Summary

1. China trade friction intensified as Trump declared Beijing “totally violated” agreements over rare-earth export license approvals, with Trade Rep Greer confirming China is “slow-rolling” compliance
   

2. PCE inflation data provided relief at 2.1% versus 2.2% consensus, giving the Fed more flexibility amid trade uncertainty
   

3. Massive institutional rebalancing hit markets with Goldman estimating $20 billion in pension fund equity selling after stocks outperformed bonds significantly in May
   

4. Corporate profit pressures mount with Q1 profits down 2.9%, the sharpest fall since 2020, as trade uncertainty weighs on business fundamentals

Market Overview

Key Market Drivers

1. Trade Compliance Breakdown: China is “slow-rolling” rare-earth export license approvals, violating trade agreements according to U.S. Trade Rep Greer. Administration prepares backup tariffs under 1974 Trade Act allowing duties for 150 days if courts block current approach.
   

2. Technical Selling Pressure: Goldman estimated $20 billion in pension fund equity selling for month-end rebalancing after stocks outperformed bonds significantly in May. This institutional flow drove intraday volatility.
   

3. Inflation Relief: PCE came in at 2.1% versus 2.2% consensus, with core also missing below estimates. Data gives Fed more policy flexibility amid trade uncertainty.
   

4. Earnings Pressure Mounts: Corporate profits fell 2.9% in Q1, the steepest drop since 2020. Trade uncertainty and economic headwinds continue weighing on business fundamentals.
   

5. Consumer Sentiment Holds: University of Michigan reading stayed flat from April but improved from preliminary levels. Survey director credited “temporary pause on some tariffs on China goods” for the stability.
   

Stock Spotlight

Ulta Beauty $ULTA ( ▼ 0.54% ) raised annual guidance after strong quarterly results driven by new product launches and lower inventory losses. CEO Kecia Steelman noted consumers are “leaning into beauty as a comfort and escape from the stress of macro uncertainty.”

Nvidia $NVDA ( ▲ 2.8% ) continued its pattern of post-earnings weakness, marking the fourth consecutive time investors faded the initial earnings reaction.

Boeing $BA ( ▲ 0.93% ) sees potential legal relief as DOJ asks a Texas judge to dismiss the criminal fraud case related to 737 MAX crashes in exchange for over $1.1 billion in fines and reforms.

Big Name Updates

Tesla $TSLA ( ▲ 0.46% ) CEO Elon Musk joined President Trump for a press conference where Trump declared automakers have 12 months to build all products and parts in America.

Netflix $NFLX ( ▼ 0.09% ) received a price target increase to $1,350 from $1,150 at Evercore, with analysts citing strong survey data and attractive forward valuation metrics.

Microsoft $MSFT ( ▲ 0.22% ) secured a major enterprise win as Barclays agreed to purchase 100,000 Copilot licenses, representing tens of millions in annual revenue at list prices.

JPMorgan Chase $JPM ( ▲ 0.61% ) CEO Jamie Dimon delivered stark warnings about impending bond market disruptions while advocating for continued China engagement. Dimon stated investors “are going to see a crack in the bond market.”

Other Notable Company News

Palantir Technologies $PLTR ( ▲ 0.86% ) strengthens government relationships with over $113 million in contracts since Trump took office, plus a pending $795 million DoD award. The company also expanded internationally through an Ecuador partnership for customs enforcement AI tools.

Dell Technologies $DELL ( ▲ 3.53% ) raised full-year earnings guidance after Q1 revenue of $23.38 billion beat the $23.14 billion estimate.

Costco $COST ( ▼ 0.12% ) outlined successful tariff-mitigating measures during its earnings call, including pulling orders forward and sourcing products where they’re sold.

Synopsys $SNPS ( ▲ 0.02% ) halted all China sales due to U.S. export restrictions, highlighting technology sector trade tensions.

Airbnb $ABNB ( ▲ 2.53% ) faces headwinds with Truist downgrading to Sell from Hold, lowering the price target to $106 from $112.

Sector Watch

Bond Market

The 10-year Treasury yield settled at 4.404%, down from Thursday’s 4.423% close as PCE inflation data came in below expectations.

• Jamie Dimon’s warning about impending bond market “cracks” adds volatility concerns
• Month-end rebalancing pressures intensified as stocks significantly outperformed bonds in May
• The JPMorgan CEO expressed confidence in his bank’s positioning for potential disruptions

Policy Watch

Treasury Secretary Scott Bessent confirmed China talks are “a bit stalled” while maintaining that “very large deals” remain close despite friction over rare-earth export compliance.

• The administration explores alternative tariff authorities through the 1974 Trade Act as court challenges continue
• Germany escalates tech taxation with plans for digital tax on companies like Alphabet and Meta
• China announced plans to inject 500 billion yuan ($70 billion) into new infrastructure targeting AI, digital economy, and consumer-linked projects

What to Watch

1. OPEC+ Weekend Meeting: The group is expected to announce crude output increases for July, which could pressure energy stocks and provide broader economic implications for inflation expectations.
   

2. Appeals Court Tariff Decision: Next week’s ruling on Trump’s tariff appeal could determine whether the administration implements the backup tariff plan under the 1974 Trade Act.
   

3. China Rare-Earth Export License Processing: Beijing’s response to U.S. pressure on export licenses will signal whether trade tensions escalate further or see diplomatic resolution.
   

4. Corporate Earnings Guidance Revisions: With multiple companies citing trade uncertainty this week, watch for continued guidance cuts across sectors exposed to tariff impacts.
   
   
   Thanks for reading 🙂
   
   - John
   

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