May 6th Market Overview

Happy Tuesday.

Markets down today as President Trump's meeting with Canadian PM Mark Carney to failed to ease trade tensions. The record $140.5 billion trade deficit and multiple companies suspending guidance added to investor concerns. Gold hit new record highs as traders seek safety. Sorry about the late letter today, spotty wifi where I’m at!

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Executive Summary

• President Trump walked back expectations for trade deals during his meeting with Canadian PM Carney, stating “we don’t have to sign deals”
  

• US trade deficit hit a record $140.5 billion in March as importers raced to beat tariff implementation
  

• Multiple corporations including Ford and Mattel suspended 2025 guidance due to tariff uncertainties
  

• Treasury auction showed unexpectedly strong demand for 10-year notes despite tariff concerns

Market Overview

Key Market Drivers

1. Trade tensions escalate: President Trump’s meeting with Canadian PM Carney yielded tense exchanges rather than progress. Trump stated “there’s nothing” Carney could say to avoid tariffs and that “for the most part, we’re just going to put down a number.”
   

2. Record trade deficit: The March trade deficit soared to $140.5 billion, up 14% from February. Imports jumped 4.4% to $419 billion while exports increased only 0.2% to $278.5 billion as businesses accelerated purchases ahead of tariffs.
   

3. Corporate guidance suspensions: Companies across multiple sectors pulled 2025 forecasts, citing inability to predict tariff impacts. Ford estimates a $1.5 billion hit to pretax earnings, while Mattel braces for a $270 million impact.
   

4. Investor safe-haven shift: Gold prices rose to another record high while Treasury yields fell after a strong 10-year note auction, indicating investors are seeking safety amid economic uncertainty.
   

Stock Spotlight

Palantir Technologies ($PLTR ( ▲ 1.49% ) ) shares fell despite beating revenue expectations with $884 million against $863 million forecasted. Analysts pointed to concerns about international growth prospects and potential tariff impacts on global operations.

Ford Motor ($F ( ▼ 1.53% ) ) stock gained despite suspending its 2025 guidance. CEO Jim Farley expects tariffs to remain for “at least the next three years” and noted they would create “huge numbers” in added costs.

Tesla ($TSLA ( ▲ 0.32% ) ) declined after new car sales in Britain and Germany dropped to two-year lows in April, falling 62% and 46% year-over-year respectively. The company faces increasing competition from European and Chinese EV manufacturers.

Sweetgreen ($SG ( ▼ 0.22% ) ) dropped after JPMorgan downgraded to neutral from overweight. Analyst Rahul Krotthapalli cited waning macroeconomic background, excess restaurant supply, and pricing 7-30% higher than peers.

Upwork ($UPWK ( ▲ 3.5% ) ) shares rose after reporting better-than-expected Q1 results and raising full-year guidance, showing resilience in the freelance marketplace sector.

Big Name Updates

Canadian relations deteriorate: Trump posted on Truth Social that Canada needs “everything” from the US while the US needs “nothing” from Canada except friendship. During their meeting, Carney responded that Canada “won’t be for sale—ever,” rejecting suggestions about becoming America’s 51st state.

Goldman Sachs ($GS ( ▲ 0.47% ) ) shares declined, contributing to the Dow’s underperformance.

Treasury Secretary contradicted: Scott Bessent’s recent optimism about imminent trade deals was contradicted by President Trump today, who downplayed expectations for agreements.

Paul Tudor Jones warning: The billionaire hedge fund manager predicted markets could reach new yearly lows even if Trump scales back China tariffs, saying it would be “the largest tax increases since the 60s” and could “take 2%, 3% off growth.”

Other Notable Company News

WK Kellogg and Marriott International both cut financial forecasts, citing tariffs and economic uncertainty.

Clorox shares fell after updating guidance to include tariff impacts.

Mattel ($MAT ( ▲ 4.69% ) ) rose after announcing plans to increase US toy prices while accelerating manufacturing shifts away from China.

Diamondback Energy ($FANG ( ▼ 1.83% ) ) CEO Travis Stice warned that US onshore oil production has likely peaked and will begin declining this quarter due to falling crude prices, contradicting President Trump’s promises to increase domestic supply.

Archer Daniels Midland ($ADM ( ▼ 0.91% ) ) reported that trade battles are slowing agricultural shipments and creating product gluts, pressuring prices and eroding profit margins “across our businesses.”

Morgan Stanley survey found consumer electronics spending intentions at a two-year low, indicating tariff concerns are already impacting tech sector demand.

Sector Watch

Bond Market

• Treasury yields fell after strong demand at $42 billion 10-year note auction

• 10-year yield settled at 4.31%, down from yesterday

• Non-primary dealers took 91.1% of total—highest since February 2023

Policy Watch

• Fed two-day policy meeting began today, rates expected to remain unchanged

• Fed Funds futures show just 2.7% chance of a rate cut

• Markets focused on Powell’s commentary tomorrow regarding tariffs vs. slowdown risks

• Trump to announce pharmaceutical tariffs “within two weeks”

• EU plans to end Russian energy imports by 2027

• Non-US countries accelerating trade deals to offset US tariff impacts:

  • UK-India trade agreement finalized

  • EU advancing deals with India and South America’s Mercosur bloc
    
    

What to Watch

1. Fed Chair Powell’s comments tomorrow: His assessment of tariff-related inflation risks versus economic slowdown concerns will provide crucial insight into potential rate decisions.

   • Listen for any shift in language about the inflation outlook

   • Note any mentions of tariff impacts on growth projections

2. Corporate earnings reactions: Companies reporting this week will provide real-time insights into tariff impacts.

   • Watch for more guidance suspensions or revisions

   • Pay attention to comments about supply chain adjustments

3. Treasury market demand signals: Recent strong auction results contradict fears about foreign buyers retreating.

   • Monitor upcoming auctions for continued strong participation

   • Watch for any shifts in international buyer patterns

4. Agricultural sector pressures: With ADM reporting trade-related shipping slowdowns and price pressures, watch for ripple effects.

   • Agricultural commodity price movements

   • Impacts on rural economic indicators

5. Tech sector consumer spending: With the Morgan Stanley survey showing weakening electronics spending intentions, watch for confirmation in retail data.

   • Electronics retailers’ sales figures

   • Tech manufacturers’ inventory adjustments

   
   
   Thanks for reading 🙂
   
   - John
   

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