May 9th Market Overview

Happy Friday.

Pretty decent week with all macro issues considered. Essentially sideways (tiny bit red) across major indices for the week. After last 2 weeks' big bounce, I think this is healthy market consolidation as sentiment remains bullish. I still feel very strongly about resolving these tariffs to get growth in the markets; we need a deal with China asap… I do not want to see another -20% leg like we saw in early April.

Top US officials will meet with a Chinese delegation in Switzerland this weekend - this might give us some clarity on what the next couple of months will look like as far as trade policy. I'd expect Monday to be a large volume day on either the buy or sell side depending on how these talks go.


Let's dig in...

Executive Summary

• Markets remain cautious ahead of pivotal US-China trade talks this weekend, with Treasury Secretary Bessent set to meet Chinese counterparts
  

• Fed Governor Barr issued stark warnings about tariffs creating “persistent upward pressure on inflation” and potentially leading to “higher unemployment”
  

• Energy sector outperforms amid oil price strength, while consumer spending data reveals concerning weakness in April
  

• India makes aggressive trade proposal to the US, offering zero duty on 60% of tariff lines in exchange for exemptions
  

Market Overview

1. US-China Trade Negotiations: Treasury Secretary Bessent heads to Switzerland for weekend talks with Chinese officials. President Trump’s “80% tariff” comment establishes a negotiating position, significantly lower than the current 145% but higher than reports suggesting rates could drop to 50-54%.
   

2. China’s Export Resilience: April export data from China showed surprising strength with a year-over-year increase despite US tariffs. However, shipments specifically to the US plunged, as Chinese exporters successfully redirect trade flows to Southeast Asia, Europe, and India.
   

3. Consumer Spending Weakness: Bank of America data revealed soft household spending in April. Total credit and debit card spending was essentially flat month-over-month. Economist Aditya Bhave noted particular weakness in airlines, clothing, and home improvement categories.
   

4. Global Trade Developments: Following the US-UK deal, Commerce Secretary Lutnick promised “dozens of deals” in the coming month. India’s proposal to slash its tariff gap with the US to less than 4% from nearly 13% represents a major development that could provide a template for other nations.
   

Stock Spotlight

Lyft $LYFT ( ▼ 3.39% ) shares moved higher after expanding its share buyback program and reporting record gross bookings for Q1. CEO David Risher dismissed consumer slowdown concerns, telling CNBC the company isn’t “seeing anything to worry about.”

Insulet $PODD ( ▼ 0.91% ) gained after first-quarter results beat estimates on both top and bottom lines. The medical device company also raised full-year guidance for revenue growth.

The Trade Desk $TTD ( ▼ 3.36% ) delivered strong Q1 results driven by rapid adoption of its Kokai platform, with two-thirds of clients now using it. CITI raised its price target to $82, citing the company’s “leadership position.”

Expedia $EXPE ( ▼ 1.96% ) declined after its Q1 revenue missed expectations. The travel booking platform also issued soft forward guidance, weighing on the stock.

Affirm $AFRM ( ▼ 5.03% ) fell following disappointing revenue guidance for its fiscal fourth quarter that landed below consensus estimates.

Big Name Updates

Apple $AAPL ( ▼ 2.31% ) is developing two significant chip projects – “Baltra” for AI servers expected by 2027, and another chip powering smart glasses by 2026-2027, potentially competing with Meta’s $META ( ▼ 0.25% ) Ray-Ban smart glasses.

GE Healthcare Technologies $GEHC ( ▼ 3.16% ) could benefit most among large-cap medical technology stocks if US-China trade tensions ease, according to Bank of America. The company has been particularly hurt by bilateral tariffs.

Alphabet $GOOGL ( ▲ 2.79% ) has the best AI model according to Polymarket data. Bank of America maintains its buy rating, noting Google’s core Ads and Play businesses trade at just 9x 2026 estimated earnings.

Nvidia $NVDA ( ▼ 1.92% ) is modifying its H20 chip specifically for the Chinese market to overcome US export controls, according to Reuters reports.

Tesla $TSLA ( ▼ 2.68% ) received positive signals as supplier Panasonic indicated in its earnings call that EV battery demand from main clients is not falling.

Other Notable Company News

Pinterest $PINS ( ▼ 0.12% ) reported that Gen Z has become their largest and fastest-growing user group. The company beat revenue estimates and stated top-tier performance marketers are now allocating 5-10% of ad spend to the platform.

Cloudflare $NET ( ▼ 0.57% ) secured the largest contract in company history worth over $100 million, driven by its Workers platform. Free cash flow increased year-over-year, and operating cash flow nearly doubled.

Rocket Lab $RKLB ( ▼ 3.19% ) confirmed the Neutron rocket remains on track for debut launch in H2 2025 and announced a new contract with the US Air Force for a return-to-Earth mission no earlier than 2026.

Taiwan Semiconductor $TSM ( ▼ 0.87% ) posted its highest-ever monthly revenue in April, showing significant growth year-over-year and from March.

Sector Watch

Bond Market

The 10-year Treasury yield edged higher to 4.385% amid mixed economic signals:

• 30-Year Bond Auction Weakness: Yesterday’s auction tailed 0.7 basis points above WI, with lower-than-average demand from indirect bidders and light overall interest

• Rate Cut Expectations: Futures markets still price in three Fed cuts by year-end, but probabilities have dropped to 58% from 88% a week ago as trade optimism grows

Policy Watch

Trade Developments:

• Commerce Secretary Lutnick: “Over the next month or so, we’re going to roll out dozens of deals”
• EU threatened retaliatory tariffs on $100B+ of American goods if negotiations fail
• India offered to cut its tariff gap with the US from nearly 13% to under 4%
• Trump advisor Navarro warned that retaliatory tariffs would “hurt effective negotiations”

Federal Reserve & Economic Policy:

• Fed Governor Barr: Tariff increases are “without modern precedent” and could disrupt supply chains, pressure inflation, and increase unemployment
• President Trump stated economy is strong even without rate cuts
• Trump indicated support for tax increases on individuals earning $2.5M+
• Trump on potential rate cuts: Would be “like jet fuel” for the economy

What to Watch

1. US-China Trade Talks Outcome: The weekend meetings in Switzerland could significantly shift market sentiment.

   • Watch for statements from Treasury Secretary Bessent

   • Monitor Chinese state media for signals about negotiating positions

   • Track industries most exposed to US-China trade flows for Monday market reaction
     

2. Additional Trade Deal Announcements: Following the UK framework, more agreements could materialize.

   • European Union negotiations remain high-stakes with retaliatory tariffs threatened

   • India’s aggressive offer for duty reductions could set precedent for other nations

   • Look for progress on deals with Gulf Wealth Funds mentioned in reports
     

3. Consumer Spending Trends: Bank of America data showed concerning weakness.

   • Upcoming retail sales data will provide clearer picture of consumer health

   • Watch for signs of “front-loading” purchases ahead of tariff implementation

   • Monitor earnings from consumer-facing companies for spending pattern insights
     

4. Fed Commentary on Tariffs: Governor Barr’s warnings signal growing concern.

   • Further statements could provide clues about potential policy adjustments

   • Watch for divergence among Fed officials on inflation and growth outlook

   • Track shifts in rate cut expectations as reflected in futures markets

   
   
   Thanks for reading 🙂
   
   - John
   

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