Trade Talks See Little Traction, Dimon Wary of Stagflation, Musk Has Regrets, CPI Looms
Should we sell the news as China talks fall short? Let's check that, and the market stats.
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I thought we already had a "framework" in place. Negotiators representing the United States and China met in London on Monday and Tuesday. I actually thought the meeting could go three days. I guess the groups did not think much more could be accomplished by extending the talks an extra day. Mission accomplished? Not really. Maybe.... If the mission was simply ratcheting down the heat and rolling conditions back to what was agreed to last month in Geneva,, then sure. Mission accomplished. If that makes you happy.
Wouldn't we love to see a finalized trade deal with a major global partner, one that we could put in the trophy case next to that lonely deal with the U.K. U.S. Commerce Sec. Howard Lutnick, who was part of the U.S. team in London, said: "The two largest economies in the world have reached a handshake for a framework. We're going to start to implement that framework upon the approval of President Trump and the Chinese will get their President Xi's approval and that's the process."
Lutnick was accompanied by China's Vice Minister of Commerce, Li Chenggang who appeared to nod in approval to what Lutnick was telling the press. Hooray.
Lutnick expects Pres. Trump to approve this framework, which seems to really just be an agreement to keep talking, as soon as later today (Wednesday) or tomorrow. The U.S. needed China to ease the export of rare-earth minerals and magnets to the U.S., which was agreed to a month ago. In return, the Chinese team is thought to have asked the U.S. to ease curbs on the export of high-end AI-capable technology to China. What exactly the U.S. gave up in order to gain access to these rare-earths and magnets has not yet been disclosed. Advanced Micro Devices AMD is already up 6.07% for the week after two days.
Sell the News?
I would normally expect to see some profit taking once news like this is released, especially since the news released, while positive, is not as positive as one might have hoped. Readers will see U.S. equity index futures trading somewhat, but not significantly, lower on the lack of concrete improvement in the condition of trade between the U.S. and China over what had already been agreed to during the last talks.
Additionally, the U.S. Court of Appeals for the Federal Circuit extended a ruling it had already made allowing the president's tariffs to stand as challenges to those tariffs continue to work their way through the appeal process. The court announced that these appeals will be expedited and that the arguments will be heard by July 31.
The markets will now turn to this morning's consumer price index print for May for guidance. Expectations are that on a month-over-month basis, headline CPI will print at 0.2% in line with April. Core inflation, however, is expected to have accelerated from 0.2% to 0.3%. On a year-over-year basis, headline inflation is seen accelerating from 2.3% to 2.5% while core inflation is projected to have accelerated from 2.8% to 2.9%.
Marketplace
On Tuesday, U.S. equity markets enjoyed another moderately successful session. The S&P 500 gained 0.55% and has now closed six of the past seven trading days in the green. Last night's closing bell reflected the highest end of day value for the S&P 500 since Feb. 20, The Nasdaq Composite gained 0.63% on Tuesday, also finishing on the plus side for a sixth day in seven and also sporting its highest close since Feb. 20.
Among mid-major equity indexes, the Philly Semiconductors led the way at +2.06% followed by the Dow Transports at +1.3%. The semis were led by Intel INTC and KLA Corp KLAC, while the transports were led by Old Dominion Freight ODFL and United Parcel Service UPS. Ten of the 11 S&P sector SPDR ETFs finished the Tuesday session in the green, with Energy XLE up 1.78% followed by Communication Services at +1.27%. Only the Industrials XLI closed out the day in the red.
Breadth was impressive. Winners beat losers at the NYSE by a 7-to-4 margin, and by a more than 3-to-2 margin at the Nasdaq. Advancing volume took a commanding 79.3% share of composite Nasdaq-listed trade and a 60.7% share of composite NYSE-listed activity. Most importantly, trading volume soared. On a day-over-day basis, aggregate trade popped for a gain of 17.7% across Nasdaq-listings and a gain of 5.2% across NYSE-listings.
Interestingly, though, on Tuesday, aggregate trade across the Nasdaq Composite landed 22% above the 50-day trading volume simple moving average for that index, but aggregate trade across the membership of the S&P 500 still fell 7% short of reaching that metric. While it's safe to say that overall, professional money was on balance, put to work on Tuesday, there is still a tinge of caution visible ahead of the CPI data.
Inflation Nation?
On Tuesday, JPMorgan JPM CEO Jamie Dimon said: "I think there's a real chance (that economic) numbers will deteriorate soon. There's a lot of moving parts."
Dimon allowed that "The tariffs are hitting." He then added, "If inflation rears its ugly head, or you see stagflation, that will shock people."
Almost on cue, the World Bank cut its expectation for 2025 U.S. GDP from 2.3% (in its January report) to just 1.4%, down from 2,8% in 2024. The Washington-based development bank also lowered its forecasts for economic growth for the Eurozone, Japan, India, and many countries. This includes Mexico, where growth expectations were taken from 1.5% down to 0.2%. Global growth expectations were ratcheted down from 2.7% to 2.3%.
Investments
- Meta Platforms META is reportedly in advanced talks to invest a rough $14 billion in startup Scale AI and hire that firm's CEO Alexander Wang to lead Meta's AI efforts.
- General Motors GM announced plans on Tuesday to invest $4 billion in three American assembly plants to move production now in Mexico back to the U.S. The company expects to shift production of Chevy Blazer and Chevy Equinox from Mexico to the U.S. and also reopen a plant in Michigan that had previously been closed.
I'm Sorry
I'm sorry, so sorry
Please accept my apology
But love was blind
And I was too blind to see
- Ronnie Self, Dub Allbritten (Brenda Lee), 1960
Musk's Morning Regrets ...
While most of you were sleeping, Tesla TSLA CEO Elon Musk posted to X (tweeted) "I regret some of my posts about President @realDonaldTrump last week. They went too far." Well, I guess we all expected a post like that to show up sooner or later. On with the show.
Economics (All Times Eastern)
07:00 - MBA 30 Year Mortgage Rate (Weekly): Last 6.92%.
07:00 - MBA Mortgage Applications (Weekly): Last -3.9% w/w.
08:30 - CPI (May): Expecting 0.2% m/m, Last 0.2% m/m.
08:30 - Core CPI (May): Expecting 0.3% m/m, Last 0.2% m/m.
08:30 - CPI (May): Expecting 2.5% y/y, Last 2.3% y/y.
08:30 - Core CPI (May): Expecting 2.9% y/y, Last 2.8% y/y.
10:30 - Oil Inventories (Weekly): Last -4.304M.
10:30 - Gasoline Stocks (Weekly): Last +5.219M.
1:00 p.m. - Ten-Year Note Auction: $39B.
1:00 - Federal Budget Statement (May): Last $258B.
The Fed (All Times Eastern)
Fed Blackout Period.
Today's Earnings Highlights (Consensus EPS Expectations)
Before the Open: CHWY (.34)
After the Close: ORCL (1.64)
At the time of publication, Guilfoyle was long AMD equity.
