PMI Data Piques Interest as Amazon, Walmart Offer Dueling Tariff Takes
Plus, more retail earnings on deck but we’re still concerned about margin prospects.
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Following the market’s move lower over the last few days, equity futures and Treasury yields are little changed as we approach Thursday's market open.
We are reading that the House passed a large reconciliation bill by a vote of 215-214, which includes an extension of 2017 tax cuts for all income levels, spending cuts for Medicaid and green energy spending, deregulation, energy reform, immigration reform and a debt ceiling increase of $4 trillion. The more than 1,000-page bill now heads to the Senate where changes are expected but only a simple majority is needed to pass instead of the typical 60 votes required to move bills through the Senate. In this week's "Stocks & Markets" podcast, we discussed why the bill's tax implications could be a non-event for the market, but how it lands on the topic of deregulation will be of interest.
While we take a wait-and-see approach for that bill as well as progress on Trump trade deals, the Flash May Composite PMI for the eurozone came in at 49.5, down from April’s 50.4 reading, hitting a six-month low in the process. Per the report, “new orders have now decreased on a monthly basis throughout the past year. The latest decline in new business was modest, but the most pronounced since December 2024.”
On the inflation front, “Manufacturing input costs decreased for the second consecutive month, and to the largest extent since March 2024. On the other hand, services input prices were up sharply again, with the pace of inflation slightly stronger than in April.”
That suggests tariffs are having only a modest impact thus far, a sentiment shared by Amazon AMZN CEO Andy Jassy when he communicated that the company hasn’t seen any meaningful reduction in consumer spending or an increase in prices as a result of tariffs introduced by Trump earlier this year.
That flies in the face of recent comments from Walmart WMT, but the dueling views have us even more interested in what today’s Flash May PMI for the U.S. will say about input and output price trends when it’s published at 9:45 a.m. ET. The same report will also give us reason to revisit rolling central bank GDP forecasts for the current quarter that currently peg it growing at 2.3% to 2.4%. The Flash May data will also lead us to closely parse the language from Fed speakers on Thursday and Friday, but also from Fed Chair Powell over the weekend.
On the earnings docket for Thursday morning, we get another look at the consumer and retail land courtesy of BJ’s Wholesale BJ, Ralph Lauren RL and Williams-Sonoma WSM. Ross Stores ROST, Deckers Outdoor DECK and Buckle BKE will round out that view on Thursday afternoon and Friday morning.
Based on what we’ve seen from the likes of Target TGT and Home Depot HD, which have telegraphed they are not inclined to boost prices, we continue to think the longer we go without trade deals, the more likely their margins and bottom-line results will face headwinds.
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At the time of publication, TheStreet Pro Portfolio was long AMZN.
