General Market Commentary
Equity markets retreated last week after a robust two-month rally in the S&P 500, as investor optimism was dampened by several converging factors. Chief among these were renewed concerns about the fiscal health of the United States, following Moody’s downgrade of the U.S. credit rating. With this move, all of the “Big Three” agencies have now downgraded the country. Contributing to this anxiety was a weak 20-year Treasury auction and the passage of the “One Big Beautiful Bill” in the House, which proposes an extension of the 2017 tax cuts and could potentially add nearly $3 trillion to the federal deficit over the next ten years. These developments have brought renewed attention to the long-term trajectory of government debt, especially as interest costs reach levels not seen since the early 1990s.
Bond yields, particularly on the 30-year Treasury which breached the 5% mark, rose in response, exerting downward pressure on equities. The technology sector was hit hardest. A decline in the dollar and tepid demand at recent auctions indicate that investors may be reassessing the risk premiums associated with long-duration U.S. government debt.
Further unsettling markets were rising trade tensions. Former President Trump floated the idea of imposing 50% tariffs on the European Union and a 25% tariff on Apple, sparking fears of a new trade war. These threats, against an already fragile fiscal backdrop, intensified risk aversion. Major U.S. indices closed last Friday with their fourth consecutive day of losses. However, bond markets experienced a modest reprieve, as yields edged lower on the back of safe-haven buying.
Despite the stream of negative developments, analysts suggest this may simply be a short-term pause rather than a reversal of the broader market uptrend. Historical data indicates that strong equity rallies often sustain momentum over a 12-month horizon. As a result, investors are advised to remain diversified, look into opportunities within intermediate and long-term bonds, and prepare for ongoing volatility amid evolving fiscal and trade policy discussions.
Latest Market and Economic Update
Asian equities displayed mixed performance on Monday. Technology stocks, particularly Apple suppliers in China, South Korea, and Taiwan, declined following President Trump’s threat to impose a 25% tariff on imported iPhones. Conversely, Japanese equities outperformed, driven by a nearly 4% gain in Nippon Steel after Trump expressed support for its acquisition bid for US Steel.
U.S. equity futures gained late Sunday after President Trump decided to delay the proposed 50% tariff on the European Union until July 9, following a phone call with European Commission President Ursula von der Leyen. U.S. markets are closed today in observance of Memorial Day, after a volatile week defined by market losses tied to fiscal concerns and rising trade tensions.
In Europe, equity markets closed sharply lower last Friday. President Trump’s tariff announcement triggered fears of reduced export demand and possible retaliatory measures. The Eurozone’s STOXX 50 index fell by 1.9%, with the broader STOXX 600 also declining. Sectors such as autos, luxury goods, and textiles led the downturn, despite Germany’s Q1 GDP being revised upward to 0.4%, driven by strong manufacturing and export figures.
The U.S. dollar index fell below 99 on Monday, marking its lowest point in over a month. The euro strengthened to 1.1407 following Trump’s decision to postpone the EU tariffs. The dollar remains under pressure as investors grow increasingly uncertain about Trump’s fluctuating trade and fiscal strategies.
In commodity markets, oil prices in Asia ticked up slightly this morning, aided by eased trade concerns following Trump’s delay of the EU tariff imposition. However, gains were capped due to oversupply risks ahead of the OPEC+ meeting and ongoing U.S.-Iran nuclear discussions that could impact global supply.
Meanwhile, President Trump stated on Sunday that he is “absolutely” considering new sanctions against Russia, after a wave of missile and drone strikes in Ukraine left at least 12 people dead. His remarks, which took a more assertive tone towards President Putin, followed a call where Trump urged a ceasefire.
Equities on the Move
Nvidia is preparing to launch a lower-cost AI chip for the Chinese market. This new product, which uses the Blackwell architecture and GDDR7 memory, complies with U.S. export controls and is set to replace the banned H20 model. Nvidia’s market share in China has dropped from 95% to 50%, facing intensified competition from Huawei and growing concerns over the impact of ongoing U.S. restrictions.
Shares in nuclear energy companies rose on Friday after President Trump signed executive orders to reduce regulations and expedite licensing processes. These actions are designed to support nuclear power amid rising electricity demand from AI data centers and cryptocurrency mining operations. The initiative also backs uranium production, helping nuclear energy gain favor as a cleaner and more stable alternative to wind and solar.
The U.S. Department of Justice has entered into a non-prosecution agreement with Boeing over the fatal 737 MAX crashes that resulted in 346 deaths. The deal enables Boeing to avoid trial and criminal conviction, though it has drawn criticism from victims’ families. The agreement includes over $1.1 billion in fines, compensation, and compliance enhancements, but terminates independent oversight, prompting public outcry.
Salesforce has rekindled acquisition talks with Informatica, after negotiations fell apart in April 2024. A deal could be finalized as early as this week. Other interested parties, such as Cloud Software Group, have also shown acquisition interest.
Wedbush Securities has raised its 12-month price target on Tesla to a Street-high of $500. Analysts cite strong growth potential in autonomous vehicles and AI as key drivers. They believe Tesla’s full self-driving technology could be a game-changer, potentially doubling the company’s market valuation to $2 trillion by 2026.
Deckers Outdoor Corporation experienced several analyst downgrades amid slowing momentum in its flagship HOKA brand. Concerns cited include margin pressures, increased dependence on wholesale channels, and broader economic challenges such as tariffs and weakening consumer sentiment. The outlook suggests reduced growth and more cautious valuations.
Analysts at Bernstein continue to express confidence in Chipotle’s long-term prospects. They highlight the company’s pricing strength, best-in-class restaurant-level margins, and opportunities for operational improvement. Despite facing short-term sales challenges, Bernstein raised their price target to $65, asserting that the market is underestimating Chipotle’s potential for recovery and sustained margin strength.
Upcoming Data and Events
The upcoming week is packed with significant events, including Nvidia’s fiscal Q1 earnings announcement and the release of the Federal Reserve’s preferred inflation data. The market will also review the minutes from the latest FOMC meeting. Globally, attention will be focused on monetary policy decisions in South Korea and New Zealand, inflation statistics from major European economies, and Q1 GDP results from Turkey, India, Brazil, and Canada.
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