Short On Time… Executive Summary
Kevin Warsh was sworn in as the new Fed Chair on Friday. Trump will want him to lower rates, but he is painted into a corner at the moment and will not lower rates. Higher oil prices and an impending shortage of oil derived supplies continues to wear on the economy in the form of rising inflation. Every time a deal around Hormuz comes up, oil drops and stocks move up a bit. The problem, I believe, is a deal is already baked in. Oil isn’t at $150 because we think a deal will get done. The superfluous tone of the Trump administration makes it a bit difficult to know how close we actually are. That isn’t really the problem though. We know eventually a deal will get done. The problem is the inflation this is causing. Inflation just doesn’t go away when an agreement is reached. It has to trickle its way through the system, and that can take a while. So, the sooner an agreement is reached, the better.
Meanwhile, corporate earnings have been good, but the market is overbought. It can stay overbought for as long as it wants, but it’s breathing some rare air. Some big players like SpaceX, Anthropic and OpenAI are rushing now to have IPOs. We don’t typically see things like this at market lows. I’m not pulling the fire alarm, but it would not surprise me to see some kind of pullback that refreshes. I hope I’m wrong. The fact that there is some caution among some around the markets may mean we’re not there yet as the market likes to climb a wall of worry. It typically falls down a slope of hope to finish the thought. Anyway, keep an eye on inflation. Here’s a Truflation chart updated today. I left the numbers off the Y axis on purpose. All you need to do is look at the trend.
The Week On Wall Street
Stocks bounced back last week as enthusiasm for the AI trade continued and rumors of a Middle East peace agreement bolstered investor optimism. The Standard & Poor’s 500 Index advanced 0.88 percent, while the Nasdaq Composite Index edged ahead 0.45 percent. The Dow Jones Industrial Average climbed 2.13 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, rose 2.16 percent.
S&P 500’s 8th Winning Week
Stocks sputtered out of the gate as a capacity issue amid soaring demand in the memory chip space put pressure on those stocks, along with the AI trade and tech more broadly.
Then markets took a leg up midweek as investor optimism returned for a Middle East peace deal; oil prices and Treasury yields fell. Investors also looked ahead to a quarterly earnings report from one of the megacap AI chipmakers. The Dow hit a fresh record close. Then, on Friday, markets rallied once again as investors continued to hold out hope that a Middle East peace deal would materialize. Kevin Warsh was sworn in as the new Fed chair, while investor enthusiasm over the AI trade and other tech stocks added to the market’s ebullient sentiment. The Dow closed at another record high, while the S&P 500 finished its eighth consecutive week in the green, its longest weekly winning streak since 2023.
Fed Meeting Minutes
The Federal Reserve released minutes from its April Federal Open Market Committee meeting, Jerome Powell’s last FOMC meeting as Fed Chair. The minutes revealed that if the Fed were to adjust rates sometime during the remainder of this year, it might be a rate hike rather than a rate cut.
This Week: Key Economic Data
Tuesday: Case-Shiller Home Price Index. Consumer Confidence.
Thursday: Weekly Jobless Claims. New Home Sales. Durable Goods.
Friday: Gross Domestic Product (GDP). Personal Consumption & Expenditures (PCE) Index. Trade Balance in Goods. Retail & Wholesale Inventories.
This Week: Notable Companies Reporting Earnings
Wednesday: Marvell Technology, Inc. (MRVL), Salesforce, Inc. (CRM), Synopsys, Inc. (SNPS)
Thursday: Costco Wholesale Corporation (COST), Dell Technologies Inc. (DELL)
Stay tuned...
