Good Morning Investors,
Markets are retreating from near-record highs as the Trump tweet effect officially flatlines. His “China deal done” post landed with a thud, while May’s inflation data lit the spark for a market move. We’ve transitioned from theatrics to data dependency and today’s producer price report will test whether disinflation has real legs.
Opening Bell
Stock futures are solidly red across the board. Dow futures are down nearly 300 points, S&P 500 off 0.5%, and Nasdaq 100 under similar pressure. Yesterday’s session broke a three-day win streak, as the tragic Boeing 787 crash in India weighed heavily on sentiment. Overnight, a firmer yen pressured Japanese exporters, while the dollar slid to its lowest level since mid-2023. Gold is catching a bid on safe-haven flows as geopolitical nerves resurface.
Market Framework: The Death of Trump Tweet Alpha
Here’s what everyone missed Wednesday morning: at 8:04 AM, Trump posted “OUR DEAL WITH CHINA IS DONE” on Truth Social. Futures barely twitched. At 8:30 AM, May CPI came in cooler than expected and risk assets immediately rallied.
That contrast reveals the market’s new operating system. Trade policy uncertainty has been absorbed. The effective tariff rate sits around 15%, elevated, but no longer a live fire drill. Treasury Secretary Bessent’s hint that “good faith” negotiators may get deadline extensions just confirms what markets have already priced in: tariffs are the new baseline.
CPI showed headline inflation at 2.4% YoY (vs 2.5% expected), with core holding steady at 2.8%. More critically, the three-month annualized core rate dropped to 1.7%, well below the Fed’s 2% target. The data reduced stagflation risk and kept hopes alive for “good cuts”, policy easing driven by cooling inflation, not economic decay.
But the Fed still faces a complex equation. Unemployment is ticking higher. Fiscal pressure is mounting. With $92 billion in monthly debt servicing and a $316 billion May deficit, there’s urgency for relief but also very little room for policy error.
Corporate Framework: Oracle Soars, Boeing Sinks
Oracle delivered the quarter’s standout performance, raising revenue guidance to $67 billion for FY26 (16.7% growth vs prior 15% projection). CEO Safra Catz projected AI-related cloud growth above 40%, striking a confident but measured tone. Shares surged 7% premarket as Oracle repositions itself from legacy enterprise stalwart to AI infrastructure enabler.
Boeing, meanwhile, faces another reputational blow. An Air India Dreamliner crashed near Ahmedabad with 242 people on board. The cause remains unknown, but early reports suggest the aircraft struck a civilian area. Shares fell more than 7% premarket, a painful setback just as confidence in the widebody program was beginning to recover.
Other headlines worth tracking:
Amazon will face a lawsuit from independent authors alleging Audible monopoly pricing — another antitrust front for Big Tech.
Papa John’s is reportedly evaluating a $60/share buyout offer from Apollo and Irth Capital.
Dana Inc is offloading its off-highway unit to Allison Transmission for $2.7 billion, sharpening its focus on electrified commercial systems.
Synopsys has resumed partial China operations after halting sales due to U.S. export curbs.
CSX Corp finalized a new five-year labor agreement with its engineers’ union, locking in operational stability.
Bunge–Viterra merger awaits final regulatory approval in China, with a verdict due ahead of the extended 13 June deadline.
Technology Evolution: The Autonomous Decade
Nvidia CEO Jensen Huang reiterated his core thesis at the Paris tech conference: “This is the decade of AV, robotics, autonomous machines.” The building blocks are aligning. Waymo is expanding its U.S. robotaxi footprint, Baidu and Pony ai are scaling in China, and Europe is finally getting in gear with the UK’s Autonomous Vehicles Act.
Uber’s partnership with UK firm Wayve marks a real signal shift: legislation is catching up to the tech. Nvidia, which supplies both hardware and software to AV makers, is positioning itself beyond just the current AI chip cycle — it’s building the stack for the autonomy economy.
Economic Framework: PPI as the Inflation Litmus Test
Today’s PPI release is the next big test. Expectations are for +0.2% headline and +0.3% core. If it aligns with CPI’s cooling tone, it strengthens the case for at least one rate cut before year-end.
But the Fed isn’t there yet. Growth is softening, labor markets are loosening, and inflation is easing but not enough to warrant aggressive easing. Meanwhile, the fiscal backdrop is deteriorating. May’s $316 billion deficit pushed the year-to-date total to $1.36 trillion, 14% higher than last year. Interest on the $36.2 trillion debt hit $92 billion in May, now the third-largest federal expense.
With the 10-year Treasury yield still near 4.4%, the cost of waiting is rising. But so is the risk of moving too soon.
Strategic Outlook: Healthy Pullback in Progress
After flirting with record highs, this tactical retreat feels less like weakness and more like a reset. The drivers of the rally, cooling inflation, resilient earnings, improving AI monetization, are still intact. But the market needed a breather.
A 3–5% drawdown would flush out stretched positioning and offer entry points to longer-term investors. Watch whether the S&P 500 holds its 50-day moving average on any deeper selloff. I wrote a piece last week about testing and holding the 200 day moving average. A test and hold of this could confirm the new bull market from lows. Also keep an eye on jobless claims (due this morning) and whether dollar weakness persists — the Bloomberg Dollar Index just hit a two-year low.
The AI trade remains resilient beneath the surface. Oracle’s print, Nvidia’s outlook, and Adobe’s earnings after the bell all point to a long-term trend with legs.
Analyst Recommendations
Oracle (ORCL): Jefferies raises TP to $220 from $200 on AI infrastructure momentum
Starbucks (SBUX): Citi lifts TP to $95 from $84 following staffing expansion reports
Fortive (FTV): TD Cowen cuts TP to $85 from $90 after investor day commentary
Final Thought
Markets have matured. The days of knee-jerk rallies on political noise are fading. What matters now is whether inflation can move sustainably toward the 2% target without tariff-induced spikes and without growth collapsing. If that balance holds, earnings should remain resilient, allowing investors to justify higher multiples.
As tariff clarity improves, headline-driven volatility should begin to fade. That brings the kind of reassurance markets have lacked, the sense that one tweet or rumor won’t derail an otherwise stable uptrend. I still believe we end the year at the highs, but expect a bit more chop until the tariff framework is finalized in early July. A short-term pullback would be a welcome reset and a stronger base for a more durable bull market.
Please feel free to reach out to me on LinkedIn or by email if you would like help navigating this market environment or have any planning-related questions.
Dan Sheehan
This newsletter is for informational purposes only and should not be considered as investment advice. Please consult with your financial advisor about your specific situation.