Stocks Modestly Lower into Afternoon on Escalating US-China Trade Tensions, Earnings Outlook Jitters, Profit-Taking, Tech/Biotech Sector Weakness

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 36.98 -.41% 
• US 10-Year T-Note Yield 4.41% unch.
• 3-Month T-Bill Yield 4.34% unch.

• China Iron Ore Spot 95.4 USD/Metric Tonne -.3%
• Dutch TTF Nat Gas(European benchmark) 34.2 euros/megawatt-hour -3.3%

• Citi US Economic Surprise Index 11.5 -.4 point

• Citi Eurozone Economic Surprise Index 17.7 +2.8 points

• Citi Emerging Markets Economic Surprise Index 39.0 +3.5 points
• S&P 500 Current Quarter EPS Growth Rate YoY(491 of 500 reporting) +12.5% unch.
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 276.68 +.39:  Growth Rate +8.9% +.2 percentage point, P/E 21.3 unch.
• S&P 500 Current Year Estimated Profit Margin 13.26% unch.
• NYSE FANG+ Current Quarter EPS Growth Rate YoY(8 of 10 reporting) +32.5% unch.
• NYSE FANG+ Blended Forward 12 Months Mean EPS Estimate 428.13 +1.67: Growth Rate +23.8% +.5 percentage point, P/E 32.0 -.2
• Bloomberg US Financial Conditions Index .32 -1.0 basis point
• Bloomberg Euro-Zone Financial Conditions Index 1.43 -2.0 basis points
• Bloomberg Global Trade Policy Uncertainty Index 7.6 +.8
• US Yield Curve 50.25 basis points (2s/10s) +2.0 basis points
• US Atlanta Fed GDPNow Q2 Forecast +3.8% +1.6 percentage points
• US Recession Within 6 Months Probability(3M/18M Forward Yld Curve Spread) 41.8% +4.3 percentage points

• Cleveland Fed Inflation Nowcast Core PCE YoY +2.65% +5.0 basis points: CPI YoY +2.40% unch.
• 1-Year TIPS Spread 2.84 +6.0 basis points
• 10-Year TIPS Spread 2.35 +3.0 basis points
• Highest target rate probability for July 30th FOMC meeting: 73.1% (-4.5 percentage points) chance of 4.25%-4.5%. Highest target rate probability for Sept. 17th meeting: 55.3%(+1.9 percentage points) chance of 4.0%-4.25%. (current target rate is 4.25-4.5%)
  

Overseas Futures:

• Nikkei 225 Futures: Indicating -329 open in Japan 
• China A50 Futures: Indicating -144 open in China

• DAX Futures: Indicating +33 open in Germany

Portfolio:

• Slightly Lower: On losses in my financial/tech sector longs
• Disclosed Trades: Added to my (IWM)/(QQQ) hedges, then covered some
• Market Exposure: 75% Net Long

Monday's Earnings/Economic Releases of Note; Market Movers

Earnings of Note 
Company/Estimate 

Before the Open:

• (CPB)/.65
• (SAIC)/2.13
  

After the Close: 

• (CRDO)/.27

Economic Releases

9:45 am EST

• Final S&P Global US Manufacturing PMI for May.
  

10:00 am EST

• The ISM Manufacturing Index for May is estimated to rise to 49.2 versus 48.7 in April.
• ISM Prices Paid for May.
• Construction Spending MoM for April is estimated to rise +.4% versus a -.5% decline in March.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Powell speaking, Fed's Waller speaking, Fed's Logan speaking, Fed's Goolsbee speaking, Atlanta Fed GDPNow Q2 update, BofA Tech Conference, William Blair Growth Stock Conference, Baird Consumer/Tech/Services Conference, RBC Energy/Power/Infra Conference, Jefferies Healthcare Conference, American Society of Clinical Oncology Meeting, THE Mining Investment Conference, (ZG) annual meeting, (DAVE) annual meeting and the (UNH) annual meeting could also impact global trading on Monday.

US Equity Market Hours

• 9:30 am - 4:00 pm EST

Friday Watch

Around X:

• @ElonMusk

• For the past several days, Tesla has been testing self-driving Model Y cars (no one in driver’s seat) on Austin public streets with no incidents. A month ahead of schedule. Next month, first self-delivery from factory to customer.

• @ZeroHedge

• Libya At Risk Of Declaring Force Majeure On Oil Production After Militia Attacks.
• Peak Escalation. 
• 16 States File Lawsuit Against National Science Foundation For Ending DEI Support.
• Senate Ag Chair Balks At "Controversial" Mystery Meat Country-Of-Origin Labeling.
• How Lies And Hubris Caused An Awakening.
• California Grid Operator Increasingly Curtailing Solar And Wind-Powered Electricity Generation.
• Democrats And Their DEI Albatrosses.
• US Warns UN: 'Deal On Offer Now Is Russia's Best Possible Outcome'.
• Business Insider Cuts 21% Of Staff After "Going All-In On AI".
• Senator Chuck Grassley Declassifies FBI Files On Nellie Ohr, Including Lies Told To Congress.
• Ignore The Court Challenge: When It Comes To Trump's Trade War, Here's The One Thing That Really Matters.
  
• Bonds & Bullion Bid As Tech, Tariffs, & Troubling-Data Spark Pump'n'Dump In Stocks & The Dollar.
  

• @MarioNawful

• NVIDIA + DELL + TRUMP = NEXT-LEVEL SUPERCOMPUTER. The government just hit “build” on a mega AI brain. Nvidia and Dell are teaming up with Trump’s crew to launch “Doudna.” This monster supercomputer is dropping in 2026. It’s basically Iron Man’s lab, but real, and at Berkeley Lab. It’s 10x faster than anything before, and it’s built to crack fusion energy, invent new meds, and mess with quantum stuff most people pretend to understand. Trump’s calling it a power move. Nvidia says it’s a "science time machine." Either way, it’s America going full nerd... on purpose. 
• TAP, PAUSE, GOOGLE IT: YOUTUBE’S NEW POWER MOVE. YouTube’s adding Google Lens to Shorts, which means you can now pause a video and search anything you see—without leaving the app. Watching a clip in Paris and wondering what that fancy tower is? Tap it. Like someone’s shoes? Highlight them. Lens will give you instant answers right on top of the video. No ads (yet), and it won’t work on paid promos or shopping links—but everything else? Fair game. Basically, YouTube just made being nosey way easier. TikTok and Instagram? Still catching up. 
• TRADE CZAR NAVARRO: “MAIN STREET GETS IT, WALL STREET DOESN’T”. "The emergency is $1.3 trillion a year going abroad, $18 trillion of American wealth so far transferred into foreign hands. Millions of jobs lost, hundreds of thousands of factories gone. That’s the emergency. Main Street understands this, Wall Street is in denial.". (video) 
• PRESS SEC LEAVITT: “ACTIVIST JUDGES ARE SABOTAGING THE U.S.”. "Last night, the Trump administration faced another example of judicial overreach. 3 judges brazenly abused their judicial power to usurp the authority of Trump. The president’s rationale for imposing these powerful tariffs was legally sound and grounded in common sense." (video)
• QUANTUM COMPUTING: THE NEXT TECH GOLD RUSH. Quantum computing (QC) is about to blow up the tech world. Think of it as AI on steroids—but here’s the kicker: the entire U.S. quantum sector is worth less than Dogecoin. Imagine buying Bitcoin at $500. That’s where QC is today. Regular computers process in 1s and 0s. QCs use qubits, which can be 1, 0, or both at the same time (superposition). Translation? They solve ridiculously complex problems insanely fast. 
• AI COULD OUT-ENERGY BITCOIN BY YEAR’S END. Artificial intelligence isn’t just hungry for data; it’s power-thirsty too. New estimates say AI could burn more electricity than Bitcoin mining by the end of 2025, potentially guzzling as much energy as the UK. And that’s with efficiency gains, they are offset by increased usage (Jevons paradox). Why? Because big tech keeps chasing bigger models, bigger bragging rights, and building data centers that light up like small cities. Researchers are calling it the next energy crisis no one’s measuring. And AI isn’t cooling off: it’s just getting started.
  

• @LauraLoomer 

• NIH won't renew 'cruel' drug experiments on beagle puppies. “Taxpayer watchdog @WhiteCoatWaste⁩ unearthed the contract via a FOIA request, with documents showing up to 300 beagles — as well as rats and mice — were being tested per week”.
• @MoodysRatings just downgraded the U.S. credit rating under President @realDonaldTrump. They refused to do it under Joe Biden, even when inflation was soaring, banks were collapsing, and the economy was in a massive freefall. As I exposed this week, Moody’s CEO Robert Faube is a DEI-obsessed Trump-hater who backs ESG and criticized President Trump on January 6. This is financial warfare by politically biased Wall Street elites. These aren't credit ratings. They're political hit jobs in disguise.
• EXCLUSIVE. Spouse of Judge Who Issued Ruling Against Trump Tariffs Has International Corporate Ties That Benefit From Ruling, Raising Concerns Over Judicial Corruption and Conflicts of Interest. In a controversial ruling yesterday, Judge Timothy Reif of the U.S. Court of International Trade (USCIT) was one of the three judges on a panel who struck down tariffs imposed by the Trump administration, igniting a firestorm of criticism over judicial overreach. However, the most damning aspect of the ruling went completely unnoticed by the media.
  

• @TheTranscript 

• $MRVL CEO: "Marvell delivered record revenue in the first quarter of $1.9B, a 63% Y/Y increase, and we are forecasting continued strong growth into the second quarter. This momentum is being fueled by strong AI demand in the data center end market, where our revenue is benefiting from the rapid scaling of our custom silicon programs and robust shipments of our electro-optics products". (graph)
• ZScaler double beat. CEO: "We delivered outstanding Q3 results...The proliferation of AI in all aspects of business is increasing the need for our AI security." $ZS: +4.5% AH.
• Dell COO: "We achieved first-quarter record servers and networking revenue of $6.3B, and we’re experiencing unprecedented demand for our AI-optimized server." $DELL: +5% AH. 

• @RodDMartin

• MASSIVE SHAKE-UP AT NIH - Fauci's Inner Circle REMOVED. Behind the scenes. Fauci's closest allies - INCLUDING HIS WIFE - are being STRIPPED of power.

• @AGPambondi

• The American Bar Association has lost its way, and we do not believe it serves as a fair arbiter of judicial nominees. @TheJusticeDept will no longer give the ABA the access they’ve taken for granted.

• @DerrickEvans4WV

• Mike Benz says American Taxpayers paid $50 billion dollars for the Black Lives Matter protests & were orchestrated with money laundered to NGOs. (video)

• @WallStreetApes

• A Federal court blocked Trump’s tariffs. Judicial coup is trending again and of course the GOP does absolutely nothing. America has been SO RIGGED by Democrats. “There are nearly 700 federal district court judges across the country. Barack Obama and Joe Biden held the White House for 12 of the last 16 years. They appointed 72% of the federal district court judges. Those are left wing federal district court judges. — Those left wing robed radicals are routinely using nationwide restraining orders against the Executive Office of the United States. (video)

• @SecScottBessent

• America’s voters gave @POTUS a clear mandate to confront the national security threat posed by massive trade deficits. Unelected judges have no right to block the Executive Branch from using its lawful powers to protect our country. (video)

• @KobeissiLetter 

• BREAKING: US Treasury Secretary Bessent says trade talks with China have “stalled.” Bessent says he believes more talks will happen over the next few weeks. This explains recent escalations with China.Quote 

• @matt_vanswol

• WAIT WAIT WAIT. If Elon Musk donated $288 MILLION to Republicans in 2024... ...and not a single one of them has voted on the DOGE cuts. How much money are the GOP actually making from waste, fraud, and abuse in the government?

• @catturd2

• 95% of Republicans in Congress are silent about the judicial coup. Tells you everything you need to know.

Night Trading 

• Asian equity indices are -1.25% to -.25% on average. 
• Asia Ex-Japan Investment Grade CDS Index 77.75 +.25 basis point. 
• China Sovereign CDS 51.0 +.25 basis point.
• China Iron Ore Spot 96.0 USD/Metric Tonne -.92%.
• Swiss Franc/Offshore Chinese Renminbi Cross 8.73 -.04%.
• Bloomberg Emerging Markets Currency Index 37.07 -.16%.
• Bloomberg Global Risk-On/Risk Off Index 68.5 -1.0%.
• US 10-Year Yield 4.42% unch.
• Volatility Index(VIX) futures 20.2 +1.0%.
• Euro Stoxx 50 futures -.15%. 
• S&P 500 futures -.27%. 
• NASDAQ 100 futures -.37%.

Morning Preview Links

BOTTOM LINE: Asian indices are mostly lower, weighed down by consumer discretionary and technology shares in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon.  The Portfolio is 75% net long heading into the day.

Stocks Modestly Higher into Final Hour on Lower Long-Term Rates, Declining Inflation Expectations, Earnings Outlook Optimism, Energy/Biotech Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Mixed

• Volume: Around Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 19.2 -.4%
• S&P 500 Intraday % Swing .77 -8.0%
• Bloomberg Global Risk On/Risk Off Index 68.5 -1.7% 
• Swiss Franc/Offshore Chinese Renminbi Cross 8.74 +.51%

• Euro/Yen Carry Return Index 184.34 +.24%

• Emerging Markets Currency Volatility(VXY) 8.43 -.59%

• CBOE S&P 500 Implied Correlation Index 21.9 +3.5% 

• ISE Sentiment Index 176.0 +10.0

• Total Put/Call .73 -8.8%

• NYSE Arms 1.64 +74.5%
• NYSE Non-Block Money Flow +$43.4M 
  

Credit Investor Angst:

• North American Investment Grade CDS Index 56.4 +.5%
  

• US Energy High-Yield OAS 418.95 -2.9%
• Bloomberg TRACE # Distressed Bonds Traded 215.0 -2.0

• European Financial Sector CDS Index 61.7 -.6%
  
• Deutsche Bank Subordinated 5Y Credit Default Swap 143.7 -1.7%
  

• Italian/German 10Y Yld Spread 98.0 basis points unch.

• Asia Ex-Japan Investment Grade CDS Index 76.9 -2.1%
  

• Emerging Market CDS Index 171.0 +.3%
• Israel Sovereign CDS 98.1 +1.1%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 23.77 +.04%

• 2-Year SOFR Swap Spread -22.5 basis points -.5 basis point

• 3M T-Bill Treasury Repo Spread 2.25 basis point -.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -1.5 +1.25 basis points
• MBS  5/10 Treasury Spread 155.0 +1.0 basis point
• Bloomberg CMBS Investment Grade Bbb Average OAS 614.0 +2.0 basis points
• Avg. Auto ABS OAS 60.0 unch.

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 37.15 +.36% 
• US 10-Year T-Note Yield 4.42% -6.0 basis points
• 3-Month T-Bill Yield 4.34% +1.0 basis point

• China Iron Ore Spot 97.0 USD/Metric Tonne +.06%
• Dutch TTF Nat Gas(European benchmark) 35.2 euros/megawatt-hour -4.2%

• Citi US Economic Surprise Index 11.9 -2.4 points

• Citi Eurozone Economic Surprise Index 14.9 +1.3 points

• Citi Emerging Markets Economic Surprise Index 35.5 +1.4 points
• S&P 500 Current Quarter EPS Growth Rate YoY(487 of 500 reporting) +12.5% +1.2 percentage points
• S&P 500 Blended Forward 12 Months Mean EPS Estimate 276.19 -.03:  Growth Rate +8.7% -3.3 percentage points, P/E 21.3 -.1
• S&P 500 Current Year Estimated Profit Margin 13.26% -4.0 basis points
• NYSE FANG+ Current Quarter EPS Growth Rate YoY(8 of 10 reporting) +32.5% +3.4 percentage points
• NYSE FANG+ Blended Forward 12 Months Mean EPS Estimate 426.46 -.07: Growth Rate +23.3% unch., P/E 32.2 -.2
• Bloomberg US Financial Conditions Index .33 unch.
• Bloomberg Euro-Zone Financial Conditions Index 1.45 unch.
• Bloomberg Global Trade Policy Uncertainty Index 6.8 +.3
• US Yield Curve 48.25 basis points (2s/10s) unch.
• US Atlanta Fed GDPNow Q2 Forecast +2.2% unch.
• US Recession Within 6 Months Probability(3M/18M Forward Yld Curve Spread) 37.5% -2.2 percentage points

• Cleveland Fed Inflation Nowcast Core PCE YoY +2.60% unch.: CPI YoY +2.40% unch.
• 1-Year TIPS Spread 2.78 -14.0 basis points
• 10-Year TIPS Spread 2.32 -2.0 basis points
• Highest target rate probability for July 30th FOMC meeting: 74.9% (-2.7 percentage points) chance of 4.25%-4.5%. Highest target rate probability for Sept. 17th meeting: 52.8%(+4.7 percentage points) chance of 4.0%-4.25%. (current target rate is 4.25-4.5%)
  

Overseas Futures:

• Nikkei 225 Futures: Indicating -527 open in Japan 
• China A50 Futures: Indicating -136 open in China

• DAX Futures: Indicating +20 open in Germany

Portfolio:

• Slightly Higher: On gains in my utility/financial/industrial sector longs
• Disclosed Trades: Added to my (IWM)/(QQQ) hedges
• Market Exposure: Moved to 75% Net Long

Bear Radar

Style Underperformer:

• Mid-Cap Value +.1%
  

Sector Underperformers:

• 1) Alt Energy -1.2% 2) Road & Rail -1.2% 3) Computer Hardware -1.2%

Stocks Falling on Unusual Volume: 

• BULL, BURL, UBER, U, NTNX, ETON, GME, ANF, SMR, CRM, PSTG, ANET, BBWI, PONY, BBY, GPQ, ARQQ, S, HLNE, LTBR and CAL

Stocks With Unusual Put Option Activity:

• 1) EOSE 2) NTNX 3) AI 4) ELF 5) S

Stocks With Most Negative News Mentions:

• 1) NTLA 2) HPQ 3) S 4) BBY 5) CAR

Sector ETFs With Most Negative Money Flow:

• 1) XLF  2) XLE 3) EXI 4) ITB 5) XLV

Charts:

• ETFs Falling on Unusual Volume
• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Large-Cap Growth +.5%

Sector Outperformers:

• 1)  Biotech +1.7% 2) Semis +.9% 3) Healthcare Providers +.9%

Stocks Rising on Unusual Volume:

• LZMH, AI, ELF, VEEV, BBW, DOOO, MRUS, XYF, ARWR, BPMC, NDSN, AVBP, NVMI, AKRO, VERA, SPTN, RDDT, DNLI, KYMR, PRSU, ANAB, ICUI, NVDA, JD, AGIO, LI, VRNA, LQDA, EL, ETSY, PLAB, MRNA, DECK, PHR and IONS

Stocks With Unusual Call Option Activity:

• 1) S 2) AGNC 3) UBS 4) PRMW 5) AI

Stocks With Most Positive News Mentions:

• 1) VEEV 2) ELF 3) NVDA 4) AI 5) ORIC

Sector ETFs With Most Positive Money Flow:

• 1) SMH 2) XLK 3) MSTY 4) ITA 5) CIBR

Charts:

• ETFs Rising on Unusual Volume
• Stocks Rising on Unusual Volume