This Week

This week starts with what looks like another tariff turnabout. Over the weekend the new European 50% tariff, due to begin June 1st, and “announced” just days ago was paused. That story (along with a threat to Apple) put additional weight on equities into the end of the past week. The turnabout over the weekend has S&P futures higher by about +1.2% Monday evening.

This week features a much anticipated earnings report from Nvidia but also some potentially market moving economic reports. More on the week ahead shortly—but first, a few weekend headlines:

• EU Plans to ‘Fast Track’ Trade Talks With US Amid Tariff Fight (Bloomberg)

  • “There’s now a new impetus for the negotiations,” Paula Pinho, a spokeswoman for the European Commission, told reporters on Monday, a day after Commission President Ursula von der Leyen spoke with Trump by phone. “They agreed both to fast track the trade negotiations and to stay in close contact.” Following the call, Trump extended the deadline to hit the EU with 50% tariffs by more than a month to July 9 to allow for more negotiations. “We had a very nice call and I agreed to move it,” Trump told reporters Sunday. Talks so far have been beset with a multitude of problems, with no clear path to finding a middle ground that will appease them both. The Europeans have complained that it’s not clear what the US wants or even who speaks for the American president, and the US has said the EU unfairly targets US companies with lawsuits and regulations.

• Businesses are finding a workaround for tariffs — and it’s entirely legal (CNBC)

  • Businesses are finding a workaround to minimize the most significant hit from tariffs, using a decades-old piece of legislation known as the “first sale rule.” Within U.S. customs law, the first sale rule allows U.S. importers to use the price of the first sale in a number of transactions to calculate customs duties. For instance, a Chinese manufacturer sells a t-shirt to a Hong Kong vendor for $5. That Hong Kong vendor then sells the t-shirt to a U.S. retailer for $10. That U.S. retailer then sells the t-shirt to consumers for $40. Under the first sale rule, the U.S. retailer can pay the import duty on the initial $5 price of the good, rather than the vendor’s inflated $10, thus stripping out the cost associated with the middleman’s profit.

• Investors Pile Into ETFs at Record Pace Despite Market Turmoil (WSJ)

  • This year’s volatile, trade war-obsessed market didn’t shake American investors’ fondness for exchange-traded funds. In fact, it only made them love them more. Investors have plowed a record $437 billion into U.S. ETFs so far this year, unfazed by the wildest markets since Covid. And if inflows maintain the current pace—historically, they accelerate in the summer and fall months—it will mark the second straight record year for U.S. ETF flows.

• Xi Mulls New Made-in-China Plan Despite US Call to Rebalance (Bloomberg)

  • President Xi Jinping's government is considering a new version of its master plan to boost production of high-end technological goods.

• Merz gives Ukraine green light to strike deep inside Russia (Bloomberg)

  • German Chancellor Friedrich Merz said Ukraine has been given permission to use weapons supplied by its allies to launch strikes deep inside Russia. “There are absolutely no range limits anymore for weapons delivered to Ukraine, not from Britain, the French or from us — also not from the Americans,” Merz said at a conference in Berlin on Monday. “That means Ukraine can defend itself by attacking military positions also in Russia.” The U.S. has previously approved the deployment of Army Tactical Missile Systems, known as ATACMS, in border regions with Russia. The U.K. meanwhile approved Ukraine’s use of Storm Shadow cruise missiles on deeper targets. Germany had long refused to deliver the long-range Taurus cruise missile, though Merz has expressed approval of its use.

We got a pickup in vol last week and it’s evident in this week’s expected move which at 2.0% in the SPX (for a 4 day holiday shortened week) compares to last week’s 1.6% (for 5 days.) The VIX got as low as 17 two weeks prior, but last’s week’s spike in volatility was enough to take it back to 25 before finishing the week just below 21. Keep an eye on how it reacts on tomorrow’s open which as of now should be in the green. If the VIX remains stubborn above 20 it could be a signal that the market is tiring of tariff pause rallies. If vol quickly collapses earlry this week it will be very supportive of a grind higher that could quickly make up for last week’s decline.

This Week’s Expected Moves:

• SPX/SPY: 2.0% (5675-5925)

  • QQQ: 2.5%

  • IWM: 2.5%

  • TLT: 2%

  • USO: 3.5%

The economic calendar has a couple of potential market movers including FOMC minutes, GDP, PCE and Consumer Sentiment.

Economic Calendar: 

• Tuesday

  • 8:30am - Durable Goods

  • 9am - Housing Prices

  • 10am - Consumer Confidence

• Wednesday

  • 2pm - FOMC Minutes

• Thursday

  • 8:30am - GDP

  • 10am - Pending Home Sales

• Friday

  • 8:30am - PCE

  • 9:45am - Chicago PMI

  • 10am - UM Consumer Sentiment

On the earnings front, it’s all about Nvidia mid week, but we also hear from Costco, Salesforce, and others:

Earnings (with expected moves):

• Tuesday

  • After-hours: OKTA 11%, BOX 8.5%

• Wednesday

  • Pre-market: DKS 6.5%, ANF 13%, M 9%

  • After Hours: NVDA 7%, CRM 7.5%, AI 13%

• Thursday

  • Pre-Market: BBY 8%, KSS 14%

  • After Hours: COST 4%, MRVL 11%, AMBA 9%, ZS 7%, GAP 12%

We’ve got a great week of content, stay tuned and get those questions in for the shows.

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