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Market participants have a lot of noteworthy headlines to chew on today, the most prominent of which are as follows:
- The U.S. Court of International Trade rules that President Trump does not have legal authority to impose reciprocal tariffs.
- NVIDIA (NVDA) reported better-than-expected quarterly results and guidance; shares of NVDA are up 5.4%.
- Dow component Salesforce (CRM) is down 1.8% after its earnings report, with some scrutiny over slower growth for its cloud segments.
- The 10-yr note yield climbed to 4.53%, and the 30-yr bond yield hit 5.03% before being met with resistance.
- The Joint Committee on Taxation (JCT) says the revised reconciliation bill that passed the House will add $3.94 trillion to deficits over 10 years versus its prior estimate of $3.8 trillion, given the change in the SALT deduction cap.
- Q1 GDP was revised to -0.2% from -0.3%, and initial jobless claims jumped to 240,000, while continuing jobless claims of 1.919 million hit their highest level since November 13, 2021.
Currently, the S&P 500 futures are up 43 points and are trading 0.8% above fair value, the Nasdaq 100 futures are up 261 points and are trading 1.3% above fair value, and the Dow Jones Industrial Average futures are up 77 points and are trading 0.2% above fair value.
These indications point to a higher open for the cash market; however, they have been reined in from the initial excitement over the court's reciprocal tariff ruling, which will be appealed by the Trump administration.
Presumably, there is an expectation that the administration will find some kind of avenue to adopt its reciprocal tariff approach, but regardless, the latest ruling and impending appeal have added to the uncertainty around the entire tariff scene.
Another consideration working through the market's mind is that it is possible the administration won't be able to collect as much tariff revenue as it has projected, which would be problematic inasmuch as it has been advertised as a way to help reduce the national debt.
The latter consideration and the JCT's revised estimate for the cost of the reconciliation bill fostered some deficit angst in the Treasury market that contributed to the overnight jump in yields. Notably, resistance developed with the move above 4.50% for the 10-yr and the move above 5.00% for the 30-yr. Yields started to back up, and then they backed up further after this morning's economic data.
The second estimate for Q1 GDP showed an upward revision to -0.2% (Briefing.com consensus -0.3%) from -0.3%, while the GDP Price Deflator was unchanged at 3.7% (Briefing.com consensus 3.7%).
The key takeaway from the report is that it featured a downward revision to personal spending to 1.2% from 1.8% in the advance estimate, underscoring how the tariff uncertainty and inflation angst tempered consumer spending activity.
Separately, initial jobless claims for the week ending May 24 increased by 16,000 to 240,000 (Briefing.com consensus 230,000), while continuing jobless claims for the week ending May 17 increased by 26,000 to 1.919 million.
The key takeaway from the report was the tandem jump in initial and continuing jobless claims, which denotes some increased layoff activity and some increased difficulty in finding a new job after being laid off.
The 10-yr note yield is now at 4.47%, and the 30-yr bond yield has dropped to 4.97%.
The equity futures market hasn't reacted more favorably to the drop in Treasury yields because it has been precipitated by growth concerns. That point notwithstanding, the equity futures market is still presaging a positive start, as it has concentrated on NVIDIA's report and outlook, both of which were filled with some fairly impressive growth.
