Wall Street's Mixed Reactions: Unimpressed by Trade Framework Agreement, Mild Inflation Data
Financial institutions on Wall Street respond cautiously to outlines of trade agreements with China.
Skip the official bullsht, let's get real: Wall Street ain't giving a damn about that so-called trade framework between the USA and China. Hell, neither the positive inflation data nor the stale Geneva agreement did jack sht to prop up the markets on Wednesday. Guess what? Traders are pissed off, and the Dow-Jones Index is stuck at 42,866 points. The S&P-500 and Nasdaq? They're taking a hit, falling by 0.3% and 0.5% respectively.
Sounds like talk of a 'deal' was just another load of hot air, doesn't it? London two-day negotiations boiled down to a promise to revive the Geneva agreement, leaving market watchers with fear of a flimsy framework that ain't worth a damn. The icing on the cake? China hints at a potential rare earth export ban. Rumor has it they'll only issue export licenses for six-month periods. Trump's trying to give the impression it's a signed deal, but who the hell knows? China's still got their “reserve the right to tighten exports” card up their sleeve.
The charade continued when Trump blabbed some nonsense about both nations receiving 55% and 10% tariffs. Makes about as much sense as a well-worn pair of socks on a summer day. And don't even get us started on that "politics determining the economy" comment from Richard Clarida. Guess that's the new mantra around here.
Truth and Lies in economics: A Politician's Tall Tales
The dearth of details in the agreement had Wall Street playing the skeptic card. Adding insult to injury, a US appeals court upheld Trump's tariffs, further dampening spirits on the Street.
Bond Yield Nostalgia and Buck's Bleeding Heart
Yield on ten-year U.S. Treasury bonds dropped 6 basis points to 4.42 percent. Why, you ask? Well, surprise, surprise: inflation data showed consumer prices rising less than expected in May. This set off a wave of fantasies about rate cuts among the bond community. The yields plunged to their daily lows following a $39 billion ten-year bond auction. Market rats were fawning over another successful confidence test for U.S. bonds.
Falling bond yields and rate cut fantasies took a toll on the dollar, with the dollar index dropping 0.4 percent, allowing the euro to reach its highest level in almost a week. Gold prices climbed 0.8 percent, boosted by the interest rate outlook and the dollar's weakness.
Tesla's Whirlwind Ride and Trump's Tail Whipping
Tesla shares inched up a mere 0.1 percent by the end of the day. Elon Musk laid off the steam, dialing back his attacks on Trump and easing concerns about repercussions for Musk's companies, Tesla and SpaceX. Musk also announced Tesla might finally roll out the long-awaited robotaxi service on June 22.
Meta Platforms shares slid 1.2 percent, allegedly in the middle of talks to invest around $14 billion in Scale AI and tap the startup's CEO to lead AI development. Lockheed Martin shares took a beating, dropping 4.2 percent, as the U.S. Air Force may be planning to order fewer F-35 fighter jets in 2024 than previously expected.
GameStop reported lower quarterly sales, yet still managed to make a profit. The "meme stock" ended up taking a 5.4 percent dive. General Motors shares rose 1.9 percent, with their $4 billion U.S. production boost plan to avoid pesky tariffs. First Solar shares climbed 2 percent after Jefferies bumped them up to "buy." Howard Schultz, the former Starbucks CEO, backed their turnaround strategy, pushing the stock up by 4.4 percent.
The dearth of concrete details in the trade framework between the USA and China, combined with the uncertainty surrounding China's potential rare earth export ban, has Wall Street exhibiting skepticism and frustration. In a separate but related development, the bond community is getting caught up in fantasies about potential rate cuts due to a drop in U.S. ten-year bond yields and more accommodative inflationdata. This has led to a weakening of the dollar, boosted gold prices, and created a more favorable environment for stocks like General Motors and First Solar.
