“The market doesn’t reward the smartest traders. It rewards the most disciplined ones.”

1. US Retail Sales Rise in Broad Gain Despite Higher Gas Prices — The value of retail purchases rose 0.9%, marking a fourth straight month of increases, Census Bureau data showed Wednesday. The figures aren’t adjusted for inflation. The report shows consumer spending strengthened heading into the summer even as average gasoline prices rose to the highest level in almost four years. Companies have also noted demand continues to hold up, with big-box retailers including Target Corp. and Walmart Inc. signaling shoppers are resilient despite years of elevated inflation. Still, the card data suggest wealthier Americans are spending at faster rates while lower-income households face tighter budgets and elevated borrowing costs. Recent reports have also shown a decline in inflation-adjusted wages and a slide in the saving rate, and some retailers have emphasized that many consumers are seeking value when making purchase decisions.
2. Fed Holds Rates Steady, but More Officials See Higher Rates as Next Move — Federal Reserve officials signaled Wednesday that their next move might be to raise interest rates, not cut them, a striking reversal at Kevin Warsh’s first meeting as chairman and a sign of how sharply the inflation outlook has turned.
The Fed held its benchmark rate steady, in a range of 3.5% to 3.75%, in a unanimous vote. But officials’ quarterly economic projections told the story of the shift: Nine of 19 officials penciled in at least one rate increase by year’s end, up from none in March. Just one foresaw a cut, down from 12. The U-turn reflected an economy that has run hotter than the Fed expected. Inflation has reaccelerated this year—driven up by the energy shock from the Iran war and a surge in demand tied to the boom in artificial intelligence. A labor market that officials had feared was weakening instead held firm.
3. Summary for the Week

The week ahead — Economic data from Econoday.com:

“The men on the trading floor may not have been to school, but they have Ph.D.’s in man’s ignorance.” ― Michael M. Lewis

1. US Trade Gap Narrows as Oil Exports Offset AI-Driven Imports — The gap in goods and services trade shrank 1.2% from the prior month to $55.9 billion, Commerce Department data showed Tuesday. The median estimate in a Bloomberg survey of economists called for a $56.1 billion deficit.
The value of exports rose 2.6% in April from the prior month, driven by a 60% increase in crude oil alongside advances in fuel oil and other petroleum products. Imports advanced 2%, led by computers and semiconductors. The windfall to US producers from higher oil prices has helped offset an ongoing surge in imports of capital goods tied to the buildout of data centers in the US. Imports of computers, computer accessories, telecommunications equipment and semiconductors were up 83% in April from a year earlier.
2. US Inflation Picks Up to Three-Year High — The consumer price index climbed 0.5% from April and 4.2% from a year earlier, the most since early 2023, according to Bureau of Labor Statistics data out Wednesday. An underlying gauge of inflation that excludes food and energy, however, rose a less-than-expected 0.2% from the prior month. More than half of the advance in the overall CPI was due to higher energy costs, though prices in some categories like transportation services, health insurance and new vehicles fell. That offers cold comfort for consumers who are already seeing price hikes eat into their paychecks. Prices of household essentials, aside from gasoline, rose at a more muted pace in May, the report showed. Grocery prices increased just 0.1%, held back by declines in beef, tomato and cheese prices. Energy services costs, a category which includes utilities prices like electricity and natural gas, also advanced at a slower pace. Gasoline climbed 7%.
3. Trump Cancels Planned Iran Strikes in Latest Reversal — President Donald Trump pulled back threatened military strikes against Iran, a stark reversal that came just hours after he vowed to hit the Islamic Republic “VERY HARD” and threatened to seize its oil infrastructure. Trump’s announcement is the latest in a string of threats he has pledged — and revoked — to strike since the start of the conflict in February. He has insisted a deal was within reach dozens of times, but none has yet materialized. Earlier Thursday, he promised to seize Kharg Island, a crucial energy hub for Iran, a move that would likely require US ground troops.
4. SpaceX Passes Tesla as Most Valuable Company in Musk’s Portfolio — The $75 billion initial public offering of Space Exploration Technologies Corp., or SpaceX, propelled the company’s value above $2 trillion on Friday, surpassing Tesla’s own 13-digit market capitalization of around $1.5 trillion. SpaceX stock jumped 19% in its trading debut, making Musk the world’s first trillionaire. On its own first day on the public market in 2010, Tesla’s shares rallied even more, some 41%. The stock has surged roughly 25,000% since then, compared with a 610% jump in the S&P 500. On Friday, though, it rose just a bit more than the broader market.

The week ahead — Economic data from Econoday.com:

“Do More of What Works and Less of What Doesn’t” — unknown

1. Trump Begins Rebuilding His Tariff Wall, Citing Forced Labor — The US is proposing new tariffs of at least 10% on imports from 60 trading partners in President Donald Trump’s biggest move to rebuild his protectionist wall since his earlier levies were struck down by the Supreme Court. Products from other major economies, including China, India, Japan, South Korea, Brazil and Switzerland, would be subject to a 12.5% levy. Beijing denied the allegations and criticized Trump’s move, while an official in Tokyo said Japan is in close contact with counterparts in Washington about the matter. The EU called it unjustified and added that the bloc would respect the terms of its trade accord with the US.
2. US Small Business Hiring Plans Drop to Lowest Since May 2020 — A seasonally adjusted 9% of owners plan to create new jobs in the next three months, down 4 percentage points from April, and the share reporting they had job openings they couldn’t fill fell by 5 percentage points to 29%, the NFIB said in a release Thursday. Both measures were the lowest since May 2020. The NFIB figures are at odds with Bureau of Labor Statistics data released Tuesday showing US job openings jumped in April to the highest level in almost two years — led by a record monthly increase in postings by establishments with fewer than 10 employees. The report suggests rising energy costs and economic uncertainty amid the ongoing Iran war may be weighing on expansion plans.
3. US Hiring Surged in May, Boosting Bets on Fed Rate Hike — Nonfarm payrolls increased 172,000 last month after upward revisions to the prior two months, according to Bureau of Labor Statistics data out Friday. That marked the strongest three-month advance in more than two years. The figures boosted bets that the Federal Reserve will consider an interest-rate increase this year in order to contain inflation. The report suggests the labor market is firming across multiple sectors after near-zero job growth last year, despite more recent concerns about rising energy prices that have driven consumer sentiment to a record low..
4. SpaceX IPO Is Said to Draw More Orders Than Shares Available — The IPO for Elon Musk’s rocket, satellite and artificial intelligence company is oversubscribed after one-on-one meetings between the company and institutional investors, one of the people said, asking not to be identified as the information isn’t public. The Starbase, Texas-based company is offering about 555.6 million shares at $135 each in a deal that could value it at roughly $1.8 trillion. The deal is expected to price June 11 and begin trading the following day, and remains very early in the marketing process, the people said. Deliberations are ongoing and details could change, the people said. A spokesperson for SpaceX didn’t immediately respond to a request for comment.

The week ahead — Economic data from Econoday.com:

“There will not be any posting for the week of May 22nd – 30th, 2025. We are away for some needed R&R.” — Have a good week.

The week ahead — Economic data from Econoday.com: