Daily Market Summary – Jun 28th

Markets reach record highs amid global optimism

Markets surged to record highs, with the S&P 500 and Nasdaq reaching all-time peaks, driven by a confluence of factors including easing geopolitical tensions, dovish signals from the Federal Reserve, and optimism surrounding artificial intelligence. A ceasefire between Israel and Iran helped stabilize oil prices, while progress in U.S.-China trade negotiations, particularly agreements on rare earth minerals and high-tech exports, buoyed investor sentiment. Despite President Trump's abrupt termination of trade talks with Canada over its digital services tax and threats of new tariffs, markets remained resilient. The dollar experienced its worst first-half performance in over five decades, while global equities and commodities like platinum rallied. Investors are increasingly pricing in multiple interest rate cuts by the Fed this year, even as Chair Jerome Powell maintains a cautious stance.

Trump pressures Fed as banks pass stress tests

President Trump’s influence on monetary policy continued to dominate headlines. He reiterated his demand for a Federal Reserve chair who supports aggressive rate cuts, calling for a reduction to 1% from the current 4.25%-4.50% range. Trump criticized current Chair Jerome Powell and hinted at appointing a successor before Powell’s term ends in 2026. Potential candidates include Treasury Secretary Scott Bessent and other economic advisers. These developments raise concerns about the Fed’s independence and the potential for politically motivated monetary policy. Meanwhile, the Federal Reserve’s annual stress tests showed that all 22 major U.S. banks, including JPMorgan Chase and Bank of America, could withstand a severe recession, maintaining capital levels well above regulatory requirements. The results may bolster the Trump administration’s push for looser capital rules, potentially increasing bank profitability and M&A activity.

Tesla and Meta push AI frontiers

In the tech sector, Tesla made headlines with the first fully autonomous delivery of a Model Y from its Texas factory to a customer’s home in Austin. The delivery, completed without human or remote intervention, marks a significant milestone in Tesla’s push toward autonomous driving and robotaxi services. CEO Elon Musk emphasized the company’s future in AI and robotics, despite declining vehicle sales and executive departures. Tesla is also advancing a $556 million grid-scale battery project in China, aiming to support the country’s renewable energy transition. Meanwhile, Meta Platforms is aggressively expanding its AI capabilities, hiring top talent from OpenAI and seeking $29 billion in private capital to build AI data centers. The company is also investing heavily in Scale AI and offering multi-million-dollar compensation packages to attract researchers, underscoring the intensifying competition in the AI space.

AI's economic impact and Nvidia's dominance

Anthropic launched its Economic Futures Program to study AI’s impact on the labor market and global economy. The initiative aims to develop policy proposals to address potential job losses, with CEO Dario Amodei warning that AI could eliminate half of entry-level white-collar jobs within five years. This contrasts with OpenAI’s focus on AI adoption and infrastructure. Nvidia’s stock continued to soar, fueled by strong demand for its AI chips, the successful rollout of its Blackwell chip line, and expansion into sovereign AI and robotics. The company is shipping 1,000 Grace Blackwell server racks weekly and plans to build 20 AI factories in Europe, despite facing export restrictions to China and competition from AMD and in-house chips developed by hyperscalers.

U.S. investment position and market bubble fears

On the macroeconomic front, the U.S. net international investment position (NIIP) deficit reached $26 trillion, nearly 80% of GDP, raising concerns about financial market stability. The U.S. Dollar Index has dropped 10% this year, the worst performance since 1973, driven by fiscal deficits, trade policies, and pressure on the Fed to cut rates. This has led to increased demand for gold among foreign investors, while American investors are selling off gold assets amid economic optimism. Bank of America analysts warned of a potential stock market bubble in the second half of the year, driven by expectations of rate cuts and tax reductions. They advised investors to hedge by owning U.S. growth stocks and international value stocks. Ray Dalio echoed concerns about a U.S. debt spiral, recommending diversification, inflation-protected securities, and investments in fiscally sound countries.

Trade policy uncertainty and tax reform

Trade policy remained a focal point, with the White House struggling to finalize agreements ahead of a looming deadline. Only two frameworks have been completed, raising the risk of increased tariffs and economic instability. The Senate introduced a revised $4.2 trillion tax cut package, including compromises on Medicaid and renewable energy tax credits, and a $25 billion rural hospital fund. The bill also raises the debt ceiling by $5 trillion. Meanwhile, Trump’s “revenge tax” proposal targeting countries with unfavorable tax regimes was dropped after negotiations with G7 finance ministers, averting a crisis for British companies. However, the episode has shaken confidence in the U.S. as a stable business environment.

Energy policy shifts and Tesla's battery expansion

In the energy sector, the Senate’s latest spending package proposes a quicker phase-out of tax incentives for wind and solar projects, potentially impacting companies like NextEra Energy. The bill also introduces an excise tax on renewable projects using Chinese materials and accelerates the end of the $7,500 EV tax credit. These changes reflect Republican resistance to extended clean energy subsidies. Tesla’s expansion into battery storage in China aligns with the global shift toward renewable energy, as the country’s capacity continues to grow. However, U.S. policy shifts could hinder domestic clean energy development.

Investor caution amid high valuations

Investor caution is growing amid high stock valuations, mixed earnings outlooks, and geopolitical tensions. Global money managers are wary of the stock rally’s sustainability, citing risks such as the July 9 tariff deadline, U.S.-China tensions, and the Federal Reserve’s leadership transition. Despite a ceasefire in the Middle East and positive earnings from companies like Nike, which saw a 15% stock surge despite a 12% revenue drop, uncertainties persist. Nike plans to mitigate tariff impacts by reducing reliance on Chinese imports, raising prices, and cutting costs. Analysts remain cautiously optimistic, though concerns about declining consumer favor linger.

Housing market struggles with weak demand

In the housing sector, homebuilders are facing declining demand due to high prices, elevated mortgage rates, and economic concerns. New home sales dropped 14% in May, prompting builders to cut prices and offer incentives. Despite these efforts, demand remains weak, with the largest inventory of unsold homes since 2009. Builders are scaling back future development plans, potentially exacerbating the long-term housing shortage. Mortgage and refinance rates have decreased, offering some relief to buyers, but builder confidence remains low.

AI trade broadens beyond tech giants

The AI trade is expanding beyond the “Magnificent Seven” tech giants, with companies like Broadcom, AMD, Dell, Vistra Corp, NRG Energy, and Oracle experiencing significant gains. This broader participation suggests a more sustainable bull market driven by thematic growth rather than individual stocks. Despite near-term uncertainties, the absence of recession, Fed hikes, and extreme valuations supports continued market optimism. Meanwhile, OpenAI has begun renting Google’s AI chips, marking a shift from Microsoft’s data centers and highlighting the growing demand for alternative chip providers amid Nvidia’s dominance.

Legal rulings and corporate M&A activity

In legal and regulatory developments, the U.S. Supreme Court’s decision to pause nationwide injunctions against Trump’s order ending birthright citizenship has raised concerns about a fragmented legal landscape. The ruling allows the policy to take effect in 28 states while legal challenges continue. Critics argue this weakens judicial checks on executive power and could lead to legal limbo for thousands of children. In the corporate world, the DOJ settled its antitrust lawsuit against Hewlett Packard Enterprise’s acquisition of Juniper Networks, requiring divestitures to maintain competition in the networking equipment market.

Corporate setbacks and strategic shifts

Other notable corporate developments include Aston Martin’s legal battle with supplier IMR Industries over halted component deliveries, reflecting the carmaker’s ongoing financial struggles. Ocado faces a potential £20 million loss after its vertical farming investment, Jones Food, fell into administration. GE Vernova is considering selling its industrial software unit, Proficy, amid rising power demand driven by AI and cryptocurrency data centers. Meta’s acquisition of a 49% stake in Scale AI and its aggressive AI hiring strategy underscore the intensifying race for AI dominance.

IPO market revival and trade tensions

In the IPO market, Citigroup anticipates a surge in large offerings as companies remain private longer and valuations rise through secondary stock sales. Institutional investors are eager to invest in late-stage firms, particularly in AI and robotics. NIQ Global, backed by KKR, filed for a U.S. IPO, signaling renewed investor interest. Meanwhile, the Canadian steel industry criticized government measures as insufficient to counter U.S. tariffs, warning of mass layoffs and urging broader protections. Prime Minister Mark Carney has threatened counter-tariffs if a broader trade deal is not reached.

Global economic trends and AI's labor impact

Finally, consumer behavior and labor market trends continue to evolve. U.S. consumer spending weakened in May amid rising inflation, while new-home sales and building permits declined. In Europe, German companies are optimistic due to expected public spending, but private sector growth remains stagnant. In Asia, Chinese industrial profits fell, and Tokyo apartment rents surged. Mexico’s central bank cut interest rates, while other emerging markets held steady. Anthropic’s Economic Futures Program and Meta’s AI investments highlight the growing focus on understanding and shaping the economic impact of technological disruption.