| | | Market Snapshot
| Dow | 42305.48 | +35.41 | (0.08%) | | Nasdaq | 19242.60 | +128.85 | (0.67%) | | SP 500 | 5935.94 | +24.25 | (0.41%) | | 10-yr Note |
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| | NYSE | Adv 1493 | Dec 1271 | Vol 1.05 bln | | Nasdaq | Adv 2347 | Dec 2110 | Vol 7.73 bln |
Industry Watch
| Strong: Energy, Technology, Communication Services |
| | Weak: Industrials |
Moving the Market
-- Tariff-related volatility continues: President Trump doubles tariff on steel imports, starting Wednesday
-- China says U.S. to blame for violating trade agreement reached in Geneva; President Trump and President XI reportedly will talk later this week
-- Early profit taking after strong May, though market shows resilience and bounces back to close at highs for the day
--Mega-cap strength
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Closing Stock Market Summary
02-Jun-25 16:25 ET
Dow +35.41 at 42305.48, Nasdaq +128.85 at 19242.60, S&P +24.25 at 5935.94
[BRIEFING.COM] The stock market got hit with a few jabs early, but once again showed that it has plenty of fight in it, with the mega-cap stocks acting as the enforcer. Meta Platforms (META 670.90, +23.41, +3.6%), which is reportedly planning full, AI-generated ads by 2026, according to The Wall Street Journal, and NVIDIA (NVDA 137.38, +2.25, +1.7%), which remains the go-to AI play, were today's ringleaders.
The Vanguard Mega-Cap Growth ETF (MGK) advanced 0.9% versus the Invesco S&P 500 Equal-Weighted ETF (RSP), which was up 0.1% for the day.
The early hits flowed from the weekend news that the U.S. will be doubling the tariff rate for steel and aluminum imports to 50%, effective Wednesday, and China's pugilist stance that it was the U.S. that violated the preliminary trade agreement reached in Geneva.
That combination put the market on its heels, contemplating the potential for higher inflation stemming not only from the tariff increase but also from the potential for ongoing supply chain disruptions.
The market cap-weighted S&P 500 declined 0.9% shortly after the open but just as quickly started to rebound following the release of a better-than-feared ISM Manufacturing PMI for May at 10:00 a.m. ET and a CNBC report that President Trump and President Xi are likely to speak this week. Later, Reuters, citing a U.S. Trade Representative draft letter, carried a report saying the Trump administration is seeking best offers from countries by Wednesday for trade negotiations.
By and large, it was a one-way trade higher from the time of the ISM report, with the S&P 500 and Nasdaq Composite stairstepping their way to successive highs. Both basically closed at their highs for the session.
Something notable about the move, other than it taking place on relatively light volume, is that it happened at the same time Treasury yields were pressing higher behind selling interest. The turnaround by the stock market, then, may have been helped by some asset reallocation out of bonds and into stocks.
We would venture a guess that it was also helped by short-covering activity and the squeezing in of sidelined investors sitting on a lot of cash, as the market's continued resilience left them fearful about missing out on further gains.
Ten of the 11 S&P 500 sectors finished higher. The energy sector (+1.2%) was the biggest gainer, aided by a nice pop in oil prices ($62.57, +1.81, +3.0%) after OPEC+ agreed to raise production by 411,000 barrels per day in July. Traders had been worried that the output hike could be much larger.
The information technology sector (+0.9%) was second in command today, lending its weight to the broader market along with the communication services sector (+0.6%). The industrials sector (-0.2%) was the only sector that gave up some ground.
Market breadth substantiated the somewhat narrow nature of today's gains. Decliners outpaced advancers by a roughly 5-to-4 margin at the NYSE, while advancers led decliners by a narrow margin at the Nasdaq.
- S&P 500: +0.9% YTD
- Nasdaq: -0.4% YTD
- DJIA: -0.5% YTD
- S&P 400: -4.1% YTD
- Russell 2000: -7.2% YTD
Reviewing today's data:
- The May ISM Manufacturing Index slipped to 48.5% in May (Briefing.com consensus 49.0%) from 48.7% in April. The dividing line between expansion and contraction is 50.0%, so the May reading suggests that activity in the manufacturing sector contracted at a slightly faster pace than the prior month.
- The key takeaway from the report is that manufacturing sector activity was hampered in May by tariff uncertainty.
- Total construction spending decreased 0.4% month-over-month in April (Briefing.com consensus 0.1%) after a downwardly revised 0.8% decline (from -0.5%) in March. Total private construction was down 0.7% month-over-month, while total public construction was up 0.4% month-over-month. On a year-over-year basis, total construction spending was down 0.5%.
- The key takeaway from the report is that residential spending weakened noticeably with a downturn in new single-family construction.
Another impressive show of resilience
02-Jun-25 15:30 ET
Dow -16.19 at 42253.88, Nasdaq +129.44 at 19243.19, S&P +22.50 at 5934.19
[BRIEFING.COM] The major indices started today on a weak note, but that weakness was not allowed to persist. A broader rebound effort picked up steam with the release of the May ISM Manufacturing PMI at 10:00 a.m. ET.
Notably, stocks steadily advanced to session highs as Treasuries moved to session lows, suggesting perhaps that there may have been some asset reallocation in play.
There may have also been some short-covering activity, as the stock market's resilience once again in the face of some seemingly concerning headlines fueled some added buying interest among sidelined investors fearful about missing out on further gains.
From its low today to its current session high, the market cap-weighted S&P 500 has advanced 1.3%, with mega-cap stocks pacing that move.
Buying the dip (again)
02-Jun-25 15:05 ET
Dow -50.95 at 42219.12, Nasdaq +120.49 at 19234.24, S&P +19.19 at 5930.88
[BRIEFING.COM] The stock market has done what it has grown accustomed to doing: bouncing back from losses.
It has helped that the mega-cap stocks have been a bastion of relative strength today, as they are pulling their weight for the broader market. The move to session highs, however, has been helped by many other stocks paring earlier losses and/or extending their gains.
Breadth continues to favor decliners at the NYSE and Nasdaq; however, the margin over advancing stocks has narrowed with the comeback effort.
The Vanguard Mega-Cap Growth ETF (MGK) is up 0.8%, while the equal-weighted S&P 500 is flat.
S&P 500 gains as Micron, Boeing, and Best Buy lead; Amentum sinks on Federal contract worries
02-Jun-25 14:30 ET
Dow -62.27 at 42207.80, Nasdaq +105.77 at 19219.52, S&P +12.92 at 5924.61
[BRIEFING.COM] The S&P 500 (+0.22%) is in second place on Monday afternoon as the broader market rallied a bit over the last half hour.
Briefly, S&P 500 constituents Micron (MU 98.42, +3.96, +4.19%), Boeing (BA 212.10, +4.78, +2.31%), and Best Buy (BBY 67.84, +1.56, +2.35%) dot the top of the standings. MU shines after reports suggested bullish May memory pricing data, Boeing caught a BofA Securities upgrade to Buy this morning, while Telsey analysts commented that recent BBBY store visit in Paramus, NJ, showed solid execution with strong inventory levels, improved in-stock conditions, and healthy foot traffic.
Meanwhile, Amentum Holdings (AMTM 19.27, -1.39, -6.73%) is today's top decliner as reports suggested that the government was aiming to slash more federal contracts.
Gold jumps 2.5% on tariff hike, war fears, and Fed cut hopes
02-Jun-25 14:00 ET
Dow -185.78 at 42084.29, Nasdaq +43.41 at 19157.16, S&P -4.55 at 5907.14
[BRIEFING.COM] The tech-heavy Nasdaq Composite (+0.23%) is in positive territory this afternoon, shaving a bit off levels from the prior half hour.
Gold futures settled $81.80 higher (+2.5%) at $3,397.20/oz, the escalation of the Russia-Ukraine conflict, coupled with President Trump's announcement to double tariffs on imported steel and aluminum to 50%, heightened investor anxiety, prompting a shift toward safe-haven assets like gold. Additionally, the Fed's indication of potential interest rate cuts later this year bolstered gold's appeal, as lower rates diminish the opportunity cost of holding non-yielding assets. A slight dip in the U.S. dollar further supported bullion prices by making them more affordable for foreign buyers.
Meanwhile, the U.S. Dollar Index is down about -0.5% to $98.87.
Tesla grapples with sharp European sales drop, pins hopes on Robotaxi and updated Model Y (TSLA)
Tesla (TSLA) experienced a significant downturn in European sales for May 2025, with registrations plummeting 53.7% in Sweden to 613 vehicles, 68% in Portugal to 547 vehicles, 19% in Spain, and a stark 67% in France, the EU’s second-largest market, according to industry data. These declines reflect a confluence of challenges: intensifying competition from Chinese EV makers like BYD Company (BYDDY) and Xpeng (XPEV), which have gained market share with cheaper, innovative models, and TSLA’s aging vehicle lineup, unchanged since the Model Y refresh. Additionally, CEO Elon Musk’s political alignment with President Donald Trump and his vocal far-right stance in Europe have fueled consumer backlash, with protests and vandalism targeting TSLA showrooms contributing to a reputational crisis that has eroded brand loyalty in key markets.
- In contrast, Norway emerged as a bright spot, with TSLA sales surging 213% yr/yr to 2,346 vehicles in May, driven predominantly by demand for both new and existing versions of the Model Y, up from 690 units the previous year. The introduction of the revamped Model Y, featuring updated design and features, has resonated strongly in Norway, where EVs dominate. To stimulate demand, TSLA has implemented aggressive incentives across Europe, including interest-free loans for the new Model Y in Norway, alongside discounts and financial incentives in Sweden, Germany, France, and the UK.
- The robust performance in Norway could foreshadow improved results across other EU markets, as TSLA’s websites in Germany, Britain, France, and Italy indicate that deliveries of the lowest-cost version of the refreshed Model Y are set to commence in June 2025. These deliveries were not reflected in May’s sales data, suggesting potential upside in the coming months as the updated model becomes more widely available. If the Norwegian market’s response is indicative, the broader rollout of the cost-competitive Model Y could help Tesla regain traction in Europe.
- June is a pivotal month for TSLA. Beyond its European sales efforts, the company is poised to launch its much-anticipated robotaxi service in Austin, Texas, with a modest fleet of fewer than 100 Model Y vehicles equipped with Full Self-Driving software. This “invite-only” pilot, supported by approximately 300 test operators and remote teleoperators, is a critical step toward scaling autonomous driving, with internal estimates projecting an initial low single-digit billion-dollar revenue opportunity, potentially growing to $20-$30 bln or more as the service expands to cities like San Francisco by late 2026.
In conclusion, TSLA’s May 2025 sales in Europe reflect a deepening slump, driven by fierce competition, an outdated lineup, and reputational damage tied to Musk’s political activities. However, the strong Norwegian performance, fueled by the refreshed Model Y, and the impending robotaxi launch in Austin signal potential catalysts for recovery, with the lower-cost Model Y and autonomous driving initiatives offering hope for brighter days ahead, provided TSLA can navigate execution and regulatory hurdles.
Steel stocks up sharply on higher tariffs, but steel consumers are pulling back (SLX)
Steel stocks are up big today after President Trump announced he would double tariffs on steel and aluminum imports from to 50% from 25% with the new rates set to take effect on Wednesday, June 4. Trump made this announcement during a rally at a US Steel plant as he was touting the Nippon Steel takeover of US Steel (X). Trump opposed the takeover on the campaign trail, but says the deal is now more favorable for workers. All of the details are still being worked out.
- Steel prices have been falling in recent months. Demand has been impacted by the tariff uncertainty, which has caused companies to become more cautious about future production plans. The tariffs are likely to boost selling prices for steel, which benefits US steel producers. However, demand from steel consumers may be reduced further if price rise.
- The EU has responded that it is not pleased and may increase tariffs on US imports of steel. The timing of the tariff increase may also complicate ongoing trade talks between the US and the EU. However, the tariff move may also just be a negotiating tactic by Trump to extract better terms from the EU and could easily be reversed if a trade deal comes together.
- While the tariffs clearly benefit US steel producers, the bigger concern is what this does for costs to the much larger contingent of steel consumers. Steel is a core input for many industries, including automotive, appliances, home builders, farm equipment, energy infrastructure, just to name a few. This is not good news for the economy generally as those higher costs are likely to get passed on to consumers.
- Another wrinkle here is that a US trade court recently held that Trump's reciprocal tariffs are unconstitutional and not within the scope of the International Emergency Economic Powers Act (IEEPA), which is the statute cited by Trump to give him authority to impose tariffs. An appeals court issued a stay for now, but the legal challenge continues and may eventually reach the US Supreme Court. The steel tariffs are based on Section 232, so they are not part of the IEEPA case.
Steel producers are up sharply on the tariff news: CLF +25%, STLD +10%, NUE +10%. However, the net benefit to the economy is not really there as the much larger cohort of steel consumers are trading lower on the news: automotive (GM -4%, F -4%, STLA -3%), appliances (WHR -2.2%), farm/mining equipment (TEX -3%, CAT -1.3%, DE -0.3%), homebuilders (TOL -2.5%, KBH -2.3%, PHM -2.1%, DHI -1.9%, LEN -1.8%).
Given the size of the tariff increase, we would have thought the declines in share prices would be more. However, we suspect that investors are thinking that the tariffs may be short term given Trump's penchant for changing course often. Or they may just be a negotiating tactic and will get worked out when a trade deal with the EU emerges. On a final note, even with the tariffs on imported steel, it is not a sure bet we will see a surge in steel prices because demand has already been falling and higher steel prices might dampen demand even more.
Campbell Soup beats Q3 expectations as at-home cooking surge drives sales (CPB)
Campbell Soup (CPB) delivered solid 3Q25 results, comfortably exceeding analysts' EPS and revenue expectations, primarily driven by a resurgence in the Meals & Beverages segment, which saw consumption trends reminiscent of peak pandemic levels in 2020 as consumers increasingly opted for at-home cooking. The acquisition of Sovos Brands, completed on March 12, 2024, also served as a significant top-line catalyst, with notable contributions from the Rao's brand, particularly in pasta sauces.
Despite the strong Q3 results, CPB only reaffirmed its FY25 EPS, revenue, and organic net sales guidance, while cautioning that it expects to land at the lower end of the $2.95-$3.05 range, excluding the impact of tariffs. The company highlighted potential incremental headwinds of $0.03-$0.05 per share if current tariffs persist, effectively signaling a slight downward adjustment to its EPS outlook. The Snacks segment continues to face challenges, with organic net sales declining 5% due to headwinds from reduced consumer discretionary spending and a shift toward private-label brands, such as Costco’s (COST) Kirkland Signature, as cost-conscious consumers prioritize value.
- The Meals & Beverages segment, encompassing CPB’s condensed and ready-to-serve soups, Pacific Foods broths and non-dairy beverages, Prego pasta sauces, and Pace Mexican sauces, exhibited remarkable strength in Q3. The segment reported a 7% increase in volume/mix, a 6% rise in organic net sales, and a 15% surge in total net sales to $1.46 bln, significantly bolstered by the Sovos Brands acquisition.
- Standout performers included Rao’s pasta sauces and U.S. soup products, particularly condensed soups and broth, which benefited from increased at-home cooking and the timing of shipments related to the implementation of CPB's existing SAP enterprise-resource planning system for Sovos Brands.
- In contrast, the Snacks segment, which includes Pepperidge Farm cookies, Goldfish crackers, Snyder’s of Hanover pretzels, Lance sandwich crackers, and Cape Cod chips, experienced a more uneven performance. Organic net sales fell 5% reflecting intense competition and reduced consumer spending on discretionary items.
- While new product innovations, such as Goldfish Limited Time Offerings and new Cape Cod flavors, provided some lift, the segment struggled against this challenging backdrop.
- CPB’s adjusted gross margin contracted by 110 basis points to 30.1%, pressured by several factors. Cost inflation, particularly in labor, raw materials, and supply chain inputs, combined with unfavorable net price realization, weighed on profitability. The Sovos Brands acquisition, while accretive to revenue, contributed to margin dilution in its early integration phase, though this was partially offset by supply chain productivity improvements and cost-saving initiatives.
CPB’s Q3 results showcased solid upside, driven by strong Meals & Beverages performance and the strategic boost from the Sovos Brands acquisition, particularly through Rao’s pasta sauces. However, the reaffirmed FY25 EPS guidance, leaning toward the lower end and factoring in potential tariff-related headwinds of $0.03-$0.05 per share, reflects cautious optimism amid persistent challenges in the Snacks segment and margin pressures.
Elastic's strong Q4 results undermined by cautious FY26 revenue guidance, triggering selloff (ESTC)
Elastic (ESTC), the provider of a search and observability platform, delivered solid 4Q25 results, surpassing EPS expectations, continuing its consistent trend of beating earnings forecasts. Revenue grew by a healthy 16% yr/yr, also exceeding analysts' estimates, driven by strong adoption of ESTC's AI-driven solutions, particularly within the Elastic Cloud segment, which grew 23% yr/yr to $182 mln. Additionally, improved sales execution targeting high-value enterprise accounts provided another boost. However, these strong results are being overshadowed by ESTC's cautious FY26 revenue guidance of $1.655-$1.670 bln, which fell short of the consensus estimate, raising concerns about future growth potential.
- Coming off an impressive Q3 beat-and-raise report, ESTC had set a high bar for investor expectations. The Q3 performance was fueled by robust enterprise demand for consolidating observability tools on ESTC’s Elasticsearch platform, bolstered by enhanced sales execution following a strategic shift to focus on larger accounts. This shift addressed earlier Q1 sales execution challenges, resulting in a customer net expansion rate of 112% and a total of 1,460 customers with annual contract values (ACV) exceeding $100,000, signaling strong customer loyalty and upselling opportunities.
- The Q3 success, coupled with ESTC’s advancements in generative AI capabilities, such as the Elastic Rerank Model and Cloud Detection and Response integrations, significantly boosted investor sentiment, amplifying the disappointment when FY26 guidance underwhelmed expectations.
- For 1Q26, ESTC provided in-line EPS guidance of $0.41 to $0.43 and revenue guidance of $396 -$398 mln, slightly above expectations, while its FY26 revenue growth forecast of 12-13% missed the mark. The cautious guidance stems from several factors, including macroeconomic uncertainties impacting enterprise spending, a $10 mln sequential headwind from three fewer days in Q4 compared to earlier quarters, and a $1-2 mln foreign exchange impact.
- Additionally, ESTC’s investments in AI innovation and sales initiatives, particularly front-loaded in 1Q26 for events like sales kickoffs, may pressure near-term margins, contributing to the conservative outlook.
- Elastic Cloud revenue, a critical metric for investors, grew 23% yr/yr in Q4, down from 26% growth in Q3, raising some concerns about potential deceleration in cloud adoption. This growth, though still robust, contrasts with prior quarters’ stronger growth rates (e.g., 30% in 1Q25), reflecting possible challenges in scaling cloud deployments amid competitive pressures from other observability and security platforms. Investors are closely monitoring Elastic Cloud’s trajectory, as it represents a key growth driver, accounting for a significant portion of the company’s subscription revenue.
- ESTC's customer metrics remain a bright spot, with the total customer count with ACV greater than $100,000 rising to over 1,510 in Q4, up from 1,460 in Q3 and 1,330 in 4Q24, reflecting a 14% yr/yr increase. This growth is driven by ESTC’s strategic focus on landing and expanding within enterprise and high-potential mid-market accounts, supported by its field segmentation changes initiated at the start of FY25.
ESTC’s Q4 results showcased strong execution, with EPS and revenue beats driven by robust cloud growth and enterprise adoption, yet the stock’s sharp sell-off reflects investor disappointment with cautious FY26 revenue guidance that fell below expectations. Despite near-term macroeconomic headwinds, ESTC’s observability platform remains well-positioned for sustained demand, particularly as enterprises leverage its AI-driven capabilities for generative AI use cases, which could drive long-term growth.
Marvell heads lower despite modest Q1 upside; investors wanted more robust guidance (MRVL)
Marvell (MRVL -6%) is heading lower despite reporting upside with its Q1 (Apr) report last night. The data infrastructure chipmaker reported its typical modest EPS upside. Revenue jumped 63.3% yr/yr to $1.90 bln, which also was slightly better than expected. The Q2 (Jul) guidance was in-line. Its Data Center end market continued to benefit from robust AI demand. In addition, Marvell is seeing ongoing recovery in its Carrier Infrastructure and Enterprise Networking end markets.
- Its Data Center end market, which represented 76% of Q1 sales, posted 76% yr/yr and 5% sequential sales growth to a record $1.44 bln. Growth is being driven by the rapid scaling of its custom AI silicon programs to high volume production, along with robust shipments of its electro-optics products for AI and cloud applications. Marvell expects the momentum to continue in Q2 with mid-single digit sequential growth.
- Marvell continues to see strong tailwinds in AI, including robust capital expenditure plans from hyperscalers, an increasing number of sovereign data center announcements, and an emerging group of hyperscalers further expanding the market.
- Turning to its Enterprise Networking segment, sales grew 16% y/yr to $177.5 mln while Carrier Infrastructure jumped 93% to $138.4 mln. Collectively, EN+CI revenue grew by 14% sequentially, exceeding the midpoint of guidance and reflecting the ongoing recovery in both end markets. Marvell expects EN+CI to grow sequentially in the mid-single digit range in Q2.
- Consumer sales grew 50% yr/yr but fell 29% sequentially to $63.1 mln. Automotive/Industrial was down 2% yr/yr to $75.7 mln.
Overall, investors are disappointed with Marvell's Q1 report and guidance. The numbers were decent, but could have been better. The results were pretty lackluster relative to what we saw from Nvidia's (NVDA) report and its commentary this week. Given the recent stock performance with shares having been roughly cut in half from its January highs, we thought a lot of negativity was priced in, but investors are taking the stock even lower today. We think investors wanted to see more robust Q2 guidance following big reports from data center infrastructure peers NVDA and even Dell (DELL) last night.
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