Following days of speculation, Israel attacked Iran, killing three of Iran’s most powerful leaders and bombing multiple nuclear, missile and military targets. Oil prices shot up over 10%, bolstering inflationary fears and neutralizing Trump’s argument for a Fed rate cut. The last time CL broke out of its triangle, stocks fell nearly 5%.Futures initially fell nearly 2% overnight, but have since rebounded to a 1% loss. Though the State Department initially disavowed any knowledge of or assistance in the planning of the attack, Trump’s latest comments have called that into question – increasing the odds that the US will be drawn into a kinetic conflict.

“Iran should have listened to me when I said — you know, I gave them, I don’t know if you know but I gave them a 60-day warning and today is day 61,” he told CNN. “They should now come to the table to make a deal before it’s too late.”

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PPI rose only 0.1% MoM in May, but the annual rate was still elevated at 2.6% (2.7% less food, energy and trade services.) It leaves the FOMC in a place where they can delay any rate cuts in order to see how tariffs affect prices.

Futures have made up some of their losses following yesterday’s .886 tag.

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Between delays in imposing the worst of the tariffs and massive help from the energy sector, inflation came in at 0.1% MoM (slightly below expectations) and 2.4% YoY (slightly above expectations.) Core inflation, which excludes food and energy price effects, rose 2.8% YoY.

The news was just good enough to get ES up to our .886 Fib target where it retreated despite a predictably well-timed tweet from Trump that trade negotiations with China have been successfully completed.The deal is reportedly subject to final approval from Trump and Xi, which means that Xi now has maximum leverage since Trump is desperate for a “win” which will drive stocks to new highs.continued for members… (more…)

Futures are up slightly ahead of the open, with an eye on tomorrow’s CPI print.

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Futures are slightly higher in advance of Wednesday’s CPI print and Thursday’s PPI print.

In addition to being fearful of higher inflation, traders are perhaps nervous about National Guard troops and US Marines being deployed in the streets of Los Angeles to address another Trump-generated crisis.

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Futures regained most of yesterday’s intraday losses following a better than expected jobs report which, of course, makes it less likely that the FOMC will cut rates any time soon.

But, the more entertaining story is the Trump vs Musk cage fight. Regardless of how it turns out for either, it clearly makes getting Trump’s budget busting bill passed much more difficult.

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More weak economic data was released this morning but was quickly followed (a coincidence?) by news of a phone call between Trump and Xi.

Initial claims were 247k versus consensus of 239k and unit labor costs rose a whopping 6.6%, up from an already inflationary 5.7%. This is a combination that supports our expectations of stagflation.

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The economic data would probably be weak enough to spur the Fed into a rate cut…if it weren’t for Trump’s ridiculous tariffs. So, Trump can tweet all he wants about rate cuts. It just ain’t gonna happen until the threat of much higher inflation abates.

ADP employment came in at a surprising 37k versus 115k consensus and 62k prior. Mortgage applications were down 3.9% versus -1.2% prior. ISM services are due out at 10am ET, and the Fed’s Beige Book at 2pm ET. Remember that ISM manufacturing has declined every month since Trump took office.

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With the US dollar at 3-year lows, you have to wonder what the White House is thinking. The US is a net importer, so a lower DXY translates into higher inflation – already facing an increase from Trump’s tariffs.

Another interesting development is the House’s budget provision Section 899, which would tax certain foreign investors’ holdings in the US by up to 20%. Another would charge noncitizens a 3.5% surcharge for remittances. Sounds like a good way to disincentivize foreign investors and keep the dollar sinking.

Bill Blain says it well.

Donald Trump has misjudged both China and Europe – and set in motion a swift re-ordering of how the world works. It’s increasingly possible any new global trade ecosystem that emerges will have a much smaller space for the USA. That has potentially massive implications for global tech innovation, the mythos of American stock exceptionalism, and the future of the US tech mega-stocks.

A few weeks ago US Trade Secretary Scott Bessent proudly claimed success and a US/China trade reproachment – but there is still very little actual trade steaming across the Pacific. This isn’t just deliberate trade disengagement ordered by the Chinese authorities – but individual Chinese businesses making a call on the commercial realities of dealing with Trump’s America. They react to the impossibility of making informed business decisions, investments and long-term plans in the face of flip-floppery and volatile decision making in Washington.

In Europe much the same is true. The shock of losing American markets weighs heavy across European businesses – but the response is not panic about lost markets, but how to find new ones and new directions. Businesses might make all kinds of promises about new investment into the USA – but most have little intention of spending money in an economy they can no longer understand. They will smile, say the right things, and wait to see what follows Trump.

Futures are off modestly ahead of the open. You know the drill.

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Another day of tariff turmoil, another premarket pullback. Futures are off modestly ahead of the open in a week featuring plenty of important ISM and payroll data.

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