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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And, just like that, tariffs are back – at least until June 9 when a Federal appeals court’s stay expires.

Futures are off modestly as traders assess the tariff news and hotter than expected personal income and spending prints and PCE prices which were in line with expectations.University of Michigan consumer sentiment is due out at 10am ET.

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In a surprising twist, a federal court has potentially halted Trump’s tariff war in its tracks, saying that he exceeded his authority in imposing the most extreme tariff regime in US history. The three judge panel (including a Trump appointee) ruled unanimously that the US Constitution gives Congress exclusive authority to regulate commerce with other countries.

“The court does not pass upon the wisdom or likely effectiveness of the President’s use of tariffs as leverage,” a three-judge panel said in the decision to issue a permanent injunction on the blanket tariff orders issued by Trump since January. “That use is impermissible not because it is unwise or ineffective, but because [federal law] does not allow it.”

Naturally, the administration has appealed and is questioning the court’s authority and accusing it of judicial overreach.

From an economic and markets perspective, this development will greatly increase confusion and uncertainty. Consider the recent budget passed by the House with a one vote margin which included substantial tariff revenue in its calculations. Consider the impact on currency flows. Consider all the recent announcements – many disingenuous – of manufacturing being moved/returned to the US.

Consider the potential reduced inflation. If you remove inflation from the current stagflation forecast, you’re left with plain ol’ stagnation. Indeed, interest rates are falling along with the DXY. The only certainty in this development is that the chaos of the Trump presidency will continue.

Futures are up strongly but off their highs after mixed economic news and a beat by NVDA.

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Futures are essentially flat in advance of today’s FOMC minutes.

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Once again, the arsonist sprinkled a little water on the fire and is looking for a reward. After sending markets into another freefall last week with the imposition of 50% tariffs on the EU, Trump “rescued” them by delaying the start date.

As expected, SPX backtested its SMA200. ES is back above its. All is good, until the next calamity strikes.

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Futures took a nosedive this morning when Trump tweeted in quick succession that the EU trade talks were going nowhere and that Apple must move manufacturing to the US. The penalty for not bending to his will in each case is a 50% tariff.

Markets are still adjusting to our new mob boss system of government.

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The 10Y broke out again yesterday, sending and S&P 500 100 points lower on the day. The House’s budget bill passage, which promises to sharply hike the deficit/debt while cutting medicare and medicaid, won’t help.

The next big test for bears will be SPX 5767, the 200-day moving average.

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