Author Archive

• Morning News: June 13, 2025
  Eddy Elfenbein, June 13th, 2025 at 7:04 am

  Oil Prices Surge and Stock Markets Stumble After Israel Attacks Iran

  Iran Retaliates After Israeli Strike as Trump Urges Nuclear Deal

  An Israel-Iran War May Not Rattle the Oil Market

  Republicans Are (Almost) Ready for Maximum Pressure on Russia

  China’s ‘Cash-for-Clunkers’ Underlines Need for Structural Reform

  China Forced to Keep Unprofitable Firms Alive to Save Jobs and Avoid Unrest

  Bank of Japan Likely to Stand Pat Again, Discuss Further Bond Tapering

  Europe’s Exporters Feel the Chill From Trump Tariffs

  Chinese Firms in Talks to Join Group for Li Ka-Shing’s Ports

  New Fees on Floating Garages Are Trump’s Latest Effort to Revive U.S. Shipbuilding

  Where’s the Inflation From Tariffs? Just Wait, Economists Say.

  The Case for Rate Cuts Is Growing

  Trend Hedge Funds Struggle as More Nimble Macro Funds Embrace Whipsawing Markets

  US Corporate Profit Fat Offers Cushion for Absorbing Tariffs

  Elizabeth Warren: Trump Is Right About This One Thing

  JPMorgan Can Retain Junior Bankers With Cash, Not Threats

  Wall Street Is Investing Billions in Marinas for Bigger Yachts

  The South Is Beating Inflation — But Not Housing

  Your Electric Bill Is Rising Faster Than Inflation. Here’s Why.

  Why There’s an Unexpected Surge in People Claiming Social Security

  F.T.C. May Put Unusual Condition on Ad Mega-Merger: No Boycotting

  Meta Finalizes $14.3 Billion Scale Investment, Hires Its CEO

  AI Will Transform Medicine, Particularly If Trump Lets It

  New Army Reserve Unit Enlists Silicon Valley Executives to Upgrade Tech

  GameStop Shares Tank More than 20% as Retailer Reveals Convertible Debt Offering, Trading Cards Plan

  Shein’s Planned Hong Kong Listing to Benefit from Wider Capital Pool

  Air India Was Struggling Long Before 787 Crash

  How the Clippers Engineered the NBA’s Best Home Court Advantage

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• Morning News: June 12, 2025
  Eddy Elfenbein, June 12th, 2025 at 7:04 am

  Iran Steps Up Enrichment With New Site After Nuclear Censure

  Saudi Arabia Is Grabbing Oil-Market Share, but It Can Open the Tap Only So Far

  The Art of the Stall: China’s Strategy for Dealing With Trump

  New China Trade ‘Deal’ Takes U.S. Back to Where It Started

  Supply Chains Become New Battleground in the Global Trade War

  U.K. Economy Shrinks on Tariff Hit

  The ‘Canada Drip’ Helps Absorb Shock of US Tariffs

  Here’s How Much Money the U.S. Is Earning From Tariffs, in Charts

  Muted May Inflation Defies Tariff Fears

  Trump Says Again He’ll Set Unilateral Tariffs in Two Weeks

  Tariffs On Medicines Will Cripple Manufacturing

  If You Understand Car Loans, You Understand the National Debt

  The Fed Can Now Declare Victory Over Inflation

  Fed Seeks to Preserve Labor Market Lessons in Rewriting Rates Strategy

  The Bond King Has a Warning for Private Credit: Feels Like 2006

  Deutsche Bank’s Deal-Making Business Weaker than Expected

  Chime Set for Long-Awaited Market Debut After $864 Million US IPO

  BlackRock Aims to Grow Revenue to $35 Billion and More by 2030

  Tech Giants’ New AI Ad Tools Threaten Big Agencies

  How Washington Has Tried to Control China’s Tech

  Trump’s Birthday Parade Isn’t a Harmless Military Spectacle

  ICE Raids Have Sent Latino Shoppers Into Hiding and Big Brands Are Hurting

  Companies Quietly Recast DEI to Duck Backlash

  Treasury Weighs Rules That May End Colleges’ Tax Status Over Race Policies

  As Companies Abandon Climate Pledges, Is There a Silver Lining?

  Charging Electric Cars, a Bane of Their Owners, May Be Improving

  Divorcing SpaceX Just Isn’t Possible Right Now

  Trump Plan to Kill Dozens of NASA Missions Threatens US Space Supremacy

  Why Warner Boss Zaslav Is Having to Split Up the Media Empire He Built

  No Home, No Retirement, No Kids: How Gen Z-ers See Their Future

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• Morning News: June 11, 2025
  Eddy Elfenbein, June 11th, 2025 at 7:02 am

  To Shake Russian Gas, Germany Pushes to Ship It in From Anywhere Else

  The Audacious Reboot of America’s Nuclear Energy Program

  US Energy Secretary Is Trying to Change Blue-State Minds About Fossil Fuels

  Market Realities Continue to Mug Faddish ‘Energy Transitions’

  Global Banks Scramble to Hire Top Talent in Booming Japan

  ECB’s Rate Cut Helps Ensure Inflation Won’t Settle Below Target, Lane Says

  U.S. and China Agree to Get Geneva Pact Back on Track

  China Walks a Line in U.S. Trade Talks, Trying Not to Overplay Its Hand

  The US Is Dooming the UN — Whether It Leaves or Not

  Pope Leo Inherits Cleaned Up Vatican Bank That’s Making Money

  World Bank Sees U.S. Growth Rate Halving as Tariffs Slow Global Economy

  US Inflation Seen Picking Up With Some Tariff Pass-Through

  The Republican Budget Bill Is a Fiscal Mirage

  Why the Self-Proclaimed Deficit ‘Hawks’ Have Always Been Wrong

  Paul Atkins Has His Work Cut Out For Him at the SEC

  Top CFPB Enforcement Official to Resign, Citing ‘Devastating’ Shifts Under Trump

  Appeals Court Keeps Trump’s Sweeping Tariffs in Place for Now

  Noisy Trade Wars Shift Into Duller Framework Implementation Stage

  How Home Depot Became Ground Zero in Trump’s Deportation Push

  Is the Immigration Crackdown Already Showing Up in the Labor Market?

  Musk Expresses ‘Regret’ Over His Criticisms of Trump

  Marc Andreessen Bet Big on Trump to Ward Off Tech’s Detractors

  Rubio Is Pressing to Open Sanctions Investigation Into Harvard

  Yale Is Rushing to Sell Billions in Private Equity Investments

  African Students Are Flocking to US MBA Programs

  Oil-Rich University of Texas Wants to Cash In on AI, Crypto and Power

  Nvidia’s Huang Sees Quantum Computing Reaching Inflection Point

  Amazon, Walmart Drone Deliveries Take Rivalry to the Skies

  Cyberattack on Food Distributor Leaves Supermarket Shelves Running Low

  The Media and Entertainment Deal Machine Is Revving Up

  X’s Sales Pitch: Give Us Your Ad Business or We’ll Sue

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• CWS Market Review – June 10, 2025
  Eddy Elfenbein, June 10th, 2025 at 6:11 pm

  (This is the free version of CWS Market Review. If you like what you see, then please sign up for the premium newsletter for $20 per month or $200 for the whole year. If you sign up today, you can see our two reports, “Your Handy Guide to Stock Orders” and “How Not to Get Screwed on Your Mortgage.”)

  On Friday, the S&P 500 closed above 6,000. To be exact, the index closed at 6,000.36. Not many people expected the market to recover so quickly. The last time the S&P 500 closed above 6,000 was on February 21.

  On Monday and Tuesday, it closed even higher. We’re now less than 2% from a fresh all-time high. Looking back at the panic this year, it all seems rather silly. We didn’t know what the tariff policy was going to be, and we were less sure of the potential impact.

  

  In any event, investors got very scared. In just 48 calendar days, the S&P 500 lost 18.9%. Then in 63 calendar days, it gained back 21.2%. (Thanks to the lower base, we’re still not quite at a new high despite the gain being greater than the loss. Don’t blame me. Blame math.)

  I wonder if a Rip Van Winkle-type of investor who had slept through the entire period would have noticed any difference. By the way, notice how much smaller the high-low bars have gotten since April. We aren’t seeing any dramatic intra-day reversals like we did this past spring.

  The U.S. Economy Added 139,000 Jobs Last Month

  On Friday, we got the jobs report for May, and it was pretty good. There had been some trepidation going into this report because the ADP report had been quite weak.

  Nevertheless, the Bureau of Labor Statistics reported that the U.S. economy created 139,000 net new jobs last month. That was 14,000 more than expected although that was a very conservative expected number. The jobs number for April was revised lower to a gain of 147,000.

  Bear in mind that recessions usually align with job losses, not slower gains. There are no signs that we’re in a recession. Of course, that could change.

  The unemployment rate stayed at 4.2%. I dug into the data and found that if we look at a few more decimal places, then the jobless rate is the highest in 43 months (see below). Although that sounds like a lot, the unemployment rate has really been quite steady. I also like to look at the broader U-6 unemployment rate, and that stayed at 7.8%.

  

  Probably the best news is that average hourly earnings rose 0.4% last month. That was 0.1% better than expected. Over the last year, average hourly earnings are up 3.9%. That’s not bad, but I’d like to see it improve.

  Here are some details:

  Nearly half the job growth came from health care, which added 62,000, even higher than its average gain of 44,000 over the past year. Leisure and hospitality contributed 48,000 while social assistance added 16,000.

  On the downside, government lost 22,000 jobs as efforts to cull the federal workforce by President Donald Trump and the Elon Musk-led Department of Government Efficiency began to show an impact.

  The number for April was revised downward by 30,000. The number for March was revised lower by 65,0000. The household survey showed a decline of 696,000 workers. There was a decline of 623,000 full-time folks and an increase of 33,000 parttime workers.

  Overall, this was a good report although there are a few signs of weakness. The Federal Reserve meets again next week, and I strongly doubt they’ll make any changes to interest rates. In fact, I don’t see any rate cuts coming in July either.

  However, the meeting after that, in mid-September, could be a different story. There’s a decent chance that the Fed will lower rates by 0.25%, but a lot can happen over the next three months. We’ll learn more tomorrow when the government releases the CPI report for May.

  Wall Street Goes Nuts for Circle

  Wall Street has gone absolutely bonkers recently over the debut of Circle Internet Group (CRCL). The company is a stablecoin issuer which means its coins are tied to the value of the dollar. Hence, the prices are “stable.” This is a major difference from bitcoin which is highly volatile.

  What I find interesting about the Circle-mania is that this appears to be another sign of crypto entering the mainstream. Years ago, I think crypto was wrongly seen as a plaything of computer nerds. Now, however, it may be taking on an important role in the financial services sector. If all goes well, then consumers can use stablecoins for fast and secure transactions.

  Basically, Circle provides a platform that lets businesses integrate stablecoins seamlessly into their operations.

  The stock took off from an offering price of $31 per share to a high of $138 per share. Well, that’s not bad for three days of work (CRCL closed lower for the first time today). The environment has also been helped by a crypto-friendly administration in Washington. The company raised $1.1 billion.

  Since the Circle IPO, a few stablecoin ETFs have already rushed in to join the frenzy. I won’t be surprised to see some larger and more established firms issue stablecoins in the coming months.

  Circle is the issuer of USDC. In the stablecoin arena, Circle is #2 to Tether. Circle currently has $60 billion in circulation while Tether is up to $150 billion.

  Circle makes its money by investing its reserves in U.S. Treasuries. At some point, stablecoins may be thought of as cash, just expressed slightly differently.

  Bloomberg says there are now 80 ETFs that track digital assets. One year ago, Bitcoin was trading around $25,000. It recently got as high as $110,000.

  Tomorrow, the Senate is scheduled to vote on an important piece of legislation that addresses the stablecoin industry. The bill is backed by the Trump administration and the stablecoin industry.

  According to Bloomberg, “The stablecoin bill would set up rules for dollar-pegged tokens used to make payments. The stablecoins would have to be backed one to one with reserves held in short-term investments like federal debt, overseen by federal or state regulators.”

  My chief concern about any stablecoin is reserve management. This is why transparency is so important.

  The bill has support from both sides of the aisle although some Democrats say the legislation could damage the financial sector. My view is to let 1,000 flowers bloom. If it has a role, the market will quickly adapt.

  Casey’s Soars on Earnings Beat

  Sixteen months ago, I highlighted Casey’s General Stores (CASY) in the newsletter. I didn’t know the company very well but some friends in the Midwest raved about Casey’s, and it’s very popular there.

  It’s basically a gas station masquerading as a pizza shop. Or vice versa. It really doesn’t matter.

  The idea is simple. If you drive a car, you’ll need gas. If you’re going to go to a gas station, you might as well choose the place that has pizza as well.

  Casey’s is based in Iowa and the stores are mostly in Iowa, Missouri and downstate Illinois. The company also has an impressive presence in the other Midwestern and Plains states. There are now over 2,700 locations in 17 states.

  Casey’s prefers to locate in small towns where there’s less competition. There isn’t a Casey’s within several hundred miles of Wall Street.

  The stock has been a huge winner over the years. Since 1991, Casey has returned more than 500-fold.

  

  I bring up Casey’s because the stock soared 11.6% higher today after it reported very good earnings. After yesterday’s closing bell, Casey’s said it made $2.63 per share for its fiscal Q4. Wall Street had been expecting $1.95 per share.

  Revenues were up 11% to nearly $4 billion which was also better than expected. Casey also increased its quarterly dividend by 14% to 57 cents per share. This is a neat little stock that’s not well-known on Wall Street. The stock is up nearly 60% since I profiled it last year.

  That’s all for now. I’ll have more for you in the next issue of CWS Market Review.

  – Eddy

• Morning News: June 10, 2025
  Eddy Elfenbein, June 10th, 2025 at 7:07 am

  British Government to Spend $19 Billion on New Nuclear Plant

  Iran Seeks ‘Framework’ Deal in US Nuclear Talks, Official Says

  China’s Chokehold on This Obscure Mineral Threatens the West’s Militaries

  China and US Holding Second Day of Trade Talks in London

  Traders Wary of Bold Bets Drag Credit Volatility Near Record Low

  ‘Collateral damage’: Fund Managers Lobby Congress over Section 899 to Avert Foreign Investors Leaving the U.S.

  Never Take Candy from Strangers

  Blackstone Plans $500 Billion Europe Investment, CEO Says

  Trump Tariffs Threaten to Derail US Midwest’s Factory Revival

  Wall Street CEOs are Cycling Through the Five Stages of Tariff Grief

  Biotech Start-Ups Feel the Pain of Federal Funding Cuts

  ‘Most Favored Nation’ Price Controls Are the Path to Drug Shortages

  FTC Seeks Information From Top Advertising Agencies as Part of Ad-Boycott Probe

  Ad Forecaster Cuts Industry Outlook as Trade Upheaval Risks Five-Year ‘Chilling Effect’

  America’s Small Businesses Hopeful of Boost From Trump’s Spending Bill

  This Year’s Pride Festivals Are Brought to You by Small Businesses

  Contra the Trump FTC, Boycotts Are Protected by the First Amendment

  Congress Contemplates What Might Be the World’s Cruelest Tax

  The White House Wants This Fight With Los Angeles

  A College Degree Is No Longer a Risk-Free Investment

  Musk Is the $350 Billion Rocket Man Who Fell to Earth

  Zuckerberg Is Personally Recruiting New ‘Superintelligence’ AI Team at Meta

  Switch 2 Resellers Drive Thriving Market in Japan Despite Crackdown

  Warner Bros. Discovery Bet on All You Can Eat. Viewers Wanted More à la Carte

  American Mid: Hampton Inn’s Good-Enough Formula for World Domination

  Smucker’s Guidance Miss Shows Struggles of Packaged Food Firms

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• Morning News: June 9, 2025
  Eddy Elfenbein, June 9th, 2025 at 7:10 am

  China’s Exports to U.S. Suffer Biggest Decline Since 2020

  U.S. and China to Meet at Precarious Moment in Trade War

  Taiwan Exports Growth Nears 15-Year High Amid Tariff Uncertainty

  Japan’s Economy Remains at Risk of Technical Recession, Data Shows

  Irish Manufacturing Contracts Sharply as U.S. Import Boost Fades

  Oil & Gas Deals Are Tanking. The World’s Top M&A Law Firm Has Been Here Before

  America Has Plenty of Rare Earths. But Not for Long

  An Empire Built on Paper Looks to Benefit From Trump’s Trade War

  Trump Aides Urge Court to Spare Tariffs as They Dismiss Worries in Public

  Senate Republicans Plan to Release Major Revisions to Trump’s Tax Bill

  Wall Street, Main Street Push for Foreign Tax Rethink in US Budget Bill

  How To Solve the Unsolvable

  ‘Most-Unloved Bonds’ Turn Routine US Auction Into Crucial Test

  Third Time Lucky? Citi Changes Its S&P Target Once More After Index Hits 6,000.

  Retail Quants May Be the Next Stabilizing Force for Markets

  Quant Firm’s $1 Billion Code Is Focus of Rare Criminal Case

  Inside the Online Marketplaces That Enable ‘Pig Butchering’ Scams

  What’s Harder? Planning Interest Rates, Or Harvard’s Class Of 2029?

  The ‘Manosphere’ Just Wants Trump and Musk to Get Along

  How Trump Has Leverage Over Musk

  Cathie Wood Says Tesla Is the Stock She’d Pick If She Could Only Invest In One Company

  Anti-Woke Crusades Only Make Hegseth and Rubio Look Petty

  CEOs Don’t Realize Their Haters Make Them Better Leaders

  Nvidia CEO Says the UK Is In a ‘Goldilocks’ Moment: ‘I’m Going to Invest Here’

  Meta Set to Throw Billions at Startup That Leads AI Data Market

  Warner Discovery Splits Cable From Marquee Streaming, Studio Businesses

  Why the Goodyear Blimp Hasn’t Been Replaced by Drones

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• Morning News: June 6, 2025
  Eddy Elfenbein, June 6th, 2025 at 7:02 am

  Xi’s Message to Trump: Rein in the Hawks Trying to Derail the Truce

  China Central Bank Pumps Liquidity Into Markets Amid Cash-Crunch Concerns

  India Central Bank Delivers Larger-Than-Expected Rate Cut to Support Growth

  Russia’s Central Bank Cuts Key Rate Despite High Inflation

  ECB Has Won Battle Against Inflation in the Eurozone, Villeroy Says

  European Industry Contracts as Tariffs Pull Exports Lower

  ‘Nobody Likes Chaos’: Businesses and the Fed Wonder What’s Next for the Economy

  Financial Repression Won’t Make Interest Rates Lower

  The More You Work, the Richer You Are: A Case Against Trump’s Tariffs

  How the Maker of the ‘Most Complex Machine Humans Ever Created’ Is Navigating Trade Fights

  China Allows Limited Exports of Rare Earths as Shortages Continue

  Companies Quietly Water Down Climate Claims in Latest Investor Reports

  Europe Is Winning the Competition for Summer Gas, at Least for Now

  Blocked by GOP and Trump, California Pivots in Clean-Air Fight

  Deficit Politics Returns in Debate Over Trump Tax Cuts

  US Household Debt Has Climbed to a Record — Are You Feeling the Pinch?

  Can We Trust a Jobs Report From the Trump Administration? Yes, With Caveats.

  Job Market Is Getting Tougher for College Graduates

  Trump Removed Crypto Warnings From Retirement Plans. Will That Affect 401(k)s?

  Private Equity in 401(k)s Isn’t as Smart as It Seems

  Age Verification Mandates Create a Foreign Enforcement Fiasco

  Musk Blinks First in MAGA Cockfight With Trump

  Musk’s Threat to Withdraw Dragon Capsule Would Leave NASA with 1 Option: Russia

  Harvard Wins Reprieve From Trump’s Foreign Student Ban

  Shari Redstone Confirms Cancer Diagnosis While Facing Trump’s ‘60 Minutes’ Suit

  Carmakers Use Stealth Price Hikes to Cope With Trump’s Tariffs

  Shop Slow, Spend More: The Retailers Hoping That Customers Linger

  Why U.S. Apparel Brands Are Becoming Tough Customers

  The Stanley Cup’s Viral Moment May Be Waning. A New Brand Chief Has a Plan.

  Chasing Big Money with the Health-Care Hustlers of South Florida

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• Morning News: June 5, 2025
  Eddy Elfenbein, June 5th, 2025 at 7:05 am

  China’s Global Income Tax Crackdown Expands Beyond Ultra Rich

  Whose Side Is the US On? Doubts Strain Alliances

  Japanese Bonds Rise as 30-Year Auction Brings Some Relief

  Global Bond Auctions Show Weaker Trend as Fiscal Angst Grows

  Ireland’s Economy Grew Much Faster Than Expected on Tariff Stockpiling

  ECB to Cut Rates as Trade Mess Weighs on the Economy

  There Is an Alternative to the Dollar — It’s the Euro

  Is There a Tariff End Game?

  This Is the True Danger of Trump’s Tariffs

  Biden’s I.R.S. Doubled Audits on the Wealthy, Data Shows

  Economists Raise Questions About Quality of U.S. Inflation Data

  Trump’s Budget Proposal Goes After Statistical Agency Funding

  U.S. Is Trimming Back Its Collection of Consumer Price Data

  ‘Price Discrimination’ Is What Enables Lower Prices In the First Place

  Not Now, Not In 10 Years, Social Security Isn’t Going Insolvent

  JPMorgan Chase Sees Growth in Asia Pacific Private Credit Market

  Wells Fargo CEO Goes from Fixer to Builder as Regulators Lift Punishments

  Buy-the-Dip Retail Investors are Getting Bolder, Just When the Risks are Getting Bigger

  Bill Ackman Is Tweeting Through It

  Cathie Wood Goes Bargain Hunting: 3 Stocks She Just Bought

  Elon Musk Urges Americans Take Action to ‘Kill’ Trump Tax Cut Bill

  Tesla Is Being Eaten Alive by Chinese Rivals It Inspired

  Cargo Ship Carrying Electric Vehicles Burns Off Alaska

  Meta’s ‘Patriotism’ Spurs Shift to Military Technology

  The Missing Engineers – There Aren’t Enough to Meet the World’s Growing Hunger for Power

  The Green Transition Needs More Workers

  Shale Drillers in Permian Basin Face Up to the Prospect of Peak Output

  Walmart’s Flipkart Secures Approval for Direct Lending in India

  P&G Plans to Cut 15% of Office Jobs Over Next Two Years

  Kleenex-Owner Strikes a Deal for Its International Tissue Business

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• Morning News: June 4, 2025
  Eddy Elfenbein, June 4th, 2025 at 7:06 am

  South Korea Inflation Cools, Easing Path for Rate Cuts

  Slowing Australia Economy Vulnerable as World Growth Stalls

  Bounced Checks Soar to Five-Year High Under Milei’s Austerity

  Hot Core Inflation Expected to Keep Bank of Canada on Sidelines

  Higher Tariffs on Steel and Aluminum Imports Go Into Effect

  A New Era of Trade Warfare Has Begun for the U.S. and China

  US Tariffs Are as Dangerous as They Are Illegal

  Trump Bemoans How ‘HARD’ It Is to Strike a China Deal

  China Weighs Ordering Hundreds of Airbus Jets in Major Deal

  Trump Wants America to Make Things Again. Does It Have What It Takes?

  Is Trump Unveiling a Crypto Wallet? His Associates Say Yes. His Sons Say No.

  America’s Novel and Gratuitous Fiscal Crisis

  ‘Rules of Thumb’ About Deficits and Debt Are Bogus from Both Sides

  How Trump’s ‘Big, Beautiful’ Bill Could End the FTC As We Know It

  House SALT Deal Will Have to Change, Senate Leader Thune Says

  We Are No Longer a Serious Country

  Both Parties Need to Face Fiscal Reality

  This Republican Agenda Is Generational Theft

  Trump’s Pick for Fed’s Top Regulator Expected to Be Friendly to Wall Street

  Wells Fargo CEO Scharf Enters Growth Era With Eye on Wall Street

  Wells Fargo’s Asset Cap Has Been a Good Punishment

  US Senators Press Antitrust Enforcers Over Rocket-Redfin Deal

  An Illustrated Guide to Who Really Benefits From ‘No Tax on Tips’

  Elon Musk Left the White House, but Tesla’s Protesters Aren’t Finished

  Apple Downgraded by Needham Over AI Risks, Limited iPhone Upgrade Cycle

  California’s Rooftop Solar Dreams Are Dimming From Rising Bills

  Chart Industries and Flowserve Strike All-Stock Merger

  The Billion-Dollar Sports Business That Got Dragged Into an FBI Investigation

  Every N.B.A. Shoe Deal Is a Gamble. Converse Hit the Jackpot

  Misery Loves Company? Bleak Week: Cinema of Despair Hits a Nerve

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• CWS Market Review – June 3, 2025
  Eddy Elfenbein, June 3rd, 2025 at 4:55 pm

  (This is the free version of CWS Market Review. If you like what you see, then please sign up for the premium newsletter for $20 per month or $200 for the whole year. If you sign up today, you can see our two reports, “Your Handy Guide to Stock Orders” and “How Not to Get Screwed on Your Mortgage.”)

  The Best May Since 1990

  On Friday, the S&P 500 closed out its best May in 35 years. It was also the second-best May since 1948.

  The old Wall Street adage that we’re to “sell in May and go away” isn’t working this year. Not only was last month the best May, but it was also the best month since November 2023.

  

  For the month, the S&P 500 gained 6.15%. If we include dividends, then the market was up 6.29%. For the year, the S&P 500 is up 0.51%, and with dividends, it is up 1.06%.

  After suffering a major scare earlier this year, it’s amazing that we’re not far from new all-time highs. For the last two weeks, the S&P 500 mostly traded within a narrow range. In thirteen of the last 15 trading sessions, the S&P 500 has closed within 1% of 5,900.

  We’ve had some disappointing economic news lately. On Monday, we got the ISM Manufacturing Index. I look forward to this report for a few reasons. For one, it’s usually reported on the first business day of the month. So many econ stats lag far behind what they’re supposed to be reflecting.

  Also, the ISM is simple. They go to several companies and ask the purchasing managers if they’ve been buying more, buying less or buying the same. That’s it.

  An ISM report above 50 means that the factory sector of the economy is growing, and below 50 means it’s shrinking. The ISM for May came in at 48.5. That’s down 0.2 from April. That’s negative but not by much. The ISM recently snapped a 26-month losing streak. The ISM doesn’t reach the worrying level until it drops down to 43 or 44.

  Interestingly, the ISM Manufacturing report also showed that imports dropped to 39.9 last month. That’s the lowest since the financial crisis.

  That’s not the only negative report on the economy. Also on Monday, the Census Bureau said that construction spending pulled back in April by 0.4%. So far this year, construction spending is running 1.4% of last year’s total.

  On Tuesday, the Census Bureau said that factory orders fell by 3.7% in April. That comes after a 3.4% increase for March. Economists had been expecting a drop of 3.1%. Orders for commercial aircraft dropped by 51.5%. Motor vehicles, parts and trailers fell by 0.7%.

  The OECD made waves on Tuesday when it cut its estimate for U.S. economic growth this year to 1.6%, and to 1.5% for next year. As key factors for the downgrade, the OECD cited tariffs and the policy uncertainty. The group also said that it expects inflation in the U.S. to increase.

  To me, these are signs that the economy is expanding but at a slow pace. I don’t think we’re close to a recession, but that could change before the end of the year.

  Growth Charges Ahead and Healthcare Lags

  I’ve been surprised by the outperformance of growth stocks over value stocks over the past two months. Of course, some of this is to be expected as growth stocks love to outperform in bull markets. Still, I didn’t think it would be by this much.

  Since the April 8 low, the S&P 500 Value Index has gained 13.3% while the S&P 500 Growth Index is up by 26.8%. That’s a hefty lead for such a short period of time.

  If we dig down a little, an interesting fact about the market in May is that every sector gained except for healthcare. In fact, healthcare has been lagging the rest of the market for the last 30 months.

  In the chart below, the red line is the S&P 500 Healthcare ETF, and the blue is the S&P 500.

  

  I notice this because healthcare has usually been a very good sector to invest in, and there have been many big winners over the years. So many trends are in its favor. You have technology and demographics working together, plus a very large amount of government support.

  Stocks like Johnson & Johnson (JNJ) and AbbVie (ABBV) are going for less than 14 times forward earnings. Merck (MRK) and Pfizer (PFE) are both trading less than eight times forward earnings. Pfizer currently yields over 7.2%.

  We’re fortunate to have some solid healthcare names on our Buy List. Abbott Labs (ABT) is up more than 17% this year. Stryker (SYK) has been a great stock for us for many years.

  I won’t predict an imminent turnaround for healthcare, but I will note that historically, it lags the market occasionally but not for long. Healthcare crushed the market from 2011 to 2015. It had a very good year in 2022 as well. The relative strength of healthcare is at its lowest point in 25 years.

  Healthcare is also a quintessential defensive stock. That means it does well when the economy is flat on its back. Healthcare’s (and Value’s) day will come, but it needs a recession first.

  Costco Rallies on Earnings Beat

  Last week, I highlighted Costco (COST) and talked about why I like the company so much, if not the stock. More proof came last Thursday when the retailer posted another solid earnings report.

  For its fiscal Q3, Costco earned $4.28 per share. That beat Wall Street’s consensus by four cents per share, and it’s up from $3.78 per share one year ago. Quarterly revenue rose 8% to $63.21 billion. That was $20 million more than Wall Street had been expecting. (It says something about your company when a beat of $20 million is basically a rounding error.)

  On the earnings call, the company conceded that tariffs have been difficult for them. Specifically, Costco had to adjust their supply chain and, in some cases, raise some prices which I know they hate to do. I can’t say how much the impact has been. Costco is one of the few retailers that does not provide earnings guidance.

  

  Same store sales were up by 8%, and e-commerce sales were up by 16%. Costco could actually benefit from the tariff policies because consumers might be more willing to lock in long-term discounts by buying Costco memberships. Still, tariffs are an issue. About one-third of Costco’s sales in the United States are in goods from outside the country.

  Costco isn’t alone in fighting higher prices. Walmart (WMT) also said it will have to pass on higher costs.

  On the company’s earnings call, CEO Ron Vachris said Costco has looked for ways to reduce tariff costs while keeping prices low. He said its buyers rushed orders to get them to the U.S. ahead of tariffs. It has rerouted goods from countries with higher tariffs to non-U.S. markets. And it’s sourced more items for its private brand, Kirkland Signature, in the countries or regions where the items are sold.

  Even with tariffs, he said, Costco has lowered the price of some items including eggs, butter and olive oil. He said it’s also trying to lean into reasons that customers might sign up for or renew membership, such as extending the hours of its gas stations that sell discounted fuel.

  On Friday’s trading, the shares rallied a little over 3%. As I’ve said, Costco is a wonderful company that I’d love to buy, but I still think it’s simply too expensive. Costco is currently trading at more than 50 times next year’s earnings. I don’t think that’s reasonable.

  That’s all for now. The May jobs report is due out on Friday. Wall Street is looking for a gain of 125,000 new new jobs. I’ll have more for you in the next issue of CWS Market Review.

  – Eddy