Macro Events & News
The markets extended their rally this week as tariff concerns eased following a temporary de-escalation in U.S.-China trade tensions, with both sides agreeing to reduce the prior triple-digit tariffs. The administration also hinted at more trade deals to come once the President returns from his Middle East trip, where agreements were reached allowing Saudi Arabia to purchase advanced AI chips and support for the UAE Stargate project, adding fuel to the semiconductor and AI rally. Softer-than-expected inflation data, with both the Consumer Price Index (CPI) and Producer Price Index (PPI) coming in below forecasts, further reinforced the bullish sentiment. April Retail Sales data released on Thursday showed a sharp slowdown from the March surge, rising just 0.1%, reinforcing the view that earlier demand was likely pulled forward due to tariffs.
It was a relatively quiet week for earnings, with Walmart (NYSE:WMT) headlining alongside Chinese names JD.com (NASDAQ:JD) and Alibaba Group (NASDAQ:BABA). Results were largely in line with expectations, but Walmart’s comments about raising prices due to tariffs should raise some concern. And while Alibaba’s earnings showed growth, they fell short of expectations, adding to the mixed signals for investors focused on macroeconomic trends.
The upbeat market tone took a sharp turn late Friday when Moody’s issued a surprise downgrade to the U.S. government’s credit rating, sparking a roughly 1% drop in after-hours trading. This could cast a shadow over the coming week, as the U.S. Treasury faces the challenge of rolling over more than $5 trillion in maturing debt in the coming months, potentially at significantly higher rates. The ripple effects of the downgrade will likely extend across all sectors.
The 10-year Treasury yield was active this week pushing past 4.5% before retreating back under 4.4% before rising again after the Moody’s downgrade. The VIX fell to 17.24.
All the major indexes had one of their best weeks this year: the Dow up 3%, the S&P 500 up 5%, and the Nasdaq was up 7%.
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Adobe Inc (NASDAQ:ADBE) moved higher this week, buoyed by positive market sentiment and technical momentum. Notably, short interest fell by over 18%, potentially alleviating some of the recent downward pressure.
august bear notes
As anticipated, Adobe was at a critical support level at the start of the week, needing a broader market catalyst to break out. The easing of trade tensions provided just that, lifting the overall tech sector. However, the late-week Moody’s downgrade could complicate this momentum, as rising yields could weigh on growth-oriented names like Adobe. Investors should keep an eye on how this plays out in the coming sessions.
14% ▲
Advanced Micro Devices (NASDAQ:AMD) surged this week, driven by a series of positive catalysts, including progress in U.S.-China trade talks, a $6 billion share repurchase authorization, softening export restrictions, and a multi-billion dollar Middle East data center partnership. A Barclays upgrade added to the momentum, leading to a sharp recovery from recent lows.
august bear notes
AMD is riding high on a powerful wave of positive news this week. The most impactful development is undoubtedly the Trump administration’s cancellation of the Biden administration’s AI Diffusion Rule, a policy that would create cumbersome three tiers of access for nations seeking AI chips and threatened international sales. The landmark $10 billion alliance with Saudi Arabia’s AI initiative, Humain, further solidifies AMD’s position as a key player in the AI revolution and confirms the strong appetite for their technology. There is considerable runway to the $227 all-time high, so AMD may still be seen as trading at a discount.
2% ▲
Costco Wholesale (NASDAQ:COST) continued its slow, steady climb this week, though its movement lagged the broader market despite the announcement of a partnership with Affirm to offer Buy Now, Pay Later (BNPL) options to online shoppers.
august bear notes
The muted response to the easing of U.S.-China tariffs is surprising, as Costco stands to benefit directly from lower import costs. The Affirm partnership is a positive step in digital transformation but is unlikely to be a major revenue driver given its limited application to online sales, a relatively small portion of Costco’s overall business. Investors should see this as a long-term holding rather than a short-term trading opportunity, particularly if broader market sentiment turns cautious.
14% ▲
Micron Technologies (NASDAQ:MU) rose this week, riding the wave of positive AI sector news, including the Middle East’s commitment to AI infrastructure investment and the rollback of Biden-era export restrictions, despite no significant company-specific announcements.
august bear notes
Micron has staged a notable recovery from its mid-$60s lows, fueled by its pivotal position as a memory supplier for burgeoning AI solutions from industry giants like NVIDIA and AMD. The company’s globally diversified manufacturing footprint offers a distinct advantage in the current trade landscape. However, while near-term demand for Micron’s memory in the AI sector is exceptionally robust, much of the anticipated revenue growth for 2025 appears to be priced in, given the full allocation of current supply. Although Micron is actively pursuing production capacity expansion, the tangible impact of these efforts on future supply and revenue remains to be seen. Consequently, significant upside potential at current levels may hinge on the performance of its other business segments, particularly the Embedded unit, which provides essential components powering advanced driver-assistance systems (ADAS) in the automotive sector.
