In the absence of the Europeans, U.S. indices seized the opportunity to notch their eighth consecutive session of gains. The Nasdaq even closed higher than its level on April 2. The infamous LIBERATION DAY has been erased from the records, and once again the recovery is spectacular. One might wonder how long this can last: rebounding massively while all the economic indicators are pointing toward a recession surely has to come at a cost someday—unless the market knows more than it’s letting on, as if it’s anticipating something from China and something from the Fed.
The Jobless Claims released yesterday showed an increase in unemployment filings, the ISM index showed a greater contraction than last month—but it didn’t matter because it was a “less bad” contraction than economists had expected—phew, dignity preserved. Add to that Wednesday’s numbers, and you don’t need to be an astrophysicist to understand that the economy is holding its breath and it’s getting really tough. This afternoon we’ll get the U.S. employment numbers, with the market expecting 133,000 job creations versus 228,000 last month. The unemployment rate is expected to remain unchanged at 4.2%. But watch out for revisions—don’t forget that the Bureau of Labor Statistics has an IQ well below average and often manages to botch the numbers spectacularly.
But beyond expectations, it’s clear that the market seems to be heading in a direction completely opposite to what logic would dictate. In a normal world, if you had an avalanche of economic data like we’ve seen this week, everyone would panic, fearing that recession is right around the corner and we’re all going to die in terrible agony. But here we are, not living in a normal world. The U.S. is run by a guy who likes to conduct real-time economic experiments and who changes his mind as often as he changes shirts—depending on yesterday’s golf score—and ever since he took office, we’ve been strapped into a rollercoaster for the next four years. In this environment, the market can no longer operate rationally.
Rates or vice grip?
Today, economic figures that point toward a recession no longer scare anyone, because the only takeaway is that THE FED WILL HAVE TO CUT RATES AND THAT’S THAT! Never forget that we’re in a market that feeds on rate cuts and dovish comments from the Fed. Never forget that between October 2023 and September 2024, we saw indices rise by 40% purely on expectations that the Fed WOULD CUT rates—40% gains on hopes, before finally getting one actual cut. Right now, we’re watching the U.S. economy slowly crumble before our eyes, and the only thing people can say is: “GREAT, the Fed is going to have to cut rates.” I’m beginning to think this relationship between the stock market and the Fed’s interest rates is becoming toxic.
Anyway, yesterday, while Europe was closed to “celebrate” LABOR by doing nothing, the U.S. once again closed higher—despite economic data that continues to scream bloody murder. Still, even though rate cut hopes remain high, eyes were elsewhere yesterday. They were on Microsoft and Meta. These two tech behemoths delivered stellar earnings, and investors focused on this good news, which pushed Microsoft up more than 7% and Meta more than 4%. Microsoft even regained the title of “world’s most valuable company.”
Then, toward the end of the session, EVEN THOUGH THERE WAS NO NEWS, NO TWEET, NO OFFICIAL RELEASE, the market suddenly dipped sharply—still finishing in the green, but less so. And this, just before the earnings releases from Amazon and Apple, which—as you may have guessed—were not great. We’re not quite there yet, but these market moves based on nothing at the end of the session, which just “happen” to anticipate good or bad after-hours earnings, are starting to feel a little weird. But apparently, no one’s bothered, so why not take advantage?
In summary:
We had another solid session of gains in the U.S.—while Europe was closed. The end of the session was a bit spoiled by a strange sell-off, followed by lukewarm earnings from Apple and Amazon, all amidst an economy that seems to be gradually falling apart, and McDonald’s publishing quarterly results that suggest even THEY are seeing customers think twice before ordering a Double Big Mac. And it’s not because of cholesterol—it’s because of money!!! But it doesn’t matter, because the Fed is going to cut rates. Let’s not ruin the party—let’s save that topic for next week!
All Quiet on the Eastern Front
This morning in Asia, China is closed for Labor Day too. Except it’s not quite the same celebration as ours—although beating up protesters seems to be just as popular with the authorities over there. The Nikkei is up 0.68% and Hong Kong is jumping 1.51%, thanks to THE NEWS OF THE DAY, which suggests—and I quote:
“China is evaluating a U.S. proposal for dialogue on tariffs.”
And just like that, China peeks out of its den to say it’s “considering the advances” from the U.S. to resume trade negotiations. Translation: Washington has been knocking at the door for days, and Beijing is like, “We’ll see if we bother answering… or not.” According to the Chinese Ministry of Commerce—which never drops this kind of line by accident—the Americans have made several attempts to reconnect “through the appropriate channels,” hoping to talk tariffs. So now, everyone’s holding their breath because if the world’s two biggest economies seriously get back to talking, that might finally ease this never-ending trade war that’s been messing up everyone’s lives and really starting to sour the mood at the G20 table.
But for now, we’re still in “strategic reflection” mode on China’s side, which means nothing will happen this weekend—except maybe a vague statement or a nasty tweet (or both). But markets are so desperate for a reconciliation that they’ll jump at the slightest diplomatic smile. Even if it’s fake. Even if it’s photoshopped. Futures are already taking off this morning.
Then there’s the other big news of the day: Trump’s outburst about oil. The U.S. President, with all the diplomacy and empathy he’s famous for, declared that ANY COUNTRY BUYING OIL FROM IRAN WILL NO LONGER BE ALLOWED TO DO BUSINESS WITH THE U.S. That means: no more Starbucks coffee, no more iPhone imports, and worst of all—no more McDonald’s. Ever. Naturally, the potential disappearance of Iranian production from the oil market caused prices to spike to nearly $60 a barrel. Once again, Trump doesn’t want to shut down global oil completely—he just wants everyone at the negotiating table with a knife to their throat. And meanwhile, oil prices are being yanked in every direction. Gold is at $3,262 and having its worst week in ages, while Bitcoin is slowly but surely approaching $100,000. As of now, the king of crypto sits at $97,000 and change.
And now: APPLE & AMAZON
So. As you probably know, Apple and Amazon released their quarterly earnings last night. Here’s the sugar-coated version of the results, which—spoiler alert—didn’t shine as brightly as their two cousins the night before…
Starting with Apple: the numbers were good, BUT. And lately, it’s the BUT that really matters…
• Yes, Apple posted $24.8 billion in net profit for the quarter, up 5%, with revenue at $95.4 billion, well above expectations.
• Yes, iPhone sales are still up, +1.9%, and services (Apple Music, TV, iCloud, etc.) are booming with a +12%.
• Yes, they announced a $100 billion stock buyback and increased the dividend.
• And yes, Tim Cook is handing out candy to everyone.
And now, after all those YES!!!, here come today’s BUTs:
• BUT there’s a $900 million cost hit due to Uncle Donald’s tariffs.
• BUT iPhones will now be produced in India and iPads in Vietnam, just to dodge the 145% import tax slapped on entry into the U.S.
• But revenue is down in China? -2%.
• But now the Chinese are buying local—Xiaomi speaks to them more than Cupertino does.
Result: the stock dropped 3% after the bell. Just goes to show that even a great report gets wrecked when you mention “tariff cancer.”
Over at Amazon, the boxes are flying off the shelves—but the Cloud is catching its breath.
They reported $155.7 billion in revenue, just slightly above expectations.
• Q2 guidance is between $159 and $164 billion—again, better than consensus.
• BUT the good vibes didn’t last long.
• Their golden goose, AWS, isn’t laying eggs like before: +17% “only,” at $29.27 billion, when the market expected $30.9 billion.
Meanwhile, Microsoft Azure hits its targets and Google Cloud is keeping pace, while Amazon’s cloud feels more like a wheezing frog than a charging bull.
To pile on, third-party sellers working with Amazon are starting to panic—some are boycotting Prime Day because of the tariffs. Translation: “We’re okay selling stuff, just not if it costs us a kidney per package.”
Result: Amazon -2% after hours, because when your cloud division looks like it’s gasping for air next to Microsoft’s bull run, Wall Street has zero mercy.
In conclusion:
• Apple beats expectations but gets slapped down due to Trump’s tariffs, China’s cold shoulder, and products migrating to Hanoi and Bangalore.
• Amazon reassures on retail but stumbles on cloud, and tariffs are turning e-commerce into a minefield.
• Post-close market mood: Apple -3%, Amazon -2%. Vibe: “Not the end of the world, but it sure ain’t party time.”
Amazon and Apple yesterday were like two cyclists who just crushed the Alpe d’Huez on a moped’s speed—only to get suspended for doping right after the finish line. The numbers were strong, but the markets don’t care: today, the only thing that matters is how much the trade war is going to cost. In the end, the biggest news of the day might just be China cracking the door open to Uncle Scrooge…
And now, on to the jobs data
In a few hours, we’ll find out whether the NFP numbers are as lousy as the rest of the recent economic figures. Personally, I’m increasingly convinced they’ll be bad—because it’s in the air—and that way, it’ll be easier to lower interest rates without Powell feeling like he got strong-armed. Besides the NFPs, we’ll get the CPI in Europe—but I think it’s safe to say no one really cares. We all know everything is “just fine” in Europe and that Lagarde has everything totally under control… We’ll also be watching the quarterly earnings from Exxon and Chevron before they head off for the weekend.
So here we are, entering the month of May in full swing—we don’t really believe in the old saying “Sell in May and go away” anymore, but maybe we keep it in the back of our minds. And if we had to sum all this up in a few lines, it’d go something like this:
China’s opening the door to Trump for talks, while Apple is suffering from China and Trump’s tariffs, and Amazon’s cloud engine is sputtering. Iranian oil has turned into kryptonite, and buying it might cost you your business superpowers with the U.S. Meanwhile, the U.S. economy is falling apart before our eyes like a zombie in The Walking Dead, and the NFPs could be the final blow that paves the way for the next rate cut.
Have a great weekend, and we’ll be back Monday morning for more adventures—just to see if Trump lost it during his two days off.
See you Monday!
