TL;DR

S&P 500, Nasdaq hit records on US-China deal; Trump threatens Canada tariffs; core inflation rises.

Highlights

• • S&P 500 and Nasdaq closed at record highs, led by tech and optimism on US-China trade 2.
• US-China trade agreement confirmed, easing rare-earth supply risks and reversing prior tariff-driven market losses 2.
• Trump halts US-Canada trade talks, threatens tariffs after Canada enacts 3% digital tax on large US tech firms 111.
• US and EU move closer to a trade deal ahead of the July 9 tariff deadline; talks could extend to Labor Day 712.
• Core US PCE inflation rose to 2.7% in May (above forecast); personal income fell 0.4%, real consumption down 3.
• Atlanta Fed GDPNow cuts Q2 US growth forecast to 2.9% on weaker inventories and spending; Goldman Sachs sees 3.9% 17.
• Oil heads for worst week since 2023 as Israel-Iran cease-fire removes war premium; OPEC+ likely to hike output again July 6 45.
• Microsoft delays Maia AI chip to 2026, increasing reliance on Nvidia for AI workloads 8.
• Trump escalates criticism of Fed Chair Powell, pushing for rate cuts; Fed’s Kashkari still expects two cuts in 2025, first likely September 918.
• US expended 15–20% of global THAAD missile-defense stockpile during Israel-Iran conflict, raising replenishment concerns 14.
• Supreme Court limits nationwide injunctions, enabling Trump administration to proceed with previously blocked policies 13.
• Trump touts US crypto sector but refuses to commit to divestment as Congress debates new regulation 1016.

Commentary

US equities finished at record levels, driven by confirmation of a US-China trade agreement that alleviates supply chain risks, particularly around rare-earth minerals 2. Tech led the rally, with Nvidia’s valuation approaching $3.8 trillion and Microsoft lagging after delaying its Maia AI chip to 2026 8. The market’s rebound has erased nearly all losses from the April tariff shock, but attention is now shifting to the upcoming July 9 tariff deadline and the Fed’s next moves 220.

Trade policy remains a key risk. Trump’s abrupt halt to US-Canada trade talks and tariff threats following Canada’s new digital tax on US tech giants add uncertainty for cross-border supply chains and the tech sector 111. Meanwhile, US-EU negotiations appear constructive, and the White House may extend the July 9 deadline to Labor Day, reducing immediate tariff risk 712. Traders should monitor for any escalation or resolution in these talks, as headlines could quickly shift sentiment 20.

Macro data was mixed. Core PCE inflation ticked up to 2.7% (above expectations), while personal income and real consumption both fell, signaling softer Q2 growth 3. The Atlanta Fed cut its Q2 GDP forecast to 2.9%, though Goldman Sachs remains more bullish 17. The Fed remains cautious, with Kashkari reiterating that rate cuts are likely but dependent on data and tariff impacts 18. Trump continues to pressure the Fed for cuts, adding to policy uncertainty 9.

In commodities, oil is sharply lower as the Israel-Iran cease-fire removes the war premium and OPEC+ prepares for another output hike 45. Energy equities and related credits may remain under pressure if supply growth outpaces demand. US defense readiness is in focus after significant THAAD interceptor usage in the Middle East, though this has not yet spilled over into broader risk assets 14.

Crypto remains volatile as Trump touts US leadership but refuses to divest personal holdings, clouding the regulatory outlook 1016. The Supreme Court’s limit on nationwide injunctions could accelerate the administration’s policy agenda, but market impact appears limited for now 13.