Inflation Cools, Trump Heats Up

In a moment of cautious optimism, U.S. markets began the day with a muted rally, buoyed by cooling inflation and the ever-theatrical rhythms of Trump-era geopolitics. A softer-than-expected Consumer Price Index reading lent Wall Street a sense of temporary calm, while investors resumed their uneasy waltz with a familiar, if no less erratic, political narrative.

The mood on Wall Street brightened this morning, if only slightly, as futures inched upward on a gentle tailwind of geopolitical détente and tamer-than-expected inflation figures. The S&P 500 futures edged up by 0.2 percent, the Dow Jones Industrial Average futures crept ahead by 0.1 percent, and Nasdaq futures matched the S&P’s modest advance.

The latest reading from the Bureau of Labor Statistics offered a small but significant surprise: the Consumer Price Index rose by just 0.2 percent in April, following a rare 0.1 percent dip the previous month. Economists polled by Bloomberg had penciled in a slightly brisker 0.3 percent rise. In a market hypersensitive to the scent of inflation, even the subtlest cooling is perceived as good news.

For markets, Mr Trump’s second presidency is beginning to look less like a disruption and more like a restoration. The financial tumult that followed his early executive orders has, for now, been absorbed. Wall Street is once again responding to a familiar Trumpian mix: bluster, chaos, and ultimately, pragmatism.

Investors are learning to appreciate a version of Mr Trump who is still combative, but quicker to retreat when faced with economic realities. He may lack finesse, but his approach - direct, divisive, unapologetic - is effective. In an era where political consensus has withered, such a bulldozer style of governance is oddly reassuring. It gives the impression, however illusory, that someone is at the wheel - regardless of how many red lights are run or toes (and allies) are crushed in the process.

This embrace is not without reservation. Bond markets remain uneasy. Treasury yields edged higher yesterday, despite April inflation data coming in slightly lower than expected. High interest rates continue to weigh on the economy. And America's yawning fiscal deficit remains unaddressed.

Concerns about recession linger. In Bank of America’s latest survey of large fund managers, 26% still expect a US downturn - down from 42% in April, but hardly comforting. On Polymarket, a predictive platform that has at times outperformed traditional financial houses, the probability of a recession stands at 39%. That figure may not dominate headlines, but it reflects a persistent undercurrent of doubt.

Meanwhile, Europe's markets have outpaced their American counterparts. The Stoxx Europe 600 is up 7% in 2025, still comfortably ahead of the S&P 500. German and Spanish indices, in particular, have performed well, each gaining 18% this year. But markets heavy in pharmaceuticals - such as Denmark, Belgium and Switzerland - have underperformed amid escalating White House rhetoric against high drug prices.

Investors are also tilting back toward American tech giants and large-cap stocks, a shift that should benefit the big US indices in the months ahead. 

On the geopolitical front, Mr Trump is touring the Middle East, touting hundreds of billions of dollars in promised financial commitments from Gulf nations to the United States. Eyes are also on Turkey, where talks are scheduled Thursday to broker a ceasefire between Russia and Ukraine. Washington’s trade diplomacy is hitting friction elsewhere: China has voiced displeasure with the terms of the UK-US trade agreement, a reminder that America’s commercial assertiveness extends well beyond tariffs.

Monetary policy remains in the spotlight. Several Federal Reserve officials are scheduled to speak today, including Christopher Waller, Philip Jefferson and Mary Daly later in the day. Their remarks will be parsed for clues on the path of interest rates.

In Asia-Pacific, markets were mixed. European markets are relatively flat.

Today's economic highlights:

On today's agenda: in Germany, January's PPI, the harmonized CPI of the European Union, and the CPI; In the United States, the DOE crude oil inventories. See the full calendar here.

• Dollar index: 100,670
• Gold: $3,182
• Crude Oil (BRENT): $66.00 (WTI) $62.70
• United States 10 years: 4.47%
• BITCOIN: US$103,718

In corporate news:

• Stellantis suspended its dealer structure overhaul in Europe, updated Italy production plans amidst CEO succession.
• Tesla board considers a new compensation package for CEO Elon Musk amidst various company activities.
• UnitedHealth Group CEO Andrew Witty resigned, leading to a stock decline after suspending the annual forecast.
• Southwest Airlines announced its 185th quarterly dividend, seeking to expand its international network.
• Sony Group reported higher quarterly earnings, plans share buyback, and anticipates flat 2025 operating profit.
• Microsoft will lay off 3% of its workforce, according to CNBC.
• Verizon will invest $5 billion in US small business suppliers over the next five years.
• The US is considering allowing the United Arab Emirates to purchase more than one million advanced Nvidia chips, according to Bloomberg.

Today's key earnings: Cisco Systems, CoreWeave, Steris, Dynatrace...

Analyst Recommendations:

• Abbvie Inc.: Citi downgrades to neutral from buy with a target price reduced from USD 210 to USD 205.
• Consolidated Edison, Inc.: KeyBanc Capital Markets downgrades to underweight from sector weight with a target price of USD 90.
• Entergy Corporation: KeyBanc Capital Markets upgrades to overweight from sector weight with a target price of USD 85.
• Epam Systems, Inc.: Zacks upgrades to neutral from underperform with a price target raised from USD 133 to USD 196.
• Exelon Corporation: KeyBanc Capital Markets downgrades to underweight from sector weight with a target price of USD 39.
• Franklin Resources, Inc.: TD Cowen upgrades to buy from hold with a target price raised from USD 21.50 to USD 27.
• Ge Aerospace: William O'Neil & Co Incorporated upgrades to buy from dropped coverage.
• Halozyme Therapeutics, Inc.: Morgan Stanley downgrades to equalwt from overwt with a target price reduced from USD 73 to USD 62.
• Kkr & Co. Inc.: Morgan Stanley upgrades to overweight from equalwt with a target price raised from USD 120 to USD 150.
• Merck & Co., Inc.: Citi downgrades to neutral from buy with a target price reduced from USD 115 to USD 84.
• Onto Innovation Inc.: Zacks downgrades to underperform from neutral with a price target reduced from USD 134 to USD 80.
• Pvh Corp.: Jefferies upgrades to buy from hold with a target price raised from USD 70 to USD 105.
• Rivian Automotive, Inc.: Jefferies downgrades to hold from buy with a target price of USD 16.
• Servicenow, Inc.: William O'Neil & Co Incorporated upgrades to buy from dropped coverage.
• Southern Company: KeyBanc Capital Markets downgrades to underweight from sector weight with a target price of USD 78.
• Teradyne, Inc.: Zacks upgrades to neutral from underperform with a price target raised from USD 64 to USD 87.
• The Carlyle Group Inc.: Zacks upgrades to neutral from underperform with a price target raised from USD 30.50 to USD 48.
• Toast, Inc.: William O'Neil & Co Incorporated upgrades to buy from dropped coverage.
• Uber Technologies, Inc.: William O'Neil & Co Incorporated upgrades to buy from dropped coverage.
• Ul Solutions Inc.: Citi upgrades to neutral from buy with a price target raised from USD 60.50 to USD 71.
• Vulcan Materials Company: Baptista Research downgrades to hold from outperform with a price target raised from USD 298.70 to USD 300.50.
• Shopify Inc.: William O'Neil & Co Incorporated upgrades to buy from dropped coverage.