Morning Roundup

By Mark Masterson on May 8, 2025

Good morning,

Below are the news items moving markets today:

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Executive Summary:

Happy trade deal Thursday!

Yes – we are finally getting our first tariff/trade deal announcement.  President Trump has scheduled a 10 a.m. oval office press conference to make the announcement.

Here is what we know…..Trump expected to announce trade agreement with UK:

• NY Times cited people familiar with the plans who say President Trump will announce a trade agreement with UK when he addresses press on Thursday at 10:00 ET.
• Trump had earlier teased he would be holding a Thursday morning press conference about a “major trade deal” with a “highly respected nation.”
• Both Trump and Treasury Secretary Bessent had also foreshadowed trade deal announcements this week.
• Details unclear, including terms of agreement.
• Press sources noted both sides were in discussions about lower tariff quotas for UK auto car and steel exports (Bloomberg, FT).
• UK also reportedly offered concessions on digital services tax, as well as reduced tariffs on US auto imports and agricultural products.
• Another unknown is whether it constitutes finalized agreement or framework enabling negotiations to continue over coming months.

We shall learn the details later this morning.  I’m curious to see if it is an actual deal, or just the framework for a deal.  That will be telling for future announcements.

While the deal today is important – perhaps most important is the discussions that start this weekend between the U.S. and China.

What we know at this point……

• Treasury Secretary Bessent says this weekend’s China talks are a beginning, not advanced discussions – Reuters
• China says U.S. asked for trade meeting in Switzerland, per CNBC
• President Trump says China should “reassess” who asked for a trade policy meeting.
• TRUMP: NOT OPEN TO PULLING BACK 145% TARIFFS

So – it is clear that the China talks are in the very early stages and mark the beginning of discussions.

Out of Europe this morning……

European Commission proposes tariffs on €95B of US goods if trade talks fail

• Considers restrictions on certain EU exports of steel scrap and chemical products to the US worth €4.4B.
• Proposal includes airplanes, cars and bourbon.
• EU has prioritized finding a mutually beneficial and balanced solution.
• Will also launch a WTO dispute against the US on its universal so-called “reciprocal” tariffs and tariffs on cars and car parts.
• StreetAccount notes that official press release in line with reports earlier this week.

Yesterday we had the Fed meeting.  I watched it, and can tell you it was uneventful.

Jay Powell made it clear he intends to wait on any rate decisions.  In fact, Powell used some version of the word “wait” (“waiting,” “await”) 22 times at the press conference.

Perhaps the key quote of the Fed meeting was: POWELL: I CAN’T CONFIDENTLY SAY I KNOW THE APPROPRIATE RATE PATH

Here are Fed’s Powell Key Comments:

On US Debt:

• Fed’s Powell: US debt is on an unsustainable path.

Economy

• Fed’s Powell: The economy is in a solid position.
• Fed’s Powell: 1Q GDP fall reflected unusual swing in trade.
• Fed’s Powell: Import swing complicated GDP data.
• Fed’s Powell: Consumers and businesses report lower sentiment in surveys.
• Fed’s Powell: If we look through Q1 distortions, the economy is solid.
• Fed’s Powell: Risks of higher unemployment and higher inflation have risen, but not yet in data.
• Fed’s Powell: Businesses and households are very broadly concerned and  postponing decisions.
• Fed’s Powell: If nothing happens to alleviate those concerns, would expect that to show up in data in weeks or months
• Fed’s Powell: We’re watching extremely carefully. We don’t see much evidence in actual data of a slowdown in the economy.
• Fed’s Powell: People are worried, but shock hasn’t hit yet.

Rates/Policy

• Fed’s Powell: We’re well positioned to wait for greater clarity before changing policy.
• Fed’s Powell: The costs of waiting are fairly low.
• Fed’s Powell: There is no hurry, we can be patient.
• Fed’s Powell: Our policy is modestly restrictive.
• Fed’s Powell: When things develop, we can move quickly as appropriate.
• Fed’s Powell: There are cases in which it it would or wouldn’t be appropriate to cut this year.
• Fed’s Powell: I can’t confidently say I know the appropriate rate path.
• Fed’s Powell asked about March projections for two rate cuts: Can’t make a projection now. Wait until June.

Inflation/Staglfation

• FEDERAL RESERVE – “THE RISKS OF HIGHER UNEMPLOYMENT AND HIGHER INFLATION HAVE RISEN.”
• Fed’s Powell: Running somewhat above 2% goal.
• Fed’s Powell: Inflation has come down a great deal.
• Fed’s Powell: Near-term inflation expectations have moved up.

Trump/Politics

• Fed’s Powell: Administration is doing substantial policy changes.
• Fed’s Powell: Tariffs so far are significantly bigger than expected.
• Fed’s Powell: If large increases in tariffs as announced are sustained, we will see higher inflation and lower employment.
• Fed’s Powell: Avoiding persistent inflation will depend on size and timing of tariffs, and inflation expectations.
• Fed’s Powell: Tariffs’ longer-term impact on inflation isn’t clear yet.
• Fed’s Powell: We’ll know more as the White House negotiates tariffs with other nations.
• Fed’s Powell: But we don’t know that yet, so much uncertainty over tariffs.
• Fed’s Powell: We won’t make progress on goals this year if tariffs stay.
• Fed Chair Powell says President Trump calling for the Fed to cut rates “doesn’t affect our job at all.”
• “My gut tells me uncertainty is extremely elevated” -Powell
• POWELL SAYS HE WILL NEVER ASK TO MEET WITH PRESIDENT TRUMP
• I have never sought a meeting with the President… it always comes from the President. But that hasn’t happened yet.

President Trump could not resist.  This morning he posted a comment on Truth Social about Powell……

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Articles of Interest:

• Trade/Tariffs:
  • Trump expected to announce trade agreement with UK (NY Times, Bloomberg, FT)
  • Beijing calls on US to cancel unilateral tariffs on China (Bloomberg)
  • China’s offer on fentanyl created opening for this week’s talks with US (link)
  • Trump says he will not lower tariffs on China as a way to jumpstart trade talks (Bloomberg)
  • Bessent says working with lawmakers to establish outbound investment rules for China (Bloomberg)
  • EU planning to hit Boeing and US cars with tariffs if trade negotiations fail (FT)
  • Japan weighs cooperation on US shipbuilding as part of trade negotiations (Nikkei)
• Central banks:
  • Fed stays pat on rates; sees increased risks around unemployment, inflation and economic outlook (Axios, Bloomberg, Reuters, link)
  • Tariffs cause divergence in global monetary policy with Fed having to contend with risks to inflation and growth (link, Bloomberg)
• Economy:
  • Economists scour earnings calls and private-sector data sources for signs of recession (NY Times)
  • China considers housing market overhaul to cap pre-sales (Bloomberg)
• Washington:
  • Trump plans revive idea of “most favored nation” model in bid to lower drug prices (Politico)
  • Speaker Johnson faces internal strife over ‘one big, beautiful bill’ as House Republicans clash on key issues (Axios)
  • GOP tax writer says a ‘bunch’ of tax provisions in reconciliation bill could be temporary (Politico)
  • Treasury and Commerce departments planning a sovereign wealth fund, but no final decisions have been made (Reuters)
• Geopolitics:
  • VP Vance takes more conciliatory tone on Europe, says US and Europe on same team (Reuters)
  • Pakistan vows retaliation after India strikes (FT); analysts see off ramp for both sides (NY Times); Trump offers to mediate (Axios)
  • EU urges Brussels to delay Trump tariff retaliation, prioritizing NATO security talks in June (FT)
  • Sources say Ukraine to considers shift from US dollar to euro amid geopolitical realignments (Reuters)

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Charts of the day:

One thing is certain – retail stock traders are aggressively buying the dip.

Whether that is good news or bad news remains to be seen.

• First – On April 3 as the S&P 500 dropped 4.8%: Individual investors bought $4.7 billion worth of equities, which according to J.P. Morgan data was the largest one-day inflow in a decade.
• ‘When the stock market sees red, retail investors see a buying opportunity,’ explained Dow Jones Newswire (4/4).
• Yahoo! Finance’s April 3 headline explains that ‘Retail Traders Step in as Others Flee.’ When this happens in a falling market, it is time to step out.”

Note From Bank of America below…..

The private clients at the bank are showing the most aggressive buying streak – 21 consecutive weeks – since 2008.

5 8 25

Update of the chart I posted last week.

It shows the S&P 500 at important resistance.  The red line is the 200 day moving average.  The huge – jawboning rally that saw 9 straight up days – has paused for now at that red arrow.

The market MUST get above it.  Perhaps todays trade deal will be the catalyst.

You can see in the past how the 200 day has been both support in rallys (the blue arrows), and resistance during choppy, downward markets (the red arrows)

It is To Be Determined in the coming days which will prevail.

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Quote of the day:

“We make a living by what we get, but we make a life by what we give.”

— Winston Churchill