Closing Volume

- NYSE volume 14% below its one-month average;

- NASDAQ volume 25% below its one-month average; 

- VIX index: down 9.20% to 16.78 

Breadth

S&P 500 Sectors

% Movers

Nasdaq 100 Heat Map

As always, thanks for providing me with this platform today, all week and since 1997.

I hope this week's output was helpful to your trading and investing.

Enjoy the weekend.

Be safe.

Dougie out.

P.S. A big thanks to Pete and our amazing editors who wake up in the wee hours for The Diary to commence.

From Peter Boockvar:

Positives,

1) In the payroll report, the workweek at 34.3 was as expected and unchanged m/o/m. Average hourly earnings were up by .4% m/o/m, one tenth more than expected and with a 3.9% y/o/y gain. Combining the two saw average weekly earnings higher by .4% m/o/m and 3.9% y/o/y.

2) In the ADP jobs report, there wasn’t much change in wages from April but still pretty good with ‘job stayers’ seeing a 4.5% wage gain, the same pace last month. For ‘job changers’, wages rose 7% vs 6.9% in the month before.

3) Challenger said hiring plans did increase by 57% y/o/y but also said, “it remains historically low when compared to pre-pandemic and early-pandemic years.”

4) The April job openings count was 7.39mm, up about 200k m/o/m, above the estimate of 7.1mm and vs 7.48mm in February. The hiring rate rose one tenth to 3.5% after four months of 3.4% prints. The quit rate though slipped one tenth to 2%.

5) Mathematically good for GDP but obviously tariff distorted, the April trade deficit plunged to $61.6b because of a 16.3% collapse in imports, well more than offsetting the 3% rise in exports. The estimate was $66b and down from $138b in March.

6) Steel companies get the benefit of 50% tariffs on their competitors. The impact is more mixed for aluminum companies.

7) From Dollar General: Comps were up 2.4% y/o/y in the quarter, "driven by growth of 2.7% in average basket, including relatively similar increases in average unit retail price per item and average items per basket. Customer traffic slightly decreased by .3% during the quarter, but remained strong on a two year stack as we lapped the 4.3% traffic increase from the prior year's first quarter. We are excited to see broad based category growth during the quarter with positive comp sales in each of our consumables, seasonal, home and apparel categories."

8) From Dollar Tree: "Each week, more shoppers across a diverse range of economic and demographic backgrounds are responding to the appeal of Dollar Tree's unique value, convenience, and discovery proposition...New customers and increasing trip frequency are both driving share gains…Trade-in trends remains strong as we attract customers from other retail channels. In recent quarters, higher income customers have been a meaningful growth driver for us. In Q1, we had measurable sales improvement across all income levels, with the most growth coming from our higher income customers. In particular, we saw a meaningful traffic increase from customers with household incomes of more than $100,000, demonstrating Dollar Tree's broad appeal."

9) From Five Below: Their comps grew 7.1% and via increased transactions of 6.2% and comp ticket of .9%. Their strategy, "Providing fresh, trend-right, and quality products at amazing value is what we are known for and what makes us special."

10) From Cracker Barrel: "In our third quarter, as we noted on the last call, February started out a bit challenged as a result of both weather and some consumer uncertainty. Then we saw improvements into March and into April. And then we're particularly pleased that improvement continued further into Q4."

11) From American Express: On business, "It's really been consistent. What we've seen through May is what we saw through April and what we saw in March and in the first quarter, and so goods and services consistent. Airline, pretty consistent, and we said that was down a little bit. I think lodging gets a little more challenged, but restaurant is still very, very strong. And if you look at the individual segments, international, SME, and US consumer, pretty consistent to the way they are. So, unless something crazy happens in June, I think when we start talking about this in July, we're going to say, the second quarter pretty much looked just like the first quarter did, FX adjusted, and all that other kind of stuff."

12) From MasterCard: They reported earnings on April 28th, so this view is obviously a month later. "Now, if you include the first three weeks of May, we see exactly the same. So, spending trends have largely been the same, Now, if you look at this a little bit closer and then you'd say, why is that? If you look at the headlines, if you look at the sentiment surveys, and we just saw one yesterday, it was surprisingly positive. So, you see a lot of rhetoric there, and you see a lot of headlines, and it hasn't really translated into consumer behavior. So, why is that? Because the underlying support of the labor market continues to be there. We still have low unemployment, and we have wage growth that is kind of keeping up with inflation, above inflation. So, purchasing power is solid, which are both key drivers."

13) From Signet Jewelers: "We delivered positive same store sales growth each month of the quarter, and into May, by bolstering our offerings at key price points and continuing the evolution of our assortment. Our three largest brands - Kay, Zales, and Jared - all saw sequential comp sales improvement from the fourth quarter on higher margins, highlighting the impact of our outsized focus on our larger brands."

14) From Broadcom: Their AI chip business is seeing huge growth, up 46% y/o/y in the quarter just reported and in the current quarter they are in they see 60% y/o/y growth.

15) Depending on one’s view of the Canadian economy, this could have been a negative instead. The Bank of Canada kept policy unchanged as expected at 2.75%.

16) The Reserve Bank of India cut rates by 50 bps to 5.50% where only 25 bps was expected. While India is already seeing solid growth, the RBI Governor said "Our aspiration is to grow at 8% and we would like to grow as fast as possible."

17) China's May private sector services Caixin PMI rose a touch to 51 from 50.7 and as expected. Caixin said, "Overall sentiment remained positive in the Chinese service sector midway through the 2nd quarter of 2025. Firms were hopeful that improvements in global trade conditions and business development plans could help to spur sales and boost activity levels over the next 12 months. The level of confidence strengthened since April, but remained below average."

18) The May Eurozone services PMI was revised up from its previous read to 49.7 from 48.9 but still down from 50.1 in April and is the lowest since last November. S&P Global said "A shaper drop in international orders was partly to blame, with export sales also falling to the quickest degree since November last year."

19) The UK May services PMI held above 50 as it was revised to 50.9 from 50.2 initially and up from 49 in April and vs 52.5 in March. S&P Global said, "The service sector regained its poise in May as receding concerns about US tariffs, recovering global financial markets and greater confidence among clients all helped to support output growth."

20) The Eurozone May CPI was higher by 1.9% y/o/y, down from 2.2% in the month before and one tenth less than expected. Helping to keep a lid on the headline was the 3.6% y/o/y drop in energy prices. The core rate slowed to 2.3% y/o/y from 2.7% and that was also one tenth below the estimate.

21) China's state sector weighted manufacturing PMI rose a .5 pt to 49.5 as expected. The non-manufacturing component remained above 50 at 50.3 vs 50.4 in the month before.

Negatives,

1) Payrolls in May rose a net 139k, 13k above expectations but the two prior months were revised lower by a combined 95k. There was a large decline of 696k jobs in the household survey but is very volatile month to month. As this though matched the 625k person decline in the labor force, the unemployment rate held at 4.2% for a 3rd straight month. Helping to explain the big drop in the labor force was the participation rate that fell to 62.4% from 62.6% and that matches the lowest since December 2022. The participation rate for the key 25-54 yr old age cohort also fell two tenths m/o/m to 83.4% but after rising by .3% last month. Also, there was a big drop in the ‘job leavers’ category. This fell to 9.8% from 11.8% and that’s the least since May 2021. Of note too, the number of people who are working part time because they can’t find full time work rose by 125k people to the most since April 2019. Smoothing out the monthly data has the 3 month headline payroll average at 135k vs the 6 month average of 157k and the 12 month average of 144k.

2) ADP said there were just a net 37k private sector jobs created in May after a 60k person rise in April. That was well under the estimate of 114k. Small business not just reigned in their hiring, they shed workers on a net basis with companies with less than 50 workers losing 13k jobs. Also of note, large companies, those with more than 500 employees, let go a few thousand. So, the only area of job growth was the 49k person gain for medium sized businesses.

3) For the 2nd week in a row initial jobless claims popped above expectations. For the week ended May 31st they totaled 247k, 12 more than expected and follows 239k last week (revised down by 1k) . The 4 week average shifted up to 235k from 231k and that is the most since late October. Continuing claims were 1.904mm, about as forecasted and down 3k w/o/w but still around the highest since November 2021.

4) Challenger reported its monthly job cut/hire data and said May job cuts were up by 47% y/o/y. They said, “Tariffs, funding cuts, consumer spending, and overall economic pessimism are putting intense pressure on companies’ workforce. Companies are spending less, slowing hiring, and sending layoff notices.” Challenger said the ‘DOGE Impact’ “remains the leading reason for job cut announcements in 2025.” The second reason cited, “market and economic conditions” followed by “closings of stores, units, or plants.”

5) The May ISM services index fell to 49.9 from 51.6. This is the weakest print since June 2024. The Business Activity component fell to exactly 50 from 53.7 in April and 55.9 in March. In terms of industry breadth, 10 saw growth out of 18 surveyed vs 11 in April. Its peak this year was 14. Eight industries saw a contraction in their business versus 7 last month. ISM said, “May’s PMI level is not indicative of a severe contraction, but rather uncertainty that is being expressed broadly among ISM Service Business Survey panelists…Respondents continued to report difficulty in forecasting and planning due to longer-term tariff uncertainty and frequently cited efforts to delay or minimize ordering until impacts become clearer.”

6) After the rush to buy autos in March (17.7mm) and April (17.27mm) to save money ahead of the tariffs, May sales saw a cool down to 15.65mm. These are seasonally adjusted annualized rate figures. The estimate was 16mm. There was also less vehicles to choose from according to Wards Automotive. "The drop in inventory, which at the end of last month was down y/o/y for the first time in nearly three years, helped explain a 10% decline in incentive spending in May from April, as there was less pressure to move stock off dealer lots despite the sharp slowdown in demand. That dynamic likely continues not just in June, but into Q3, as most automakers do not currently appear anxious to raise production levels enough to fully replace declining stock levels."

7) From the Fed’s Beige Book on the economy: "Reports across the twelve Federal Reserve Districts indicate that economic activity has declined slightly since the previous report. Half of the Districts reported slight to moderate declines in activity, three Districts reported no change, and three Districts reported slight growth." Also, "On balance, the outlook remains slightly pessimistic and uncertain, unchanged relative to the previous report. However, a few District reports indicate the outlook has deteriorated while a few others indicate the outlook has improved."

8) The NY Fed released its survey of tariffs and how companies are responding. They said, "about three-quarters of businesses facing tariff induced cost increases in both the manufacturing and service sectors passed along at least some of these higher costs to their customers by raising prices. Almost a third of manufacturers and about 45% of service firms reported fully passing along all tariff-related cost increases, while 45% of manufacturers and a third of service firms said they passed along some but not all of the cost increase."

9) Container rates exploded higher this past week and are up now 5 weeks in a row in the rush to procure whatever is needed. The Shanghai to LA container price spiked 57% w/o/w, by $2,138 to $5,876. The Shanghai to NY journey will now cost you $7,164, up 39% w/o/w, by $1,992.

10) Elevated mortgage rates still, resulted in a 4.4% drop in weekly purchase applications while refi's were down by 3.5% w/o/w.

11) Steel and aluminum tariffs are now up to 50% a big cost challenge to users of these materials.

12) From Dollar General: "During our recent customer survey work, 25% of DG customers reported having less income than they did a year ago and nearly 60% of our core customers noted that they felt the need to sacrifice on necessities in the coming year. While our core customer remains financially constrained, we have seen increased trade in activity from both middle and higher income customers. Our data shows that new customers this year are making more trips and spending more with us compared to new customers from last year, while also allocating more of their spend to discretionary categories. We believe these behaviors suggest we are continuing to attract higher income customers who are looking to maximize value while still shopping for items they want and need."

13) From Lululemon: “my sense is that in the US, consumers remain cautious right now, and they are being very intentional about their buying decisions… we did see a decline in store traffic, particularly in the US as we moved from Q4 into Q1. We did see that moderate somewhat, but we did still for the first quarter see a lower traffic trend in stores relative to Q4. Conversion trends remained relatively consistent, a little bit of a decline y/o/y. And then also, we did see an uptick in terms of average dollars per transaction in the first quarter. And then in terms of how it's progressing April into May, we don't share specifics on Q2, but I would say nothing materially different."

14) From Brown Forman: "Now, turning to our fiscal 2026 outlook; we believe the operating environment will remain volatile and visibility low due to geopolitical uncertainties and global macroeconomic conditions, particularly with regard to the tariff environment. This environment will create sustained levels of consumer uncertainty, which we believe will lead to another year of below historical total distilled spirits trends. We continue to expect that the behavior of the consumer and the level of trade inventories will not change meaningfully during the 2026 fiscal year.” Generally their view on the consumer, "I still would argue that it is the consumer and their wallet just doesn't have as much money in it. You're right, they're spending money on things like vacations and lodging and other things like that. But then when it trickles down and they go to the grocery store, I think in some cases, spirits has fallen out of the basket a little bit, and that isn't obviously great."

15) From Thor Industries: "We expect the fourth quarter of our fiscal 2025 and the first quarter of our fiscal 2026 to be challenging. The current economic uncertainty has led to downward pressure on consumer confidence and has negatively impacted retail pull-through."

16) From PVH: "We are navigating a highly dynamic and uncertain macroeconomic environment that is impacting our industry, our consumers, and our business results."

17) From Campbell’s: "In the current dynamic macro environment, consumers are making thoughtful spending decisions, which is materializing in our categories. Consumers continue to cook at home and focus their spending on products that help them stretch their food budgets, and they are increasingly intentional about their discretionary snack purchases. These behaviors supported growth in our meals & beverage categories and increased headwinds in our snaking categories."

18) From Kenvue: "we definitely see that the consumer continues to be under pressure regardless of the geography for slightly different reasons. But I would say consumers are under pressure. Consumers are worried when you look at belief in the future, and we see it in how people behave in store."

19) From Broadcom: Saw more muted growth from its non-AI semi business, "In Q2, broadband, enterprise networking, and server storage revenues were up sequentially. However, industrial was down, and as expected, wireless was also down due to seasonality."

20) From Hewlett Packard Enterprises: "In the second quarter, we saw a very dynamic macro and trade policy environment. The IT industry continues to navigate significant uncertainty, brought on by tariffs, the AI diffusion policy withdrawal, and broad macroeconomic concerns. While this led to uneven demand during the quarter, we did not benefit from significant order pull-ins. We ended Q2 with a stronger pipeline compared to Q1."

21) Vietnam's May exports were higher by 17% y/o/y, above the estimate of 15.5% and after a 19.8% y/o/y jump in April.

22) The May China private sector Caixin manufacturing index weakened to 48.3 from 50.4 and below expectations of 50.7. Of note, "The contraction in supply and demand was attributed to sluggish external demand, which fell for a 2nd straight month. The gauge for new export orders dropped to the lowest level since July 2023." Also, employment continued to decline and "prices remained at a low level as supply and demand weakened. Input costs declined for the third straight month on falling prices of energy and chemical raw materials. Sales prices were also subdued as businesses sought to lower prices to remain competitive, resulting in the corresponding gauge contracting in May for the sixth straight month."

23) The May Singapore PMI fell to 51.5 from 52.8 while Hong Kong's improved to 49 from 48.3 but still below 50.

24) Most other manufacturing PMIs remain below 50: Taiwan 48.6 vs 47.8, South Korea 47.7 vs 47.5, Vietnam 49.8 vs 45.6, Indonesia 47.4 vs 46.7, Philippines 50.1 vs 53 and India the bright spot at 57.6 vs 58.2. Japan's stayed below 50 after the revision at 49.4 while Australia's was a touch above 50.

25) The Eurozone May manufacturing index was left unrevised at 49.4 while the UK saw a lift to 46.4 from the initial print but still remaining well below 50.

26) The ECB cut rates to 2% as expected but keeping real rates still at zero.

President Trump announces a meeting on trade with Chinese representatives in London on June 9.

Then he says, "The meeting should go very well."

1. How does he know the meeting will go well?

2. Equities gap to the day's highs on the news. How many times will markets discount the same announcement?

I truly find it remarkable that interest rates (the foundation of all discounted dividend/cash flow models) are climbing so rapidly, yet equities are unconcerned (S&P futures are +70 handles).

* The yield on the 2-year Treasury note is +12 basis points to yield 4.04%.

* The yield on the 10-year Treasury note is +11 basis points to yield 4.50%.

* The yield on the 30-year Treasury bond is +8 basis points to yield 4.96%.

This makes no sense to me and contradicts everything I have learned about the capital markets over the last few decades.

I have a research call at 1:30 that should last for about an hour.

Radio silence.

Scott Galloway's No Mercy / No Malice ... "The Insiders" 

From Whitney's latest email "Updates on AI, China, and Elon Musk/Tesla":

P.S. I'll give a hat tip to Doug Kass in regard to Musk and Trump – he saw a split coming.

In his "15 Surprises for 2025," which he published on December 23, he predicted that "President Trump begins to be openly critical of Musk and finally abandons him entirely." Doug also took it a step further:

We'll see whether this prediction from Doug in that post comes to pass: "All these factors cause the shares of TSLA to drop to $100/share."

* SPY $598.30

* QQQ $529.57

If you have a shred of contrary thinking ... read this bloomberg.com

Here are today's things:

Reinitiated SPY $598.15 and QQQ $529.49 shorts.

Added to (GRNY) $21.34 short.

From Peter Boockvar:

Jobs data, a lot of confusing moving parts but friction growing

Payrolls in May rose a net 139k, 13k above expectations but the two prior months were revised lower by a combined 95k. There was a large decline of 696k jobs in the household survey but this data point really jumps around as it follows a gain of 461k in April, 201k in March and a drop of 588k in February. As this though matched the 625k person decline in the labor force, the unemployment rate held at 4.2% for a 3rd straight month.

Helping to explain the big drop in the labor force was this, the participation rate fell to 62.4% from 62.6% and that matches the lowest since December 2022. The participation rate for the key 25-54 yr old age cohort also fell two tenths m/o/m to 83.4% but after rising by .3% last month. Also, there was a big drop in the ‘job leavers’ category which is essentially a quits rate number and it measures leavers as a % of the unemployed. This fell to 9.8% from 11.8% and that’s the least since May 2021.

Private education/health continues to be the main driver of job growth, contributing 87k jobs and more than half of the 145k service sector jobs added. Leisure and hospitality added 48k so these two groups contributed to most of the service sector gains. Little job growth was seen elsewhere. Temp jobs of 20k were lost and they were too in the federal government by 22k, post DOGE.

Manufacturing shed 8k jobs while construction added 4k.

The workweek at 34.3 was as expected and unchanged m/o/m. Average hourly earnings were up by .4% m/o/m, one tenth more than expected and with a 3.9% y/o/y gain. Combining the two saw average weekly earnings higher by .4% m/o/m and 3.9% y/o/y.

The birth death model is where a lot of jobs are coming from, fictitiously in that they are being estimated and added 199k jobs, though that is similar to previous May inputs. The question though is whether this is an overstatement upon a labor market inflection point and the soft ADP figure seen Wednesday makes that good argument.

Of note too, the number of people who are working part time because they can’t find full time work rose by 125k people to the most since April 2019.

Smoothing out the monthly data has the 3 month headline payroll average at 135k vs the 6 month average of 157k and the 12 month average of 144k.

Bottom line, taking the downward revision has the job gain softer than expected but the private sector figures are still being reported much higher than ADP and I believe it’s because of the birth/death overstatement taking place right now. The other confusing part was the big drop in both the household survey and size of the labor force, along with the participation rate reduction. We also have the most amount of people working part time because they can’t find a full time job since 2019 as stated, giving further evidence of a slowdown in the pace of hiring.

On the other hand, the wage data was pretty good and the workweek held at 34.3.

The market reaction was strange too as the futures spiked on a weaker number but bond yields jumped too with the 2 yr yield back at 4% from 3.94-.95% right before and the 10 yr yield is at 4.96%, up 6 bps post figure.

Participation Rate

Working part time because can't find a full-time job

Job Leavers as % of unemployed

Most active premarket ETFs as of 8:39 a.m. ET:

Premarket percentage movers at 8:57 a.m. ET:

Upside:

-RENT +29% (earnings, guidance)

-NX +18% (earnings, guidance)

-RBRK +6.5% (earnings, guidance)

-FCEL +5.8% (earnings, guidance; to cut jobs)

-TSLA +4.7% (bounce off de-escalation hopes with President Trump feud)

-AVO +3.7% (earnings, guidance)

Downside:

-LULU -20% (earnings, guidance)

-DOCU -19% (earnings, guidance)

-TTAN -13% (earnings, guidance)

-IOT -12% (earnings, guidance)

-WOOF -7.5% (earnings, guidance)

-ZUMZ -6.8% (earnings, guidance)

-CURV -6.6% (earnings, guidance)

-AVGO -2.1% (earnings, guidance)

Reinitiated Index shorts:

* SPY $597.46

* QQQ $529.07

From Peter Boockvar

More on the US consumer and their spending behavior

Ahead of the payroll report and before I go over some earnings calls from some consumer touching businesses, here were some regional Beige Book comments on retail spending from the report on Wednesday. Sounds pretty muted.

Boston: "First District restaurant sales and retail sales slowed modestly in recent months, while tourism activity was flat. A Massachusetts restaurant industry contact said that, following a very slow winter season, April's sales remained depressed relative to one year earlier, while May's sales so far came closer to last May's levels. A clothing retailer experienced flat sales overall in recent months. A discount retailer reported a modest decline in sales overall, driven by substantial declines at stores along the Canadian border. Airline passenger traffic through Boston increased modestly, with most of the growth coming from international travel. The hotel occupancy rate in greater Boston dropped slightly from a year earlier but remained strong compared with long-run averages. Restaurant contacts remained cautious about the outlook but gained some optimism based on recent activity."

NY: "On balance, consumer spending continued to rise modestly through much of the District. Auto dealers in upstate New York reported that inventories were depleted by ongoing strong sales as customers tried to get ahead of potential tariffs. Used car sales were mostly solid, though inventory availability was sometimes limiting. Restaurant traffic picked up around New York City, especially in Brooklyn. However, ongoing reductions in visits from Canadian tourists contributed to a decline in spending in the North Country as well as a decline in sales at an upstate brewery."

Philly: "Retailers (nonauto) reported a slight decline in sales over the current period. One retailer stated that customers are overly burdened by higher prices and that in-store visits continue to be flat to slightly down despite the extensive use of promotions. Auto dealers reported a slight decline in auto sales, after strong increases in the last period. Although tariffs have yet to affect auto prices, prices have still been trending up partly owing to lower inventories on hand. Activity in the tourism sector rose slightly, unchanged from the last period. Leisure travel rose moderately despite minor dips in hotel bookings and air travel."

Cleveland: "In recent weeks, consumer spending was flat on balance. Many auto dealers reported an increase in purchases ahead of planned tariffs, and one dealership expected tariff-related sticker shock to hit customer demand starting in early June. Retailers reported a general pullback in consumer discretionary spending, although one retailer benefited from customers who traded down from larger discretionary purchases to more modest ones. Contacts had difficulty forecasting demand for the coming months because of uncertain impacts of trade policy but expected demand to see a modest slowdown on net during this period."

Richmond: "Consumer spending increased slightly in recent weeks. Most retailers reported steady to increasing sales, overall, but noted a decline in big ticket purchases. Several contacts mentioned that consumers continued to be price sensitive and were opting for lower priced alternatives. Similarly, hospitality contacts saw an overall increase in activity and shifts in consumer preferences towards budget hotels and quick service restaurants. At the same time, some luxury retailers, hotels, and experience providers reported strong sales. Despite recent increases in activity, many contacts expected sales to slow in the coming months and pointed to declining consumer sentiment, potentially higher prices, and heightened uncertainty as potential headwinds."

Atlanta: "Consumer spending was little changed since the previous report. Some retailers noted a modest spike in durables sales, particularly big-ticket items such as autos, as consumers rushed to front run tariffs. Overall, however, retailers noted some evidence of softening consumer demand that is expected to dampen future sales. Some retailers noted they were still working through previously acquired inventories and thus had not raised prices. However, they believe that consumer price sensitivity will remain high and expect a drop in sales when tariff-related price increases are enacted."

"Travel and tourism activity, including hotel bookings, declined modestly. Room rates were flat or rose slightly, and some hotels offered increased incentives such as an additional night free. Contacts reported a slowing of international travelers to the U.S., and while previously concentrated among Canadian visitors, the slowdown recently expanded to visitors from Asia and Europe. Domestic leisure travel was flat. Declining consumer confidence slowed leisure travel for lower income consumers but also caused more higher-income Americans to vacation in the U.S. instead of abroad."

Chicago: "Consumer spending increased modestly over the reporting period. Nonauto retail sales were up moderately. Contacts noted pull-forward spending for big ticket items such as computers, electronics, and appliances. Consumer staples, such as groceries, posted solid gains. Sales in the lawn and garden and landscaping categories were healthy. However, leisure and hospitality spending continued to be soft. A museum contact indicated that admissions were down, though spending by visitors was strong. Air travel declined, but hotel demand picked up. Light vehicle sales remained robust as consumers looked to get ahead of potential tariff actions. Vehicle parts and service activity strengthened slightly."

St. Louis: "Consumer spending reports were mixed. Recreation and hospitality contacts reported, on net, a slight increase in activity. A restaurant owner in Louisville reported that they were expecting sales to continue to grow and were spending on capital improvements in their restaurants. Another restaurant owner in Kentucky noted that customers were coming to dinner, but they were skipping the appetizer and dessert. Retail sales have slightly declined, especially for discretionary items. Several retailers reported that sales have been below expectations, with customers being cautious with their spending. One retailer reported that food and consumable sales remain stable, while general merchandise sales have been weak, resulting in higher inventories of these items. Auto dealers reported no change in sales. A Missouri dealer reported that higher-end vehicle sales were significantly lower and buyers were paying cash for those vehicles instead of financing."

Minneapolis: "Consumer spending fell modestly. Retail contacts generally reported slower business of late. Several restaurants noted that activity was concentrated on weekends and less busy during the week; patrons were also spending less. Tourism and hospitality firms in Minnesota reported that recent customer traffic, revenue, and profits were all lower compared with a year ago. Some improvement was expected over the coming summer months, but overall sentiment was still slightly pessimistic. Contacts reported—and border-crossing data confirmed—that Canadian travelers to the District continued to decline. A tourism contact in northwestern Montana reported a 10 to 20 percent decline in Canadian visitors. Hotel occupancy and revenue per average room were lower across District states in April compared with a year ago. Vehicle sales were slightly higher overall, but new-vehicle sales fell slightly, according to a large dealership. Sales of recreational and powersport vehicles were lower."

KC: "Spending declined significantly across several retail categories, including apparel, electronics, and furniture. Both foot traffic at retail locations and online retail sales softened in recent weeks. Consumers seemingly spent more time at home over the past month as modest declines in spending at restaurants and hotels were offset by moderate growth in spending on groceries and home maintenance. Several contacts indicated expectations for a reduction in consumer demand ahead, with lots of uncertainty about the size of the change in spending. The primary driver of the softening outlook for consumers was an expectation higher prices would tighten household budgets, and consumers would reign in spending to some extent, particularly on travel-related services and retail goods."

Dallas: "Retail sales rebounded in April but declined notably in May. Auto sales dipped after strengthening in March amid forward buying ahead of tariffs. There were scattered reports of product delays among retailers, sometimes stemming from shipping issues. Retail outlooks worsened notably over the reporting period, and higher tariffs are expected to have an extensive impact, as most Texas retailers source at least 25 percent of their goods from outside the U.S."

SF: "Retail sales weakened slightly on net over the reporting period. Some retailers, particularly from tourism-driven areas, attributed sluggish sales to lower foot traffic and cautious spending behavior from consumers. Sales at other retailers, including grocery stores, home centers, and sports apparel stores were reportedly steady. A contact from Arizona observed higher sales of non-food and discretionary items ahead of potential reinstatement of higher tariff rates."

"Demand for leisure travel slowed further as consumers postponed or canceled their trips...Major tourist hubs across the District highlighted a substantial drop in international visitors which led to lower consumer spending and weaker local economic activity."

And what some companies said...

From Cracker Barrel:

"Looking back at Q3 (the quarter they just reported), the quarter started soft. So, we took actions to support the top line and tightly manage our expenses without limiting our ability to deliver our important fourth quarter initiatives."

Q3 comps were up 1% and they did say Q4 started off better, "driven by our Campfire promotion." Those are "delicious foil wrapped meals that are packed with hearty protein, seasoned vegetables and rich broth." https://investor.crackerbarrel.com/news-releases/news-release-details/cracker-barrel-commences-summertime-return-its-iconic-campfire

More color on their sales trends, "In our third quarter, as we noted on the last call, February started out a bit challenged as a result of both weather and some consumer uncertainty. Then we saw improvements into March and into April. And then we're particularly pleased that improvement continued further into Q4."

Pricing by the way was up 4.9% in the quarter and they expect that around 5% rate will be for the full year too.

From Lululemon whose stock is down notably pre market:

"Based on our quarter one revenue performance and what we're seeing thus far in quarter two, we are maintaining our revenue guidance for the full year." Revenue in the US in particular rose 2% y/o/y, "which is an improvement in the trend we've seen over the last several quarters."

"But my sense is that in the US, consumers remain cautious right now, and they are being very intentional about their buying decisions."

"we did see a decline in store traffic, particularly in the US as we moved from Q4 into Q1. We did see that moderate somewhat, but we did still for the first quarter see a lower traffic trend in stores relative to Q4. Conversion trends remained relatively consistent, a little bit of a decline y/o/y. And then also, we did see an uptick in terms of average dollars per transaction in the first quarter. And then in terms of how it's progressing April into May, we don't share specifics on Q2, but I would say nothing materially different."

China happens to be a fast growing market for them and they expect 25% to 30% revenue growth there.

On how they are dealing with tariff induced cost increases, "We are planning to take strategic price increases looking item by item across our assortment as we typically do, and it will be price increases on a small portion of our assortment, and they will be modest in nature."

From Brown Forman, whose stock plummeted by 18% yesterday and with well known names like Jack Daniel's and Woodford Reserve:

"Now, turning to our fiscal 2026 outlook; we believe the operating environment will remain volatile and visibility low due to geopolitical uncertainties and global macroeconomic conditions, particularly with regard to the tariff environment. This environment will create sustained levels of consumer uncertainty, which we believe will lead to another year of below historical total distilled spirits trends. We continue to expect that the behavior of the consumer and the level of trade inventories will not change meaningfully during the 2026 fiscal year."

Generally their view on the consumer, "I still would argue that it is the consumer and their wallet just doesn't have as much money in it. You're right, they're spending money on things like vacations and lodging and other things like that. But then when it trickles down and they go to the grocery store, I think in some cases, spirits has fallen out of the basket a little bit, and that isn't obviously great."

Big picture, "Spirits continue to take share from beer and wine. So that dynamic hasn't changed."

From Broadcom, their AI chip business is seeing huge growth, up 46% y/o/y in the quarter just reported and in the current quarter they are in they see 60% y/o/y growth. But, in the quarter just reported they saw a 5% drop in non-AI semiconductor revenue. They though think this is bottoming.

"In Q2, broadband, enterprise networking, and server storage revenues were up sequentially. However, industrial was down, and as expected, wireless was also down due to seasonality."

With data overseas, reflecting the rush to ship goods upon the reciprocal tariff pause, Vietnam's May exports were higher by 17% y/o/y, above the estimate of 15.5% and after a 19.8% y/o/y jump in April. We remain bullish and long Vietnamese stocks, positive on the country's economic growth prospects.

The Reserve Bank of India cut rates by 50 bps to 5.50% where only 25 bps was expected. While India is already seeing solid growth, the RBI Governor said "Our aspiration is to grow at 8% and we would like to grow as fast as possible." He did also say though that today's bigger cut might be it for a bit. India continues to be a hugely exciting economic growth story.

* I see seven lean months ahead for our markets.

* We estimate downside risk to be roughly 3x the upside reward.

While the wheels are coming off — in so many directions — anything can happen these days (witness yesterday's juvenile and angry Musk/Trump exchange).

Never in my investing career has there been so many possible social, political, geopolitical, economic, interest rates and fiscal policy outcomes (many of which are adverse). That is why I don't understand the uber confidence expressed by the Perma Bull cabal (including Fundstrat's Tom Lee) and manifested in a near vertical move higher for equities over the last two months. It is also the reason why I have traded very actively, reduced my long holdings (purchased near the market lows) and have not bought for the purpose of holding in recent weeks:

On Thursday, Americans were exposed to unvarnished self interest, the continued loss of conventions and general lack of ethics and morals. Right in front of us it is obvious that political positions of influence can easily be bought — sold by both parties (and that certainly includes the Presidency). To this observer, few politicians are even pretending that they care about the American people.

Our government's tangled dependency on an unstable Elon Musk (SpaceX et al) has also been underscored (something I have written about for years). And so has Musk's dependency on President Trump and the U.S. been highlighted.

Finally, consider what the world outside of the U.S. thinks of us these days.

The Musk/Trump 'War' Is Much Like the Tariff 'War' — It Will Be Resolved In Time

I am not even sure where the performance ends and reality begins. In the end (probably sooner than later) — just like the president's opening salvos of ridiculously high tariff proposals — the two actors will likely have a detente (and kiss and make up) because the downside is certain for both of them as no one will win. When that make-up happens no one knows. It could happen today, next week or next month but the parties "interests" are now so enmeshed, that Musk and Trump recognize where their bread is buttered.

As darkly humorous this all is, the authoritarian nature (and the threats made) by the current administration is beyond the pale. And that Republican leadership doesn't speak the truth to presidential power and that the Democratic leaders don't even seem to exist — make the situation rather sickening and confirms my recently written "Rethinking of American Exceptionalism:"

* Political and geopolitical polarization and competition will probably translate into less political centrism and a reduced concern for deficits — creating structural uncertainties, limited fiscal discipline and imprudence around the globe ... and for the possibility of bond markets to "disanchor."

* The cracks in the foundation of the bull market are multiple and are deepening, but they are being ignored (as market structure changes have led to price momentum (FOMO) being favored over value and common sense).

* With the S&P 500 Index at 5965, the downside risk dwarfs the upside reward for equities — in a ratio of about 3-1 (negative).

* Valuations and (consensus) expectations for economic and corporate profit growth are all inflated.

* Being dismissed are JPMorgan JPM CEO Jamie Dimon's dour comments on complacency and his view that the corporate credit market is "ridiculously over-stretched" (hat tip Rosie).

* Look for the soft data (see yesterday's weak ISM and climb in jobless claims) to move into (and weaken) the hard data led by a slowing housing market likely to provide ample near-term evidence of the exposure and vulnerability of the middle class.

* Below trend-line economic growth with sticky inflation lie ahead ("slugflation") — uncomfortable for a Federal Reserve which has to make increasingly more difficult decisions.

With a forward P/E of 22x, equities remain overvalued and, after covering my Index shorts yesterday, I plan to reshort any rally.

With so many possible adverse outcomes, my baseline expectation is for (at least) seven lean months ahead:

"In the Bible, 'lean years' refer to a period of famine that follows a time of abundance, particularly in the story of Joseph in Genesis 41. The prophecy, revealed through dreams to Pharaoh, foretold seven years of great plenty in Egypt, followed by seven years of severe famine. Joseph, interpreting the dream, advised Pharaoh to prepare for the lean years by storing grain during the period of abundance. This preparation allowed Egypt to survive the famine while other surrounding lands suffered greatly."

From JPMorgan:

US: Futs are higher. Pre-market, Mag 7 are all higher; TSLA +4.9% given the potential call today between Musk and Trump. AVGO -3.6% despite a solid earnings release, as expectations were high into this print. Bond yields are 1-2bp lower; USD is higher; commodities are mostly higher. Macro headlines were largely muted overnight; All eyes on NFP today.

and...

EQUITY & MACRO NARRATIVE

NFP SCENARIO ANALYSIS – we published below in June 2 Morning Briefing

Feroli’s full NFP preview is here. He sees 125k jobs being added, which is in line with the Street’s; a step down from last month’s 177k print. For the unemployment rate (U.3) he sees 4.2%, in line with the Street’s estimate. For Average Hourly Earnings, he sees +0.2% MoM and +3.6% YoY.

The following scenario analysis is NOT A PRODUCT OF JPM RESEARCH, this is a trading desk view from JPM US Market Intelligence.

· [5%] Above 170k. SPX gains 50bps to 2.5%. The first tail outcome and the reason for the widest range of outcomes is dependent on the bond market reaction. For example, a 170k print could be written off, to a certain extent, to hiring needs around the demand pull-forward or a seasonal blip. A 250k print would likely be received as an economic re-acceleration with no material impact from the trade war (at least on labor) forcing the bond market to reset yields higher, removing one or both of the rate cuts priced into the market.

· [25%] Between 140k – 170k. SPX gains 1.5% – 2%. This is the Goldilocks print.

· [40%] Between 115k – 135k. SPX gains 25bps – 1%. The base case and even the lower end of the range is enough to keep this rally going, subject to the move in the unemployment rate. A move to 4.3% would likely push performance to the lower end of the range with the outlook on the pace of unemployment rate increasing 10-20bps per month, potentially accelerating higher as we see the full impact of the trade war. Though, any outlook is muddled given the near-weekly changes to trade policy.

· [25%] Between 100k – 115k. SPX loses 1.25% to gains 50bps. The market’s next true test is when we see NFP print below 100k since many would then point to a recession as a foregone conclusion. The other parts of the print, including the unemployment rate and wage growth factor in here, too. The worst outcome would be a 100k print, unemployment increasing to 4.3% or 4.4% with declining wages.

· [5%] Below 100k. SPX loses 2% – 3%. The second tail outcome would likely end the current bull run. Recessions are the typical reason why bull markets end and a sub-100k print would put the entire market on ‘recession watch’.

· WHAT ARE OPTIONS PRICING? For options expiring on June 6, the market is pricing ~175bps move, as of market close on May 30.

· US MKT INTEL ON NFP – The risks are skewed to the upside as we think we are in a ‘good news is good news’ type of macro environment. Positioning suggests that investors are net bearish waiting for what they believe is inevitable decline in the economy due the trade war; some think the US is trending toward a recession or, worse, a stagflationary outcome which keeps the Fed on the sidelines. Further, the rush to pass a deficit expanding tax/budget bill would leave the US with no fiscal reserves to rescue the economy from a recessionary or stagflationary outcome. Our tactical view is more sanguine as we see more economic resilience, in the near-term.

Bonus - Here are some great links:

Tesla's Drop

The Nerds Are Winning Again

Europe's Defense Stocks on a Tear

12 Amazing DJIA Facts

* This time, bitcoin...

Last week I took a trading short rental in bitcoin.

At that time, in my morning Charting the Technicals column I highlighted the universal technical optimism.

Boy, has that changed — words like "cause for concern" and "not ideal" have replaced the technical enthusiasm.

Another lesson learned — there are many great charts that lie at the bottom of the ocean.

Wolf Street howls about the Fed's balance sheet. 

The S&P Short Range Oscillator moved back into an overbought — at 2.20% vs. 0.29%.