🌞 New bill hammers solar stocks

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Good morning investors! The market remains strong as BTC continues to hit new highs.

Today we cover:

• Business activity rises

• New bill threatens solar stocks

• Time for emerging markets to shine?

📊 Economy and News 

U.S. Business Activity Rises, But Inflation and Labor Concerns Loom

U.S. business activity picked up in May following a temporary easing of trade tensions with China, but rising tariffs continued to push up prices for companies and consumers, fueling inflation concerns.

The S&P Global survey showed signs of stronger economic output, with the Composite PMI Output Index rising to 52.1 from 50.6 in April. Both manufacturing and services posted gains, with each sector's PMI climbing to 52.3, signaling modest expansion.

However, input costs surged, driving the prices businesses charged to their highest levels since 2022. Delivery times were the slowest in over two years, and inventory levels spiked to an 18-year high as companies braced for renewed tariff hikes when the 90-day trade reprieve ends in July.

Tourism and service exports dropped sharply, hurt by falling visitor numbers amid an immigration crackdown and unconventional geopolitical proposals. The downturn was the worst since early 2020.

Despite the economic rebound, job growth softened. The employment index slipped to 49.5, reflecting cautious hiring as firms faced weaker demand outlooks and rising costs.

Economists see growth slowing to below 1% for the year, with core inflation expected to rise to 3.5%, complicating the Federal Reserve’s path as it tries to manage inflation without derailing the recovery.

Global hits:

• Egypt’s central bank cut its key interest rates by 100 basis points. Elsewhere, Sri Lanka has announced an unexpected 25 basis point rate cut.

• UK net migration dropped sharply in 2024 to 431,000—nearly half the previous year's figure.

• Mexico’s inflation hit 4.22% in early May, topping forecasts and exceeding the central bank’s target for the first time in 2025. Whereas, Turkish cenbank keeps inflation forecast at 24%, ready to tighten if needed.

• Japan’s core inflation climbs to 3.5%, highest in more than 2 years.

Reminder: Risks that the U.S. economy could slide into stagflation due to geopolitical tensions, price pressures and deficits cannot be ruled out, JPMorgan Chase (NYSE:JPM) CEO Jamie Dimon said. On the other hand, Japan downgrades global economy assessment amid U.S. trade policy uncertainty.

Also, Harvard blocked by Trump administration from enrolling international students.

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📈 Stocks

S&P 500 5,842.01 (-0.044%)
DJIA 41,859.09 (-0.00032%)
NASDAQ 18,925.73 (+0.28%)
BRENT CRUDE 64.03 (-0.62%)
* Prices as of May 23rd, 12:20 AM UTC

Solar Stocks Crater as GOP Tax Bill Threatens Clean Energy Incentives

Solar stocks were hammered after the House narrowly passed a GOP-backed tax bill that accelerates the rollback of clean energy incentives. Shares of Sunrun plummeted nearly -40%, Enphase Energy dropped -20%, and SolarEdge sank -24% after the legislation proposed eliminating key tax credits, particularly those supporting leased rooftop solar systems.

Guggenheim analysts called the bill “disastrous” for the solar sector. Most solar companies have relied heavily on tax credits introduced under the Biden administration and earlier for their leasing business models—support that this bill aims to strip. Additionally, the legislation ends credits for energy facility development, which CNBC linked to the surge in solar infrastructure nationwide.

Large-scale solar developers were not spared either: Array Technologies declined -13% while Nextracker dropped -6%. Analysts caution that the measure could trigger a $220 billion loss in clean energy investments by 2030. The industry’s last hope now rests with the Senate, which has yet to vote on the bill.

The tax bill, which passed the House in a tight 215-214 vote, faced strong opposition from Democrats and even two Republicans. Branded by its backers as a “big, beautiful bill,” it extends Trump-era 2017 tax cuts, eliminates federal taxes on tips and overtime, and includes steep reductions to Medicaid and SNAP funding.

The CBO projects the bill will add nearly $4 trillion to the federal deficit over the next decade.

There, however, was a silver lining from Waller: If Trump maintains a 10% tariff policy, the Federal Reserve may be in a position to cut interest rates in 2025.

Good to know: Hims & Hers shares dropped -8% after Cigna’s Evernorth division introduced a $200 monthly cap on out-of-pocket costs for Wegovy and Zepbound, putting pressure on Hims & Hers by offering a more competitive price point.

BYD overtook Tesla in European electric vehicle sales for the first time, registering 7,231 battery-electric vehicles compared to Tesla’s 7,165. The shift comes amid a sharp 49% year-over-year decline in Tesla’s sales, while BYD saw a 359% surge. Analysts are calling it a watershed moment for the region’s EV market.

🔐 Crypto

Bitcoin $111,472 (+0.18%)
Ether $2,658 (+0.18%)
Total market cap $3.5T (+0.26%)
* Prices as of May 23rd, 12:20 AM UTC

Hong Kong Passes Stablecoin Law Amid Global Regulatory Wave

Hong Kong has passed a new law requiring stablecoin issuers to be licensed by its monetary authority, with rules on reserve management and asset protection. The regulation, focused on fiat-linked stablecoins, aims to boost financial stability and innovation and will take effect later this year.

This follows global moves by the U.S., EU, Singapore, and others to regulate stablecoins, which are seen as key to improving cross-border payments.

The stablecoin market now totals $232 billion, while bitcoin has surged past $111,000 and is the fifth largest asset in the world.

💵 Personal Finance

Emerging Markets Regain Momentum as U.S. Confidence Wavers

Emerging market stocks are drawing renewed interest amid growing skepticism toward U.S. assets, intensified by Moody’s recent downgrade of the U.S. credit rating. Bank of America has labeled emerging markets as the likely next bull run, backed by a weakening dollar, a peak in U.S. bond yields, and signs of economic recovery in China.

JPMorgan echoed the optimism, upgrading emerging market equities to overweight, highlighting easing U.S.-China tensions and compelling valuations.

This shift comes as investor confidence in U.S. assets falters. In the aftermath of the April 2 announcement of new U.S. tariffs, the divergence was clear: while the S&P 500 fell over 5% from April 9 to 21, the MSCI Emerging Markets Index rose 7%. Year-to-date, the MSCI EM Index is up 8.55%, far outpacing the S&P 500’s 1% gain.

The Moody’s downgrade has reignited market jitters. Treasury yields climbed, the dollar softened, and U.S. equities lost momentum. These developments have prompted investors to reassess geographic exposure, particularly toward emerging markets.

Analysts point to structural advantages supporting the shift. Emerging markets are trading at 12 times forward earnings, offering a significant discount to developed markets. Despite making up 10.5% of the MSCI Global Index, U.S. investor allocation to EM remains low at 3% to 5%.

India stands out as a long-term growth story driven by domestic demand, while countries like Argentina, Brazil, and Greece are gaining traction due to improving fundamentals and sovereign upgrades.

Here’s an old but interesting video on the topic:

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