💣 The economy surprises

Together with Mode Mobile

Good morning investors! Stocks moved higher yesterday but oil fell after Trump raised hopes of a U.S.-Iran nuclear deal.

Today we cover:

• PPI drops and Powell speaks

• Earnings

• The new Mag 7

📊 Economy and News 

U.S. Producer Prices Drop as Powell Warns of Trouble Ahead

U.S. producer prices fell 0.5% in April, defying expectations of a 0.2% increase, as service costs saw their steepest decline since 2009. The drop was driven by weaker demand for air travel and hotel stays.

Wholesale service prices slid 0.7%, with trade services down 1.6%, making up most of the decline. Hotel room rates fell 3.1%, portfolio management fees dropped 6.9%, and airline fares slipped 1.5%. On a yearly basis, the PPI rose 2.4%, down from 3.4% in March.

Separately on Thursday, Federal Reserve Chair Jerome Powell warned that “supply shocks” could force the central bank to keep rates higher over the long term.

He noted that “inflation could be more volatile going forward than in the inter-crisis period of the 2010s.”

Global hits:

• Slovenia’s Q1 GDP dips 0.7% y/y, marking first negative growth since Q4/20.

• Canada’s wholesale trade rises slightly in March, fueled by motor vehicles.

• Nigeria’s headline inflation rate fell slightly in April, to 23.71% year on year from 24.23% in March. On the other hand, Israel inflation rate jumps to 3.6% in April in surprise gain.

• Trump says India has offered America ‘no tariffs’. Similarly, neighbor Pakistan has made a similar offer.

• Japan’s economy contracts by a more than expected 0.2% from prior three months.

Good to know: US set to cut capital requirements for banks. Elsewhere, U.S. manufacturing production fell more than expected in April amid a sharp decline in motor vehicle output.

Factory output dropped 0.4% last month after an upwardly revised 0.4% gain in March. Economists polled by Reuters had forecast production would slip 0.2% after a previously reported 0.3% rise.

Production at factories increased 1.2% on a year-over-year basis in April.Manufacturing grew at a 4.8% rate in the first quarter after a prolonged slump due to higher interest rates.

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📈 Stocks

S&P 500 5,916.93 (+0.41%)
DJIA 42,322.75 (+0.65%)
NASDAQ 19,112.32 (-0.18%)
BRENT CRUDE 64.55 (-2.46%)
* Prices as of May 16th, 12:20 AM UTC

Walmart Misses Expectations but Remains Confident

Walmart's stock fell nearly 5% after missing fiscal Q1 revenue expectations, but it swiftly recovered, reflecting strong investor confidence.

The company reported a 22% surge in global e-commerce sales and beat earnings forecasts, driven by effective cost management and solid U.S. sales. Despite external pressures, Walmart upheld its full-year outlook, anticipating 3-4% net sales growth and adjusted EPS of $2.50-$2.60 for FY26. The stock, up 25% since mid-April, showcases resilience fueled by consumer sector optimism.

However, Walmart plans to raise prices on select items due to rising costs from an escalating global trade war.

Finance chief John David Rainey noted, “I’m concerned that consumers will start seeing higher prices, likely towards the end of this month, and certainly more in June.”

Analysts suggest Walmart’s scale and diverse supplier network could mitigate tariff impacts, keeping prices competitive and potentially boosting market share against rivals in the coming months.

Earnings:

• Deere & Co beat Wall Street expectations for its second quarter, driven by cost cuts and tighter inventory controls, sending shares up 5%. However, the company lowered the bottom end of its full-year profit forecast as high interest rates and weaker crop prices continue to hurt equipment sales. Executives warned that tariffs could cost over $500 million in 2025, but said they were responding cautiously to the uncertainty.

• Cava topped Wall Street’s Q1 revenue estimates with a 10.8% rise in same-store sales, bucking the trend of declines seen by other restaurant chains. Despite this strong start, it maintained its full-year forecast of 6% to 8% same-store sales growth.

• Alibaba shares fell after the Chinese e-commerce giant missed earnings expectations for its fiscal fourth quarter on both the top and bottom line.

Coinbase troubles: Coinbase confirmed user metric investigation, says it’s working with Trump’s SEC to resolve. Also, the company disclosed a security breach where hackers accessed customer data, including names, addresses, IDs, and banking details, after bribing an insider.

They demanded $20M to delete it. Bloomberg reported months-long access. No passwords or private keys were compromised. Coinbase rejected the ransom, offering a $20M reward for tips on the hackers.

💵 Personal Finance

Make It Magnificent 8, Welcome This Stock

Big Tech has a new standout: Palantir. In this week's Pro issue, we highlighted the stock when it was trading at $117.30. Since then, it has surged approximately 7.5%, outpacing giants like Meta, Amazon, and Netflix.

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