Trump Halts Military Action, Goldman Sachs Adjusts Rate Cut Expectations, Walsh to Swear in as Fed Chair.

Trump Delays Military Strike on Iran, Ceasefire Talks Show Progress

Overview

U.S. President Donald Trump announced on Monday that he has decided to postpone a planned military strike on Iran, originally set for Tuesday, at the request of Middle Eastern leaders. Trump indicated that "serious negotiations are underway," suggesting a potential return to the negotiating table between the U.S. and Iran.

Oil Market Reaction

The situation in the Strait of Hormuz, a critical oil transport route, has been tense, leading to energy supply concerns. Following Trump's announcement, Brent crude oil prices, which had briefly surpassed $110, saw a decline. However, WTI crude still closed up by 3%.

Uncertainty in Iran

Reports from Iran's Mehr News Agency indicated that the Isfahan air defense system was activated for unknown reasons, adding to the uncertainty in the region. Fitch Ratings noted that the conflict poses an upward risk to default expectations.

Upcoming Federal Reserve Ceremony

Trump is set to personally host the swearing-in ceremony for the new Federal Reserve Chair, Jerome Powell, on Friday, breaking from recent tradition where such events typically occur within the Fed itself.

Interest Rate Outlook

Goldman Sachs has pushed back its expectations for interest rate cuts, emphasizing that the key macro variable supporting the market is not short-term interest rates but rather productivity improvements driven by artificial intelligence (AI).

East Coast Heatwave and Energy Prices Surge

Emergency State Declared

The largest U.S. grid operator declared a state of emergency due to record high temperatures, causing electricity prices on the East Coast to spike. This situation is exacerbated by rising power demands from AI data centers.

SpaceX Stock Split

SpaceX has initiated a 1-for-5 stock split, aimed at making shares more accessible for a potential historic IPO, as the company’s valuation in private markets has reached significant heights.

Market Performance

U.S. Stock Indices

On May 18, U.S. stock indices showed mixed results, with the S&P 500 and Nasdaq experiencing declines for two consecutive days. Notable tech stocks like Nvidia and Tesla saw losses, while some Chinese concept stocks also fell.

Semiconductor Sector

Nvidia's CEO highlighted that AI-driven memory demand is outpacing current supply, while the company’s self-developed CPU, Vera, has completed its first deliveries.

Seagate's Stock Decline

Seagate Technology's stock fell over 8% amid concerns that the company may not keep pace with soaring demand for storage chips, as its CEO expressed reluctance to build new factories.

Corporate Developments

Ford's Energy Deal

Ford Motor Company announced a significant energy storage deal with EDF, allowing for the procurement of up to 20 GWh of storage systems over five years.

Baidu's AI Revenue Growth

Baidu reported that its core AI business revenue surpassed half of its general business revenue for the first time, indicating AI's growing importance to the company.

BlueFocus Technology's Acquisition

BlueFocus Technology plans to acquire a significant stake in Giant International to enhance its manufacturing capabilities in response to AI-driven market changes.

WuXi AppTec's Share Buyback

WuXi AppTec announced a plan to use up to $100 million of internal funds for share repurchases, believing that current trading prices do not reflect the company's intrinsic value.

Conclusion

The geopolitical landscape remains uncertain, particularly in the Middle East, while the U.S. market is navigating through various corporate developments and macroeconomic pressures.