Wed 21 May: After the Bell

U.S. Markets Daily

May 21, 2025

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Good evening,

Investor sentiment is being driven by progress on Trump’s flagship tax bill. The worsening of the fiscal outlook was reflected on a weak Treasury auction and a sell-off in bond and stock markets. US government bond yields have been shifting upwards during May, with 30-yr bonds now yielding over 5%. Today’s 20-yr bond auction ($16bn) was priced at 5.1%, the highest yield since October 2023. Also, 30-yr mortgage rates traded above 7%.

US equities fell sharply on Wednesday with the S&P 500 down 1.6%, the Dow Jones losing nearly 2% and the small-cap Russell 2000 plunging 2.8%. The VIX volatility index added almost 3 percentage points to 20.8%, the highest in 10 days. The DXY $ index fell below 100 points as the greenback lost ground against all major currencies. Gold and Bitcoin gained ~1% today.

It was also a volatile day for crude oil with a rally in European trading time as reports suggested that Israel is planning to target Iran’s nuclear facilities followed by a reversal during Chicago hours after the US government released bearish data on inventory. Crude (+1.3mn bbl), gasoline (+0.8mn bbl) and distillate (+0.6mn bbl) stocks posted a surprise increase last week, according to the EIA. Both Brent and WTI futures finished 1% lower today and accumulated a 13% fall YTD.

Economics: in the UK, headline inflation in April grew 3.5% YoY, the highest in 15 months and significantly more than the 2.6% in March. The main catalysts were higher utility bills and tax increases. Services inflation accelerated even faster, up 5.4% YoY (vs 4.7% prior). Core CPI inflation came in at 3.8%, also rising. Traders are pricing in only one policy rate cut by the BoE during the next 12 months.

Deals: AI-devices start-up IO, founded by Jony Ive, Apple’s former designer, is being acquired by OpenAI, ChatGPT’s parent for $6.4bn in stock, increasing its bet on alternatives to smartphones. (BBG)

Also, AT&T is acquiring the consumer fiber operations of Lumen Technologies (mcap $4bn) for $5.7bn. Lumen shares jumped 16% in after-hours. (AT&T)

In private equity, Blackstone began searching potential buyers for its British trade show events company Clarion Events, which it bought in 2017. With an estimated EV of £2bn it could become the largest PE exit of the year.

IPOs: Chinese battery maker CATL, began trading in Hong Kong, adding another line to its mainland listing. It raised $4.6bn and is valued at $166bn. (FT)

Earnings: Target (mcap $42bn) delivered weaker-than-expected results. It missed revenue and net income estimates and cut its outlook due to the tariff’s situation. Shares fell over 5% to the lowest level in 5-yrs. Also, retailer TJX Companies, beat top and bottom-line estimates and maintained its full-year sales forecast but warned of the potential impact of tariffs and shares fell >3%.

Large caps reporting earnings on Thursday include: Intuit, Analog Devices, Copart, Workday and Autodesk. In data releases, we’ll get US existing home sales and PMIs in most developed countries.

See you tomorrow.

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