Morning in New York: trade talks and the «Great and Beautiful Bill» in focus

Daily review and forecast of events on the US stock market from Mikhail Denislamov, Deputy Director of Freedom Capital Markets Research.

The reduction of tension related to the US foreign trade policy is positively perceived by the investment community. Market participants are particularly encouraged by the progress in negotiations with China. Positive reaction of stock exchange players was caused by the statement of Canada about the cancellation of the tax on digital services for the resumption of trade negotiations with the USA and the news about the entry into force of reduced import duties on British cars and aircraft components. However, the UK authorities note that the issue of import duties on steel and aluminum remains unresolved.

The U.S. Senate on June 28 approved a procedural vote to open debate on the so-called Big Beautiful Bill («big and beautiful bill»), the passage of which would increase the federal budget deficit by about $3.3 trillion over the next decade. Due to the expected vigorous debate between its supporters and opponents, passage of the bill by the House of Representatives before the July 4 deadline remains in doubt.

This Monday, June 30, will see the release of the Chicago Business Activity Index for June (consensus: 44.3 points, previous reading: 40.5). Although the index remains below 50 points, signaling the ongoing recession, the positive dynamics can be taken by the participants of stock exchange trades with optimism.

Rafael Bostic, President of FRB Atlanta, and his counterpart from Chicago Austan Goolsbee will make comments today. Presumably, the officials will evaluate the PCE statistics (consumer spending index), released on June 27.

Futures on US indices are trading in moderate plus. We assess the balance of risks for the upcoming session as moderately positive with an average level of volatility. We focus on the S&P 500 movement in the range of 6130-6230 points (from -0.7% to +0.9% to the closing level of the previous session). In the field of vision

- Major U.S. banks have successfully passed the Fed's stress tests under a scenario that includes GDP contraction, unemployment growth to 10%, falling stock prices and commercial and residential real estate, lower rates and widening spreads. Quotes of financial corporations reacted positively to this news.

- Insiders have sold more than $1 billion worth of Nvidia (NVDA) stock over the past year, including more than $500 million in June. The corporation's CEO began exiting its securities after their quotes broke through $150 according to a pre-arranged plan, while other executives realized stakes ranging from $25 million to $143 million.

- Meta Platforms (META) has brought on eight researchers from OpenAI and is in talks to raise $3 billion in equity and $26 billion in private debt financing from a pool of investors to build data centers in the United States. If this investment round goes through, it will be the largest in the history of the corporate sector.

- The U.S. Justice Department has settled an antitrust lawsuit regarding the takeover of Juniper by Hewlett Packard Enterprise (HPE) for $14 billion. As part of the agreements reached, the buyer must sell the Instant On division and license Juniper's Mist AI source code.

- The chief strategy officer of Intel (INTC) will leave the company on June 30 as part of a leadership team realignment by the new CEO.

- Torrent Pharmaceuticals (TORNTPHARM.BO) announced the acquisition of a 46.39% stake in JB Chemicals & Pharmaceuticals from KKR, followed by a merger acquisition with a share offer to minority shareholders. The deal is valued at approximately $3 billion.

Trades on June 27 on American stock exchanges ended in the green zone. S&P 500 rose by 0.52%, Nasdaq rose by 0.39%, Dow Jones added 1%, Russell 2000 rose by a symbolic 0.02%. Investor optimism is attributed to the advancement of negotiations between the U.S. and China on mutual trade terms. Shares of the «Magnificent Seven» closed predominantly in the positive territory. Only Microsoft (MSFT: -0.3%) and Tesla (TSLA: -0.66%) showed correction. Manufacturers of consumer durables (XLY: +1.67%) were the leaders of growth. The energy sector (XLE: -0.52%) was the outsider.

News from the US-China trade talks encouraged investors. The parties officially confirmed a framework agreement to implement the May Geneva Consensus. Beijing pledges to accelerate exports of rare earth metals critical to U.S. high-tech industries. Washington will lift some of the previously imposed restrictions on supplies to China. At the same time, the White House suspended negotiations with Canada over the digital tax, which the latter canceled last weekend.

The core consumer spending index (PCE) rose by 0.2% mom in May, while the consensus suggested an increase of only 0.1%, the same as in April. Personal income and expenditures declined, although they were forecasted to rise by 0.3% mom. These statistics so far only partially reflect the effect of the current US foreign trade rate. The more pronounced impact of this factor will become apparent by the end of summer, when companies will run out of stocks made before the introduction of import tariffs. The final estimate of the consumer sentiment index from the University of Michigan for June was above average expectations, while the inflation targets of the population on the annual and five-year horizon slightly decreased compared to the preliminary data.

- United Natural Foods (UNFI: +6%) reported that the recent cyberattack is likely to put pressure on fiscal fourth-quarter adjusted EBITDA. At the same time, management assured that unauthorized activity has been contained and distribution network operations have been restored.

- Shares of MP Materials (MP: -8.6%) reacted negatively to the U.S. and China's confirmed agreement on a framework to approve rare earth metal shipments from the PRC in exchange for the lifting of a number of U.S. restrictions.

This article was AI-translated and verified by a human editor