Deutsche Bank lifts S&P 500 year-end target amid Wall Street upgrade wave

Economic

Stocks

Summary:

Deutsche Bank raised its S&P 500 year-end target to 6,550, citing reduced tariff impact and strong economic data. Other Wall Street firms followed suit, though volatility from trade tensions remains a risk.

Deutsche Bank has raised its year-end target for the S&P 500 (^GSPC) to 6,550 from 6,150, citing lower tariff-related earnings drag and a resilient economy, in a move that comes amid a broader wave of target upgrades by major Wall Street brokerages.

This follows similar moves by Goldman Sachs and UBS Global Wealth Management, which raised their forecasts in May, with RBC Capital Markets joining the trend on Monday.

"We now see the tariff drag at only about one-third of what we previously penciled in," Deutsche Bank strategists led by Binky Chadha wrote in a note on Monday.

The new target is 10.35% above the S&P 500 index's last close of 5,935.94.

The S&P 500 posted its strongest monthly gain since November 2023 in May, boosted by U.S. President Donald Trump's softer stance on tariffs, strong corporate earnings, and tame inflation data that helped markets recover from April's decline.

Still, the European brokerage warned that the rally could be volatile, with potential pullbacks driven by renewed trade tensions.

"We expect the rally to be punctuated by sharp pullbacks on repeated cycles of escalation and de-escalation on trade policy", the brokerage said.

Deutsche also increased the estimate for the index's earnings per share to $267 from $240.

Source: Reuters

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Manuel

Cryptocurrency

A growing number of public companies are buying Bitcoin (BTC) for their balance sheets, but many could be exposed to significant losses if prices drop, according to a new Standard Chartered report shared with CryptoSlate.

The bank’s research, authored by head of digital assets research Geoffrey Kendrick, highlighted that 61 companies now hold Bitcoin in their corporate treasuries, collectively controlling 3.2% of the total Bitcoin supply that will ever exist.

This trend has surged in recent months, with imitators following in Strategy’s footsteps increasing their Bitcoin holdings from 50,000 BTC to 100,000 BTC in just two months.

High entry prices

Standard Chartered warned that many of these firms have entered the market at high valuations, often with net asset value (NAV) entry multiples above 1, signaling overexposure to price swings.

Kendrick emphasized that for at least half of these firms, the average purchase price exceeds $90,000 per Bitcoin and even a modest correction could lead to losses and reputational damage for firms seeking to mimic Strategy without similar risk tolerances or capital structures in place.

He warned that “Bitcoin is volatile” and such high average entry points make some companies particularly vulnerable.

According to Kendrick: “We identify a pain level of 22% below the average purchase price as a potential liquidation level.”

He explained that a 22% drop below the average purchase price may be the threshold at which liquidation risk becomes real for companies holding Bitcoin in treasuries.

Drawing from historical market events, the report cited Core Scientific’s 2022 experience as an indicator of potential stress levels.

The report included a chart showing a wide spread in purchase prices across public companies, with many clustered in the $90,000 to $110,000 range. If markets reverse sharply, firms with thinner balance sheets or investor pressure could be forced to sell.

Demand rising despite risks

Despite the risks, Bitcoin’s role as a strategic treasury asset continues to gain traction among corporates. Kendrick attributed this to NAV multiples above 1 and lingering inefficiencies in how traditional finance evaluates crypto holdings.

Standard Chartered’s findings suggest that this wave of adoption is being driven by both long-term conviction and the fear of missing out, especially in light of recent bullish momentum in crypto markets.

Kendrick wrote: “While I see these multiples as justified for now (due to market inefficiencies created by regulatory and investment committee conservatism), over time that justification will fade.”

As Bitcoin trades above the $100,000 mark, the momentum trade remains intact. However, Standard Chartered’s warning adds a note of caution: without prudent risk management, companies embracing BTC could face the same volatility that once pushed miners and speculators to the brink.

Source: Cryptoslate

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Adam

Stocks

Last week’s earnings report assuaged some key investor concerns: particularly whether US restrictions on the sales of advanced semiconductors in China would derail Nvidia’s rapid revenue growth as well as the outlook for artificial intelligence spending, and the firm’s ability to expand supply of its newest Blackwell chips.

“Those questions have been answered in the positive for Nvidia,” said Thomas Martin, senior portfolio manager at Globalt Investments. “It’s time to ramp back up your ownership.”

After soaring for two and a half years amid insatiable demand for its chips used in AI computing, Nvidia shares tumbled in the first few months of 2025 on concerns about President Donald Trump’s trade policies and a potential pullback in spending by its biggest customers.

Nvidia rose 0.9% on Tuesday, and since an April low, the stock has rallied more than 45%, pushing Nvidia’s market value to $3.4 trillion. That’s just shy of Microsoft Corp., the world’s most valuable company. Nvidia shares remain 7% below a record high in January.

Despite the big advance, Nvidia trades at roughly 29 times profits projected over the next 12 months, well below the average over the past decade at 34 times. By contrast, the Nasdaq 100 is priced at 26 times despite Wall Street estimates calling for revenue growth this year that’s a fraction of Nvidia’s. The stock’s PEG ratio — a measure of valuation relative to growth — is under 0.9, by far the lowest among the Magnificent Seven, which also includes Apple Inc., Amazon.com Inc., Alphabet Inc., Tesla Inc. and Meta Platforms Inc.

Of course, Nvidia is still exposed to US tariffs given its chips are manufactured overseas and could be hurt by a deterioration in trade relations with China, a country that accounted for 13% of revenue in the first quarter. However, purchase agreements with governments in the Middle East are seen as offsetting some lost sales and Nvidia’s product pipeline is expected to keep competitors at bay.

Microsoft, Meta, Alphabet, and Amazon, which together comprise more than 40% of Nvidia’s revenue, continue to invest aggressively in AI infrastructure. Capital expenditures for the four companies are projected to reach roughly $330 billion in 2026, up 6% from estimated spending this year, according to the average of analyst estimates compiled by Bloomberg. Amazon’s cloud services chief on Friday reiterated the company’s plan to aggressively expand its data centers.

“We just haven’t seen any kind of slowdown in AI spending, and so long as capex keeps moving up, we’re unlikely to see the cycle roll over or Nvidia experience much compression to its multiple,” said Samuel Rines, a macro strategist at WisdomTree.

Nvidia is undervalued, according to Rines, who argues the ratio of price-to-projected earnings for the stock could rise to the high 30s or low 40s.

Analysts are widely bullish on Nvidia. Of the 78 covering the stock, eight have hold ratings and only one says sell. The average price target sits at around $170, which would represent a gain of 24% from Monday’s closing price, according to data compiled by Bloomberg.

Explainer: Why Is Nvidia the King of AI Chips, and Can It Last?

Despite its popularity on Wall Street, the stock remains under-owned by market professionals relative to other Big Tech peers, suggesting the potential for more buying in the weeks to come. Nvidia is owned by 74% of long-only funds, according to data from Bank of America published on Friday. This puts it behind Amazon, Apple, and Microsoft, which is the most owned at 91%.

The relatively low exposure coupled with demand for more computing infrastructure is likely to drive Nvidia shares higher into 2026, according to Angelo Zino, senior equity analyst at CFRA Research.

“There were a lot of investors that really got out of this market prematurely and now they’re kind of being forced back into it,” Zino said.

Tech Chart of the Day

Microsoft has roared back in recent weeks, cementing its position as the world’s most valuable company. Shares of the Windows software maker are also inching toward an all-time high as the stock extends gains since the company reported stronger-than-expected sales and profit growth in the fiscal third quarter.

source : Bloomberg

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Manuel

Economic

China–U.S. Trade War

President Donald Trump will sign a directive on Tuesday formally raising steel and aluminum tariffs to 50% from 25%, White House Press Secretary Karoline Leavitt announced.

Trump said last Friday the higher charge will take effect on June 4, but Leavitt did not elaborate on the timing. The move raises trade tensions at a time when the US is locked in negotiations with numerous trading partners over his so-called “reciprocal” duties before a July 9 deadline.

Stocks pared gains in afternoon trading after Leavitt’s remarks at a regular news briefing, with makers of heavy electrical equipment and autos sinking on the news.

The president’s ability to unilaterally impose tariffs stands on shakier legal ground, after a federal court knocked down duties he announced under an emergency law. His levies on metals were not subject to that ruling, however.

Trump announced the decision during a speech at a United States Steel Corp. plant in Pennsylvania on Friday, where he endorsed the sale of the company to Japan’s Nippon Steel Corp. while pledging that it would remain under some form of American control.

“That means that nobody’s going to be able to steal your industry,” he told steelworkers Friday, in announcing the higher tariff. “It’s at 25%, they can sort of get over that fence; at 50% they can no longer get over the fence.”

He later announced in a social media post that the aluminum tariff would also rise to the same level.

Trump’s administration is locked in a legal battle over the bulk of its tariffs, imposed under the International Emergency Economic Powers Act, or IEEPA. The steel and aluminum tariffs are unaffected by that fight because they were imposed using a different authority.

Source: Bloomberg

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Adam

Stocks

The S&P 500 (^GSPC) just logged its best May in more than 30 years in large part due to the return of dominance from the "Magnificent Seven" tech stocks.

Apple (AAPL), Alphabet (GOOGL, GOOG), Microsoft (MSFT), Amazon (AMZN), Meta (META), Tesla (TSLA), and Nvidia (NVDA) combined for 62% of the S&P 500's advance in May. Nvidia and Tesla led the gains, rising more than 20% in the month. Overall, six of the seven stocks outperformed the S&P 500's 6.2% gain for May, with Apple ending the month as the lone laggard.

DataTrek Research co-founder Nicholas Colas wrote in a note to clients that Big Tech's recent outperformance shows "this important slice of the US equity market has genuine momentum."

"The fact that capital is rotating back into US large cap Tech/Big Tech is further proof that the market has finally found its footing," he added.

There are several factors that have been driving these stocks higher. But perhaps chief among them is that Big Tech continues to churn out stronger earnings growth than the rest of the S&P 500.

In the recently reported first quarter, the Magnificent Seven group of stocks grew earnings by a combined 27.7% compared to the same quarter a year ago, well above the 9.4% growth seen from the other 493 members of the index, per FactSet senior earnings analyst John Butters.

The Big Tech companies surprised analysts more too. In aggregate, Magnificent Seven earnings growth beat Wall Street's estimates by 11.7%, compared to the 4.6% beat for the other 493 companies.

Citi US equity strategist Drew Pettit told Yahoo Finance that this helps explain why the Magnificent Seven have been outperforming other stocks amid the run higher in the market over the past month. The Roundhill Magnificent Seven ETF (MAGS) has risen about 11% over the past month, roughly doubling the S&P 500's percentage return in that same time period.

"With the tariff concern and some of the macro hesitancy, like investment hesitancy and buying hesitancy, you're back to growth," Pettit said. "When valuations aren't cheap versus history for anything, might as well go to the place that's got some [earnings] upside."

Charles Schwab senior investment strategist Kevin Gordon pointed out that Big Tech also led the market lower during the sell-off that began in late February and carried through April.

"Tech and the Magnificent Seven, in general, got hit the hardest," Gordon said. "So it's not surprising to see them bounce the hardest as well."

Another reason for the Magnificent Seven's surge is that investors have favored large-cap stocks in the most recent market rally. When investors are concerned about a rise in bond yields, as has been the case over the past several weeks with the 30-year Treasury yield (^TYX) briefly pressing near levels not seen since the great financial crisis, large-cap stocks have outperformed.

This has Pettit and the strategy team continuing to describe a preference toward a "growth is defensive trade." He said as long as rates stay elevated and the 10-year Treasury yield (^TNX) hasn't fallen closer to 4%, "there's only one game in town," and it's growth.

source : finance.yahoo

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Adam

Economic

China–U.S. Trade War

Are President Trump's global tariffs of "vast economic and political significance"?

The answer could make or break the administration's chance to keep the president's "Liberation Day" tariffs in force as legal challengers try to undo them — especially if the dispute eventually reaches the Supreme Court.

The nation's highest court has made it clear in recent years that it is willing to apply a test known as the "major questions doctrine" to rein in the executive branch from usurping power vested in Congress.

That doctrine, solidified with the help of Trump's hand-picked conservative judges, limits the authority of federal agencies to take action on issues of "vast economic and political significance" except where Congress has explicitly authorized the action.

It got a formal nod from the high court in two cases that were decided against President Biden during his time in office. And now it could become a hurdle for the current president if the current lower court fight over Trump's duties reaches the Supreme Court as expected.

Last week, the US Court of International Trade in New York City struck down many of Trump's tariffs without directly applying the major questions doctrine, but on Thursday, the US Court of Appeals for the Federal Circuit in Washington, D.C., allowed Trump's duties to temporarily stay in place while legal arguments continue.

On Monday, the small businesses that initially challenged Trump's tariffs before the US Court of International Trade filed arguments with the trade saying the stay should be lifted. They reiterated a finding of the trade court, saying that "any interpretation" of IEEPA — the 1977 law Trump used to support his duties — "that delegates unlimited tariff authority is unconstitutional."

Judges considering the "major questions doctrine" will have to decide if any president can unilaterally levy import duties to address conditions that the president characterizes as a US emergency — as Trump has cited as justification for many of his duties.

The administration is arguing that the major questions doctrine is irrelevant to matters of national security concern, where a president has extreme flexibility to exert power. It has also argued that it limits actions taken by federal agencies and not actions of the president.

Trump specifically cited the International Emergency Economic Powers Act of 1977 (IEEPA) as authority for many of his tariffs. That law states that during a national emergency, the president can regulate economic transactions, including imports, in order to respond to an "unusual and extraordinary threat" from abroad.

Congress passed the IEEPA to restrict presidents from overstepping a 1917 World War I-era law known as the Trading with the Enemy Act (TWEA). The act, which regulates US transactions with enemy powers, allowed the president to exercise broad economic power during wartime and during national emergencies.

The president cited IEEPA in an executive order issued Feb. 1 when he imposed tariffs on goods from China, Mexico, and Canada by declaring that an influx of illegal immigration and drugs into the country posed a national emergency.

Trump also cited the law on April 2, so-called "Liberation Day," when he announced "reciprocal" tariffs on many countries around the world.

University of California Davis constitutional law professor Aaron Tang called the tariffs a textbook case for application of the major questions doctrine.

"IEEPA has never [been] used before to impose tariffs," Tang said. "So if the doctrine means anything, and if it applies neutrally, no matter who the president is, it will apply here."

It's possible, though unlikely, that a court could avoid the major questions doctrine in deciding the challenger's claims, Tang said.

But to rule in Trump's favor, he said, judges would have to grapple with it to explain why it doesn't apply or is satisfied, given that the US economy is at stake.

"The tariffs are way more economically significant than any of the Biden administration policies," he said.

In 2022, the Supreme Court, in a 6-3 ruling dominated by the court's conservative majority, used the major questions doctrine to find that Biden's EPA lacked clear congressional authorization to regulate certain greenhouse gas emissions.

A year later, the court held that Biden's secretary of education lacked clear authority under the HEROES Act to forgive $400 billion in student loan debt. Like the EPA case, the court said Biden's debt relief regulation was so major that it would need explicit authorization from Congress.

"President Biden and his administration took these really bold actions," Tang said. "The Trump administration, just like the Biden administration, has said, 'I'm just going to do it all by myself.'"

Trump's challengers, he added, have a "very strong argument" that the duties are not authorized by Congress.

Source: finance.yahoo

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Manuel

Economic

China–U.S. Trade War

Alarm over China's stranglehold on critical minerals grew on Tuesday as global automakers joined their U.S. counterparts to complain that restrictions by China on exports of rare earth alloys, mixtures and magnets could cause production delays and outages without a quick solution.

German automakers became the latest to warn that China's export restrictions threaten to shut down production and rattle their local economies, following a similar complaint from an Indian EV maker last week.

China's decision in April to suspend exports of a wide range of critical minerals and magnets has upended the supply chains central to automakers, aerospace manufacturers, semiconductor companies and military contractors around the world.

The move underscores China's dominance of the critical mineral industry and is seen as leverage by China in its ongoing trade war with U.S. President Donald Trump.

Trump has sought to redefine the trading relationship with the U.S.' top economic rival China by imposing steep tariffs on billions of dollars of imported goods in hopes of narrowing a wide trade deficit and bringing back lost manufacturing.

Trump imposed tariffs as high as 145% against China only to scale them back after stock, bond and currency markets revolted over the sweeping nature of the levies. China has responded with its own tariffs and is leveraging its dominance in key supply chains to persuade Trump to back down.

Trump and Chinese President Xi Jinping are expected to talk this week, White House spokeswoman Karoline Leavitt told reporters on Tuesday, and the export ban is expected to be high on the agenda.

"I can assure you that the administration is actively monitoring China's compliance with the Geneva trade agreement," she said. "Our administration officials continue to be engaged in correspondence with their Chinese counterparts."

Trump has previously signaled that China's slow pace of easing the critical mineral export ban represents a violation of the Geneva agreement.

Shipments of the magnets, essential for assembling everything from cars and drones to robots and missiles, have been halted at many Chinese ports while the Chinese government drafts a new regulatory system. Once in place, the new system could permanently prevent supplies from reaching certain companies, including American military contractors.

The suspension has triggered anxiety in corporate boardrooms and nations' capitals - from Tokyo to Washington - as officials scrambled to identify limited alternative options amid fears that production of new automobiles and other items could grind to a halt by summer's end.

"If the situation is not changed quickly, production delays and even production outages can no longer be ruled out," Hildegard Mueller, head of Germany's auto lobby, told Reuters on Tuesday.

Frank Fannon, a minerals industry consultant and former U.S. assistant secretary of state for energy resources during Trump’s first term, said the global disruptions are not shocking to those paying attention.

“I don’t think anyone should be surprised how this is playing out. We have a production challenge (in the U.S.) and we need to leverage our whole of government approach to secure resources and ramp up domestic capability as soon as possible. The time horizon to do this was yesterday,” Fannon.

Diplomats, automakers and other executives from India, Japan and Europe were urgently seeking meetings with Beijing officials to push for faster approval of rare earth magnet exports, sources told Reuters, as shortages threatened to halt global supply chains.

A business delegation from Japan will visit Beijing in early June to meet the Ministry of Commerce over the curbs and European diplomats from countries with big auto industries have also sought "emergency" meetings with Chinese officials in recent weeks, Reuters reported.

India, where Bajaj Auto (BAJA.NS) warned that any further delays in securing the supply of rare earth magnets from China could "seriously impact" electric vehicle production, is organizing a trip for auto executives in the next two to three weeks.

In May, the head of the trade group representing General Motors (GM.N), Toyota (7203.T), Volkswagen (VOWG.DE), Hyundai (011760.KS) and other major automakers raised similar concerns in a letter to the Trump administration.

"Without reliable access to these elements and magnets, automotive suppliers will be unable to produce critical automotive components, including automatic transmissions, throttle bodies, alternators, various motors, sensors, seat belts, speakers, lights, motors, power steering, and cameras," the Alliance for Automotive Innovation wrote in the letter.