MARKET RECAP

Yesterday: U.S. indexes finished mostly higher Thursday as softer inflation and slowing consumer spending raised hopes for rate cuts and a dovish Fed. The Producer Price Index (PPI) fell 0.5% in April, while retail sales rose just 0.1%, both missing forecasts and signaling cooling demand. Treasury yields declined, with the 2-year falling to 3.97% and the 10-year to 4.45%. Interest-rate sensitive sectors like utilities and real estate led gains, while growth sectors lagged. Cisco and Walmart reported better-than-expected earnings, though Walmart warned tariffs will lead to higher consumer prices. Lastly, with 92% of S&P 500 companies having reported, first-quarter earnings are on track for 13% growth, bolstering confidence in modest 2025 earnings gains despite slowing consumer spending.

On Our Radar: Markets will be closely watching the upcoming preliminary consumer sentiment reading — due later this morning — which will provide insights into how Americans are feeling about the economy amid inflation concerns and uncertainty around future Fed policy. On the earnings front, Trip.com, and ZIM will headline a slate of companies that will be reporting earnings on Monday.

TOP STORY

Powell Signals Fed May Shift Inflation Strategy After 5 Years Of Economic Upheaval

After five years of economic turmoil, Federal Reserve Chair Jerome Powell has hinted that the Fed may be reconsidering its long-standing approach to inflation and employment.

In a recent statement and after meeting with members of the Federal Open Market Committee (FOMC), Powell indicated that the central bank is evaluating its current strategy, with a review underway that could lead to significant changes in 2025. This review could mark a pivotal shift, especially in light of the challenges that have unfolded since the Fed’s adoption of "average inflation targeting" in 2020.

While the policy initially aimed to boost economic growth by allowing inflation to rise slightly above the 2% target, the unexpected surge in inflation has forced the Fed to take more aggressive measures. Now, with inflation trending closer to the target, and without triggering major job losses, Powell is suggesting that the previous approach may no longer be necessary.

As the central bank prepares for the next phase of this policy overhaul, one thing is clear: how the Fed communicates its decisions moving forward will be just as crucial as the decisions themselves.

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FIVE ZINGERS

Magnificent Sell?: Wall Street traders snapped up $33 million in puts on the “Magnificent 7” stocks Thursday afternoon, flipping sentiment after a strong market rebound. Is smart money calling the top and expecting a pullback here, or is this a hedge that won’t hold weight?

Plowing Ahead: Shares of Deere & Co. jumped after the company beat Q2 earnings expectations — even as sales dropped across all divisions. Find out how the iconic machinery giant plans to power through industry headwinds and why investors responded positively despite 2025 guidance coming in lower as well.

Tariff Decisions: Walmart reported a mixed Q1 after missing the top line, but surpassing expectations on the bottom line. While the company reaffirmed it’s outlook for 2026, CEO Doug McMillon gave investors and analysts a big warning.

Blunt Reality: Hedge fund veteran Doug Kass says most cannabis stocks are “walking dead,” crushed by debt, dilution and broken promises. But he’s named four survivors that could still thrive. Discover which cannabis plays are likely to outlast the carnage.

Recipe For Success: Cava Group's Q1 report easily topped analyst expectations on the top and bottom lines. The company also raised its new restaurant openings forecast, signaling strong growth ahead. Read on to learn why this Mediterranean chain continues to outperform.

ONE FOR THE ROAD

Fundstrat's Tom Lee Says Economists Predicting A Recession With Certainty Are 'Dead Wrong'

While recession fears have cooled from their fever pitch, there’s still plenty of pessimism flowing through trading desks and financial newsrooms. Talking head and economists continue to sound the alarm, however, not everyone is buying the doom and gloom.

Tom Lee, the managing partner and head of research at Fundstrat Global Advisors, is sounding a different alarm, and is once again striking a contrarian and optimistic tone.

In a recent interview, Lee declared that the doomsday predictions from economists are not just exaggerated — they're flat-out wrong. Drawing from three decades of market experience, Lee points to key indicators that he tracks that suggest we may be on the cusp of a powerful rally, not a recession.

What’s driving his optimism? Not only does he point to his key indicators, Lee argues that investors are too focused on daily headlines — can't see the forest for the trees — thus missing a rare setup for long-term gains. Lee isn’t the only one as major brokerages are beginning to walk back their own recession forecasts, suggesting the tide is already turning.

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