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Macrosynthesis

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TLDR

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May Ends in a Fog—Tariff Tensions and Legal Chaos

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May ended on a tense and uncertain note as trade policy chaos and softening economic data rattled markets. A federal court initially blocked parts of Trump’s new tariff regime, only for an appeals court to temporarily reinstate them—throwing trade rules into limbo. Tensions with China flared after Trump accused Beijing of violating the Geneva deal, citing stalled mineral exports and new tech curbs.


China, in turn, accused the U.S. of weaponizing export controls. With visa bans, chip restrictions, and talks stalled, the fragile truce is on the verge of collapse. Meanwhile, core inflation came in cooler than expected—Core PCE rose just 0.1% in April and 2.5% YoY—but consumer spending slowed and imports plunged, reflecting caution. Markets remain on edge, squeezed between rising debt burdens, shaky confidence, and limited policy options.

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Sentiment Diverges as Markets Lean on Muscle Memory

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As policy confusion deepened, investors responded less with panic and more with muscle memory. The late-May bounce off the 200-day moving average wasn’t a vote of confidence—it was reflexive. With buybacks still active and inflation readings easing, traders leaned into buying. But the character of this rally is shifting. Hedge fund gross exposure remains light, even as retail inflows hit new highs. Positioning is increasingly barbell-shaped—risk-on at the edges, defensive in the core. The market isn’t pricing in clarity—it’s pricing in indecision. And that’s the danger.
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As liquidity thins ahead of June’s data dump and the Q2 blackout window, headline risk becomes a market driver. If tariffs escalate or growth data deteriorates, downside gaps could open fast. For now, sentiment is fragile, fund flows are twitchy, and the floor beneath equities feels more technical than fundamental.

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Conviction Light, Volatility Loaded

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With conviction scarce and the macro backdrop muddled, May’s rally felt more like positioning than belief. Beneath the surface, fund flows split in opposite directions: retail chased momentum, while long-only institutions quietly lightened exposure. With corporate buybacks peaking and Q2 earnings silence approaching, supportive stock buying may dry up just as volatility reawakens.
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Meanwhile, the dollar’s five-month slide and gold’s continued strength hint at deeper anxiety—one not yet priced into equities.  Add in fresh tech sanctions and tariff escalations, and the path forward looks increasingly headline-driven.Without a clear catalyst or earnings tailwind, equity valuations looks stretched—and fragile.

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Tariff Turbulence Escalates as China Truce Frays and Global Blowback Builds

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Markets were pulled into a fresh cycle of legal fragility and geopolitical escalation this week, as the Geneva tariff truce between the U.S. and China teetered on collapse. A federal trade court ruled that Trump’s sweeping “reciprocal” tariffs violated constitutional and statutory limits—specifically, the misuse of the 1977 International Emergency Economic Powers Act (IEEPA), a law intended to address national security threats, not conduct long-term trade policy. Though an appeals court issued a temporary stay, the next decisive hearing is scheduled for June 9, leaving trade enforcement in limbo and exposing a key vulnerability in the administration’s tariff architecture.
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Beijing, meanwhile, has yet to comply with key Geneva concessions, notably the expedited export of rare earths and critical minerals used in semiconductors, EVs, and defense tech. U.S. Trade Rep. Jamieson Greer accused China of deliberately slow-walking licenses. In retaliation, the White House tightened chip design restrictions, revoked student visas, and began restricting aerospace tech sales. China responded by stonewalling U.S. importers and refusing to clarify its export stance, creating fresh uncertainty for global supply chains.
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The diplomatic freeze also spread to Europe. Trump shocked allies with a surprise move to double steel and aluminum tariffs to 50%, effective June 4, triggering a sharp rebuke from Brussels, Ottawa, and Canberra. The EU warned of retaliatory tariffs by July 14 if no deal is reached, reigniting transatlantic trade tensions. Canada’s Chamber of Commerce called the move a direct threat to North American supply chains, and Australia’s trade minister labeled it “unjustified and unfriendly.”

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For markets, the risks now stack on multiple fronts:

• Legal instability: IEEPA’s misuse could unravel a core pillar of Trump’s economic strategy.
• Diplomatic standoff: A Xi-Trump call, floated by the White House, hasn’t materialized. Strategic ambiguity is deepening.
• Retaliation risk: With new EU countermeasures queued and U.S. allies fuming, the threat of a multi-front trade war is growing.
• Supply chain stress: Sectors tied to green tech and AI face rising costs and tightening access to critical inputs.

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Global Allies Hit Back: Retaliation and Repositioning Intensify

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While tariffs dominate headlines, Europe’s counterpunch is taking digital form. Germany has proposed a 10% “Platform Solidarity Contribution” targeting U.S. tech giants like Google and Amazon. Officially framed as media fairness, Berlin insiders admit it’s a geopolitical counterstrike—digital tariffs in disguise. Modeled after Austria’s version, the tax could backfire by raising costs on EU startups reliant on U.S. platforms, but the signal is unmistakable: if Washington taxes analog goods, Europe will tax digital power.
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This marks a deeper shift from negotiation to structured reprisal. Lacking dominant tech champions, the EU is leveraging taxation to reclaim digital sovereignty—even at the risk of exposing its innovation gap.
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At the Shangri-La Dialogue, economic volatility—not military posture—dominated conversations. Malaysia and Australia warned that unpredictable U.S. tariffs are undermining regional trust and supply chain resilience. In response, a middle-power coalition—from Europe to Southeast Asia—is pushing for strategic autonomy and diversified trade ties to buffer against superpower volatility.

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Credit Default Swaps Surge as Fiscal Stress Rises

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Even as tariff chaos dominates headlines, investors are quietly hedging against a deeper threat: U.S. fiscal instability. One-year credit default swaps (CDS) on U.S. Treasuries have spiked to 52 basis points—just shy of levels seen during the 2023 debt ceiling standoff, and the highest (outside of crisis moments) in over a decade. The outstanding volume of CDS contracts has jumped by $1B this year to $3.9B, the second-highest since 2014.
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This reflects more than just noise. While most analysts still dismiss a true default as unlikely, the rising cost of insuring U.S. debt signals growing concern over political dysfunction and the unresolved debt ceiling. Treasury has already hit its statutory borrowing limit, relying on "extraordinary measures" to stay afloat. But time is running out. With no durable fiscal deal in place, credit stress is bleeding into markets—and adding pressure to Washington’s already precarious fiscal credibility.

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Musk Out, Math Still Broken: The Spending Fight That Won’t Die

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Elon Musk’s exit from the Department of Government Efficiency (DOGE) marks the collapse of a radical experiment in cost-cutting. Designed to slash $2T in federal outlays, DOGE claimed just $175B in realized savings before lawsuits, bureaucracy, and political backlash ground reforms to a halt. Now, with Musk gone and no permanent legislative action, the program sits in limbo—its cultural impact outsized, its fiscal footprint limited.
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Public frustration with waste, however, is still red-hot. A recent Cato poll shows 64% of Americans prefer spending cuts to taxes or debt, and nearly 80% believe the federal government wastes more than half of every dollar it spends. That anger is now being channeled into Trump’s “Big, Beautiful Bill” (BBB)—a sprawling package that extends Trump-era tax cuts, boosts defense and immigration budgets, and expands family credits, but adds $3.8T to the debt through 2035. Even Musk, once its loudest supporter, called the BBB “a disappointment,” saying it sidelines the very fiscal restraint DOGE fought for.
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The administration is scrambling to salvage credibility with a narrow rescissions bill—targeting symbolic programs like NPR, PBS, and foreign aid. But without structural entitlement reform or meaningful adoption of DOGE’s full audit, the debt curve steepens. Investors may be cheering tax relief, but long-term risks are mounting: rising borrowing costs, weaker credit confidence, and policy paralysis in the face of ballooning deficits.
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The chainsaw is gone. Whether a scalpel emerges—or the debt bomb detonates—depends on whether Congress moves past theater and tackles the math. For now, budget discipline is more campaign slogan than governing priority.

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Disinflation Holds, But Housing Cracks—and Confidence Rebounds

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April core PCE inflation cooled to 0.1% MoM and 2.5% YoY, its lowest since 2021, supporting the Fed’s wait-and-see stance. It’s the second straight month of easing, though analysts warn tariff effects aren’t fully priced in and could reverse the trend by summer. Meanwhile, real disposable income rose 0.7%, and the savings rate climbed to a one-year high—signs of resilience amid cautious spending.
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Housing told a different story: pending home sales plunged 6.3% in April, with sharp declines in the South and West. Inventory is rising, but high mortgage rates continue to sideline buyers. Even the Midwest, where prices remain more affordable, saw only a modest YoY gain in contract activity.
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However, consumer sentiment snapped a 5-month losing streak. The Conference Board’s Consumer Confidence Index jumped to 98.0 in May (vs. 86.0 est.), with optimism fueled by Trump’s temporary tariff halt and trade truce with China. The rebound was broad-based, but especially strong among Republicans and equity investors, 44% of whom now expect stocks to rise over the next 12 months.

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Last Week's Market Performance

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Markets ended May on a strong note, with the S&P 500 up +1.9%, the Nasdaq +2.0%, and the Dow +1.6%. Volatility sank -16.7% to 18.57. Tech (+2.4%), Real Estate (+2.7%), and Telecom (+2.1%) led sector gains, while Energy (-0.4%) lagged.
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Top S&P 500 gainers included Ulta Beauty (+15%), Hologic (+14%), and Intuit (+13%). Biggest losers were Regeneron (-18%), Deckers (-16%), and Copart (-15%).
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The S&P 500 surged +6.2% for May, its best monthly gain since Nov. 2023. Nvidia’s blowout quarter and easing PCE inflation (+0.1% MoM; +2.5% YoY) helped offset tariff volatility. Trump’s latest tariff move remained in legal limbo after accusations that China violated their May 12 truce.
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Gold dropped -1.9% to $3,330/oz, crude oil slid -1.2% to $60.79, and Bitcoin fell -3.8.

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Upcoming Events This Week

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Markets enter June on edge as renewed U.S.-China trade tensions escalate following President Trump’s accusation that China breached the May 12 tariff truce. Investors will monitor a packed economic calendar, headlined by the U.S. jobs report (expected +130K payrolls), ISM PMIs, and a flurry of Fed speeches.
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Additional U.S. data includes JOLTS job openings, factory orders, and trade stats. Globally, central bank decisions from the ECB, Bank of Canada, and Reserve Bank of India are due, alongside inflation prints from the Euro Area, South Korea, and Switzerland.

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Company News

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LevelFields AI Stock Alerts Last Week

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TruGolf (TRUG) Soars +20% on Buyback News

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TruGolf Holdings jumped 19.8% in a single day after its Board of Directors approved a $2 million stock repurchase program. The move signals confidence in the golf tech firm's valuation and future prospects as it looks to solidify its position in a growing niche of digital sports infrastructure.

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Canaan (CAN) Rallies +9% on $30M Buyback Plan

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Canaan surged 9.1% after announcing a share repurchase program of up to $30 million. The Chinese Bitcoin mining hardware firm is leaning into capital return amid market volatility, aiming to support its share price and demonstrate balance sheet strength following recent cost-cutting efforts.

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Nvidia Powers Ahead: AI Dominance Holds as Robotics Becomes Next Frontier

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Nvidia (NVDA) delivered another blockbuster quarter, beating expectations and forecasting $45B in Q2 revenue despite an $8B hit from U.S. export controls on China. The stock rose post-earnings as markets absorbed Nvidia’s message: global AI infrastructure buildout remains strong, with over 100 new data centers under construction using its chips. CEO Jensen Huang emphasized that AI adoption is not slowing—it’s accelerating across every sector and geography.
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Huang also unveiled GR00T-Dreams, Nvidia’s new platform for training humanoid robots, dubbing robotics the next “multi-trillion-dollar industry.” This marks a strategic expansion of Nvidia’s footprint into the broader AI-industrial complex, as competitors like Meta and Honor Device also race to deploy consumer and commercial AI-powered robots.
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But the company isn’t immune to geopolitics. China is ramping up its domestic chip ecosystem, and new U.S. rules restrict access to advanced chip design software—potentially bottlenecking international revenue. Still, Nvidia’s edge in end-to-end AI system design, combined with Blackwell chip momentum, positions it to stay ahead. The bigger risk may be overreach: as Nvidia moves from chips to platforms, it will need to maintain agility while navigating an increasingly fragmented, tariff-heavy global market.

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C3.ai Surges on AI Demand, Earnings Beat, and Expansion

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C3.ai (AI) jumped over 25% after reporting a narrower-than-expected Q4 loss of $0.16 per share and revenue of $108.7M, up 26% YoY. Generative AI continues to drive growth, with related revenue more than doubling over the fiscal year. Subscription revenue rose 9% to $87.3M, while engineering services soared 196% to $17M—together comprising 96% of total revenue.

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The company also renewed and expanded its strategic partnership with Baker Hughes, deepening co-selling efforts and scaling joint AI solutions aimed at boosting efficiency and reducing downtime across global energy assets.
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While the stock remains down 15% YTD, this earnings beat—combined with sector momentum and rising generative AI adoption—could mark a turning point. Shorts covering may have added fuel to the rally, but C3’s growing enterprise footprint and strong partnership pipeline hint at more durable upside if execution continues.

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E.L.F. Beauty Surges on Blowout Quarter and $1B Rhode Deal

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E.L.F. Beauty (ELF) rallied 24% after reporting a 47% YoY EPS jump to $0.78 on revenue of $332.7M (+4%), beating estimates and marking its 25th consecutive quarter of growth. Gross margins improved to 71%, and the company gained 190bps of U.S. market share, reinforcing its dominance in the affordable beauty space.
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But the real headline: ELF is acquiring Hailey Bieber’s Rhode for up to $1 billion—$800M at close ($600M cash, $200M stock), plus a $200M earnout. Rhode, launched in 2022, pulled in $212M in sales over the past year and is expanding into Sephora stores this fall.
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The move injects star power and TikTok-native brand equity into ELF’s portfolio, tapping into a rabid Gen Z base where a single viral reel can drive mass conversion. With Rhode’s aesthetic and ELF’s distribution machine, this deal could prove a generational unlock in beauty retail.

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This is not financial advice. All information represent opinions only for informational purposes. Given the vast number of stocks we cover in these reports, assume staff covering stocks have positions in stocks discussed.
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Have feedback or a request for specific data? Drop us a note at support@levelfields.ai

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