The heavyweight week is coming! Will the court stop Trump's tariffs? Apple WWDC debuts alongside the US CPI

The S&P 500 Index is currently just about 2% away from refreshing its historical high, a scenario that seems unimaginable given the severe sell-off in the global financial markets, especially in U.S. stocks, bonds, and currencies due to Trump's tariffs in early April. However, reality is absurd and quite unpredictable. According to statistics, as of last week’s close of U.S. stock trading, the release of the May non-farm payroll report, which consolidated the "soft landing" of the U.S. economy and appeared friendly towards expectations of a Federal Reserve interest rate cut, led to a broad rally in U.S. stocks, with all three major indices closing higher for the week. This week, as U.S. stocks approach historical highs, the U.S. CPI and PPI inflation data, along with Apple's WWDC, are set to make a significant impact. Will the shadow of Trump's tariffs further dissipate? As of last Friday's close, the three major indices each rose by more than 1% in a single day, driven by the strong gains of AI leaders like NVIDIA. The Nasdaq Composite Index, which encompasses all popular tech stocks, rose by over 2.3% for the week, while the benchmark S&P 500 Index jumped approximately 1.6% for the week, and the Dow Jones Industrial Average increased by over 1% for the week. In terms of significant macro events affecting market trends, this week the global financial markets will focus on the first meeting of the China-U.S. economic and trade consultation mechanism, the U.S. Court of Appeals possibly ruling in the coming days on whether to permanently overturn the U.S. International Trade Court's decision to block Trump's reciprocal tariffs, and the recent drama of "Trump and Musk's breakup" that global investors are collectively watching—will it lead to reconciliation or unexpectedly worsen to severely impact the U.S. economy? According to the Ministry of Foreign Affairs, at the invitation of the British government, He Lifeng, a member of the Political Bureau of the CPC Central Committee and Vice Premier of the State Council, will visit the UK from June 8 to 13. During this period, the first meeting of the China-U.S. economic and trade consultation mechanism will be held. According to previous court disclosures, the U.S. Court of Appeals may rule in the coming days on whether to permanently overturn the U.S. International Trade Court's decision to block Trump's reciprocal tariffs. The appeals court will hear both sides' opinions before June 9, but regardless of the outcome, the tariff case may still be submitted to the U.S. Supreme Court, delaying the final ruling. In terms of economic data focus, the spotlight will undoubtedly be on the May U.S. Consumer Price Index (CPI) and U.S. PPI inflation data. Additionally, the preliminary value of the University of Michigan's May Consumer Sentiment Index, which has garnered much attention, will be released on Friday evening. The U.S. May CPI data report, set to be released on Wednesday evening Beijing time, will undoubtedly test the market's optimistic expectations for the Federal Reserve's interest rate cuts, as it may show that the recent downward trend in inflation has essentially stalled. Economists generally believe that U.S. prices in May will begin to reflect the negative impacts of Trump's tariff policies, thus the overall CPI and core CPI may significantly heat up. Following the strong non-farm data release, the May CPI will also be the last important data point before the Federal Reserve's June interest rate decision In terms of corporate performance disclosures, GameStop (GME.US), known as the "Meme Stock Leader," Oracle (ORCL.US), a global leader in the software industry, and Adobe (ADBE) will stand out in this week's relatively quiet earnings disclosure cycle. The market will focus on Oracle's cloud computing revenue and Adobe's revenue scale and future outlook for its "AI + Creative Software." Additionally, although the earnings disclosure period for Apple Inc. (AAPL.US) has not yet arrived, the upcoming Apple Worldwide Developers Conference (WWDC) this week is highly anticipated by global investors. As the market focuses on Sino-U.S. trade, what kind of "tariff script" will the U.S. court present? After the two largest economies in the world reached a trade consensus in May and agreed to significantly reduce each other's tariffs, expectations for a "soft landing" of the U.S. economy have rapidly increased. Financial institutions on Wall Street, such as Goldman Sachs, have also shown a noticeable cooling in their bets on Federal Reserve interest rate cuts. Economists have shifted their predictive stance, believing that the probability of a U.S. economic recession has significantly decreased, but many still predict a slowdown in economic activity. In contrast, before the positive trade consensus was reached between China and the U.S., most economists predicted that the U.S. would fall into recession this year. According to the Ministry of Foreign Affairs, a spokesperson announced that at the invitation of the British government, He Lifeng, a member of the Political Bureau of the CPC Central Committee and Vice Premier of the State Council, will visit the UK from June 8 to 13. During this period, the first meeting of the Sino-U.S. economic and trade consultation mechanism will be held with the U.S. side. According to a statement made by the spokesperson of the Ministry of Commerce on May 12 regarding the joint statement from the Sino-U.S. Geneva economic and trade talks, both sides agreed to establish a Sino-U.S. economic and trade consultation mechanism to maintain close communication on each other's concerns in the economic and trade fields and to conduct further consultations. The Chinese representative is Vice Premier He Lifeng, while the U.S. representatives are Treasury Secretary Janet Yellen and Trade Representative Katherine Tai. Both sides will regularly or irregularly take turns conducting consultations in China, the U.S., or in a third country agreed upon. As needed, both sides may conduct working-level consultations on relevant economic and trade issues. In the U.S., the court's judgment on the "legality" of the Trump administration's tariffs will be revealed this week. It is reported that the U.S. Court of Appeals may rule in the coming days on whether to permanently overturn the U.S. International Trade Court's decision to block Trump's reciprocal tariffs. According to previous court disclosures, the appellate court will hear both sides' opinions before June 9, but regardless of the outcome, the case may ultimately be submitted to the Supreme Court, delaying the final ruling. Earlier this month, the Trump administration informed the appellate court that if the ruling to prohibit the enforcement of tariffs cannot be quickly suspended, it will seek emergency assistance from the Supreme Court as early as the 30th. The U.S. Court of Appeals for the Federal Circuit (CAFC) previously approved the Trump administration's request on May 29 to temporarily suspend the U.S. International Trade Court's (CIT) earlier ruling that prohibited the enforcement of the Trump administration's so-called "reciprocal tariff" executive order based on the International Emergency Economic Powers Act If the U.S. Court of Appeals rules in favor of the Trump administration during this period, it will not change the risk appetite and pricing status of global financial markets, and the market impact will be minimal. However, if the court supports the lower court's ruling that the Trump administration's reciprocal tariffs are "illegal," it may provide a limited boost to risk appetite, but trade negotiations between all countries and the U.S. government may stall. Nonetheless, it cannot be ruled out that the Trump administration may invoke other legal provisions to continue the tariff policy. In addition, the "Big and Beautiful" bill promoted by Trump is currently under review in the Senate. Wall Street is assessing how much stimulus this legislation will provide to economic growth, but at the same time, there are concerns that the bill will further expand the U.S. fiscal deficit, leading to a sustained rise in long-term (10 years and above) U.S. Treasury yields. "Patience" remains the keyword The non-farm payroll report for May released last Friday showed that the U.S. labor market added 139,000 jobs in the month, exceeding expectations, while the unemployment rate remained at 4.2%. This data largely alleviated market concerns about a rapid deterioration of the U.S. economy and somewhat solidified expectations for a "soft landing" of the U.S. economy. Economists generally believe that the Federal Reserve will keep interest rates unchanged at its next policy meeting on June 18. However, some economists still point out cracks beneath the resilient surface of the labor market. Neil Dutta, the head of economics at Renaissance Macro, emphasized that Friday's data report included a significant downward revision of the previous month's job gains, a decline in the employment rate of the core working population aged 25-54, and a marginal increase in the unemployment rate. The unrounded data showed that the unemployment rate in May slightly rose from 4.187% in April to 4.244%. Federal Reserve policymakers, including Jerome Powell, are waiting for the uncertainties surrounding Trump's tariff policy and other policies to be fully resolved. Policymakers generally state that the U.S. economy remains solid so far, allowing them to maintain patience for an extended period. They also indicated that it is still unclear how extensive the tariffs will ultimately be and how they will affect the economy. They expect that the U.S. unemployment rate and inflation may rise due to the negative impacts of the tariff policy, but the ongoing uncertainty regarding the tariff policy makes it difficult for them to assess how the U.S. economy will ultimately evolve, and they remain concerned that inflation may significantly heat up in the second half of the year. Federal Reserve Chairman Jerome Powell emphasized at the press conference following the May interest rate meeting that the Fed does not need to rush to adjust the benchmark interest rate, as the U.S. economy continues to show resilience. The current policy is moderately restrictive, and the cost of further observation is relatively low. He also stated that President Trump's calls for interest rate cuts will not affect the Fed's work. Federal Reserve Governor Adriana Kugler stated in a speech at the New York Economic Club last week that she tends to maintain the current policy interest rate level unchanged, as the "upside risks to inflation outweigh the downside risks to employment and output." "If the upward risk of inflation still exists, I will continue to support maintaining the federal funds rate at its current level," Kugler said. She pointed out that the recently imposed tariffs have already put upward pressure on prices, and although there are some signs of economic cooling, "it has not constituted a substantial slowdown." "Federal Reserve officials and investors in the financial markets seem to only see the superficially perfect data from the labor market while ignoring the obvious signs of weakness beneath the surface," Dutta wrote. "The longer the Federal Reserve officials delay interest rate cuts, the greater the pressure will be." The U.S. May CPI data report, which will be released on Wednesday evening Beijing time, will undoubtedly put the market's optimistic expectations for the Federal Reserve's interest rate cuts to a comprehensive test, as it may show that the recent downward trend in inflation has basically stalled. Economists generally believe that U.S. prices in May will begin to reflect the negative impacts of the Trump administration's tariff policies, thus overall CPI and core CPI may significantly heat up. Following the release of strong non-farm data, the May CPI will also be the last important data point before the Federal Reserve's June interest rate decision. In the recently released May ISM Services PMI, U.S. business activity and new orders both plummeted, while the prices paid index surged to a 30-month high, reigniting Wall Street's concerns about the U.S. economy falling into stagflation. Economists generally expect the U.S. May CPI year-on-year to rise from last month's 2.3% (the April CPI reading was the lowest since February 2021) to 2.5%, while core CPI year-on-year is expected to rise from last month's 2.8% to 2.9%, and core CPI month-on-month may reach 0.3%, higher than the previous month's 0.2%. "It is expected that tariffs will have a more pronounced impact on commodity prices, but seasonal factors for large items like automobiles and moderate service prices will limit the rise in core prices," wrote Stephen Juneau, an economist at Bank of America, in a report to clients. Apple's 2025 Worldwide Developers Conference (WWDC) will kick off on June 9 in Cupertino, California, where developers and users will preview the company's software product updates for the coming year. It remains unclear when Apple will launch its generative AI-driven Siri, and its released AI features have not truly impressed Wall Street or other sectors. This year's event may reveal more about Apple's AI plans, but it is difficult to replicate the sensational releases of last year. However, analysts generally expect Apple to introduce a series of new features for systems such as iOS, iPadOS, macOS, and watchOS. Although it is unlikely, Apple may also unveil new hardware at this conference. According to renowned Apple journalist Mark Gurman, Apple is undergoing a major overhaul of its core software, drawing on the design language of the Vision Pro headset's visionOS operating system to bring a new visual style to iOS, iPadOS, and macOS. From icons and menus to applications, updates will be made, and Gurman stated that this is the largest style change for iOS since 2013 and the most thorough design innovation for macOS since 2020 Trump vs Musk The CEO of one of the world's largest companies is still in a full-blown conflict with U.S. President Trump. After Tesla (TSLA.US) CEO Elon Musk criticized Trump's tax bill for several consecutive days, the president launched a fierce counterattack on Thursday. Trump even posted on Truth Social that the easiest way to cut the budget is to "terminate the government subsidies and contracts that Musk has received." In another post, he added, "Elon is 'tiresome,' I asked him to leave, I canceled his mandate that forced everyone to buy unwanted electric vehicles (he knew I was going to do this months ago!), and so he went completely crazy!" This dispute caused Tesla's stock price to plummet more than 14% in a single day, marking the largest single-day loss in market value in history, while dragging down the S&P 500 index and the Nasdaq Composite index on Thursday. On Friday, Tesla's stock price rebounded slightly, rising nearly 4%. The latest signal suggesting that the intense dispute between Trump and Musk may ease is that legendary hedge fund figure and major Republican donor Bill Ackman posted on social media X as a mediator, stating that everyone is working for the national interest of the United States and should coexist peacefully. Musk replied to Ackman, saying, "You are right." Therefore, Musk's response to Ackman is seen as both sides beginning to back down. However, investors should not assume that the impact has ended, as Trump stated over the weekend that if Musk funds Democratic candidates, he will face "serious consequences." He also expressed no intention to repair his relationship with Musk for the time being. "As a shareholder, this is as bad as it gets for Musk and his assets, investment plans, and future expectations, because Trump has three and a half years left in his term," said Ross Gerber, president of Gerber Kawasaki Wealth and Investment Management, over the weekend. "Musk, in a haze of arrogance and some sort of detachment from reality, actually thinks he is more powerful than Trump. This is a long-term face-off." The market's most annoying "Uncertainty" is expected to continue to ease During April, negative tariff headlines frequently disturbed the market, mainly due to the various "Uncertainty" brought about by tariff policies, making it difficult for the market to judge the evolution direction of the stock, bond, and foreign exchange markets. However, the good news is that recently, the negative market pricing situation caused by "Uncertainty" has significantly weakened, and the negative pricing trend brought about by the term "Uncertainty," which the market dislikes the most, is expected to continue to ease. Last Wednesday, even as global trade tensions escalated again, the stock market still closed higher, which is an example. Venu Krishna, head of U.S. equity strategy at Barclays, stated that recent market performance reflects a "broad awareness" that extreme tariff measures cannot be taken at face value Krishna also pointed out that the peak of uncertainty related to tariffs has passed, which occurred when Trump raised the effective tariff rate in the U.S. to its highest level in over a decade on April 2. Morgan Stanley's Chief Investment Officer Mike Wilson found that the volatility index (the VIX fear index) and the "Bloomberg U.S. Trade Policy Uncertainty Index" are both trending downward. The latter index measures the level of uncertainty by analyzing the frequency of mentions of the term "uncertainty" in news reports related to tariff-related trade policies. "Ultimately, while uncertainty related to the final outcomes of tariffs remains high, the rate of change in policy headwinds has significantly eased," Wilson wrote. "This reduces the risk of economic recession and gives global businesses and consumers more confidence in the economic outlook." Joe Mazzola, Head of Market Trading and Derivatives Strategy at asset management giant Charles Schwab, stated that this is also evident in the options market, where current bets do not show extreme bullish or bearish sentiment. "The tariff announcements from the Trump administration no longer have the same shock effect," he emphasized. "You may no longer see that kind of large and violent volatility."