Uncertainty ahead
It has been a Jekyll-and-Hyde start to 2025. Analysts and investors are bracing for more drama in the second half.
S&P 500 futures point to a weak opening on Tuesday, but the benchmark index is on a winning streak, having closed on Monday at another record. But the dollar has had its worst start to the year in more than a half-century as some investors sweat a possible return of the “sell America” trade instigated by President Trump’s trade war.
Amid this split screen, Trump has stepped up his attacks on the Fed and its chair, Jay Powell. The threat to the central bank’s independence could jolt global investors’ nerves.
A recap: Coming into the year, Wall Street hoped that Trump’s business-friendly agenda of slashing taxes and regulations would propel stocks.
But while the S&P 500 is up more than 5 percent this year, tariff uncertainty has rattled business executives, consumers and investors. And the fate of the Republican policy bill that is central to Trump’s domestic agenda remains unclear as the legislation awaits a vote in Congress.
That has been a recipe for market turbulence. Stocks have rebounded since late April on hopes for a slew of trade deals that would avert crushing tariffs. But with the administration’s initial and highly ambitious goal of 90 deals in 90 days looking less and less likely, are investors getting ahead of themselves? (Among the developments: The European Union appears willing to concede some ground, but Trump is threatening new tariffs on Japan, grumbling that the country “won’t take our RICE.”)
What’s weighing on investors’ minds:
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Growth is uncertain. G.D.P. fell last quarter in the U.S., and many economists expect faltering consumer spending. Could households benefit from tax cuts in the Republican policy bill if it passes? Many economists think the legislation would raise growth — but the Yale Budget Lab warns that it is so expensive, it could raise interest rates in the long run.
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Inflation is far from vanquished. So far, Trump’s tariffs haven’t significantly raised prices. But that could change fast, especially with a major deadline next week by which Trump could reinstate his biggest levies.
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The Fed is under pressure over interest rates. The central bank is in wait-and-see mode as it watches the inflationary and labor-market effects of Trump’s trade policy. But some Fed governors have suggested they’re ready to cut borrowing costs as soon as this month.
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Succession drama hangs over the Fed. Treasury Secretary Scott Bessent laid out a timeline on Monday in which the administration could name an heir apparent to the Fed board in January, months before Powell’s term expires in May. That could create a shadow Fed chair beholden to Trump and undercut Powell’s authority, muddling the central bank’s messaging.
That said, the underlying economy is holding up — so far. “Despite all the turmoil that took place in Q2, one factor supporting markets was broadly resilient data,” Henry Allen, a Deutsche Bank markets strategist, wrote in an investor note on Tuesday. “There was little evidence that either the U.S. or global economies were suddenly deteriorating thanks to the tariffs.”
If that trend buckles, all bets are off.
HERE’S WHAT’S HAPPENING
Senate Republicans toil toward a vote on their big domestic-policy bill. Lawmakers stayed up to slog through numerous amendments to the legislation, including over clean-energy credits, cuts to Medicaid and state-level regulation of artificial intelligence. They hoped to get to an up-or-down vote soon and for President Trump to sign the bill into law by Friday. But many questions remain, including whether the bill will pass and whether House Republicans will approve of the changes.
The Trump administration accuses Harvard of violating federal civil rights law. Federal officials said that the university had failed to protect Jewish students from harassment, which could lead to the “the loss of all federal financial resources.” Harvard denied the allegations. Separately, a conservative think tank tied to Trump sued Cornell, accusing that university of illegal discrimination via its use of diversity, equity and inclusion policies.
Trump and Paramount say they’re in “advanced” settlement talks. The two sides disclosed in a court filing that they were in negotiations to end the president’s lawsuit over a segment produced by “60 Minutes” on CBS News, which Paramount owns. The discussions have gone on for months; Paramount executives see the lawsuit as a potential hurdle to winning antitrust approval for their company’s proposed sale to the Hollywood studio Skydance.
Google makes a bet on nuclear fusion. The tech giant agreed to buy 200 megawatts of power from the first electricity facility planned by Commonwealth Fusion Systems, a start-up, and it is taking a stake in the company as well. It’s another sign of the deep hunger that tech companies have for electricity to power data services for artificial intelligence.
How far will Apple go?
Apple’s struggles with artificial intelligence are well known, to the point that we’ve asked if the company should open its wallet to pay for a major acquisition or partnership.
Reporting by Mark Gurman of Bloomberg suggests that Apple is considering something along those lines: working with OpenAI, the maker of ChatGPT, or with the A.I. start-up Anthropic to power a new version of its digital assistant, Siri. Apple could also scrap efforts to develop in-house software to make a smarter version of the tool.
Apple has asked OpenAI and Anthropic about training versions of their large language models that could run on Apple’s own cloud infrastructure, according to Bloomberg.
A recap: While ChatGPT now assists Siri with some web-based queries, Siri itself is still powered by Apple software that has been criticized for years as underpowered.
More from the Bloomberg report:
[Craig Federighi, Apple’s software engineering chief, and Mike Rockwell, its head of Siri] and other executives have grown increasingly open to the idea that embracing outside technology is the key to a near-term turnaround. They don’t see the need for Apple to rely on its own models — which they currently consider inferior — when it can partner with third parties instead, according to the people.
Licensing third-party A.I. would mirror an approach taken by Samsung Electronics Co. While the company brands its features under the Galaxy A.I. umbrella, many of its features are actually based on Gemini. Anthropic, for its part, is already used by Amazon.com Inc. to help power the new Alexa+.
In the future, if its own technology improves, the executives believe Apple should have ownership of A.I. models given their increasing importance to how products operate. The company is working on a series of projects, including a tabletop robot and glasses that will make heavy use of A.I.
Why it matters: Apple executives worry that the rise of chatbots could lessen users’ dependence on devices like the iPhone. Some analysts and investors have suggested that Apple, a $3 trillion behemoth, should buy a major A.I. start-up like the search engine Perplexity.
It’s not clear how far this will go. Bloomberg reports that Apple and Anthropic have disagreed over financial details, with the A.I. start-up looking for a multibillion-dollar annual fee that would grow sharply every year.
And some Apple executives dislike the idea of going outside the company for a solution. Members of the company’s A.I. team have reportedly indicated that they could end up leaving, especially given that rivals like Meta are offering huge pay packages for experts in the field.
“Elon may get more subsidy than any human being in history, by far, and without subsidies, Elon would probably have to close up shop and head back home to South Africa. No more Rocket launches, Satellites, or Electric Car Production, and our Country would save a FORTUNE. Perhaps we should have DOGE take a good, hard, look at this? BIG MONEY TO BE SAVED!!!”
— President Trump on Truth Social on Tuesday. He seemed to be responding to a barrage of X posts by Musk, whose criticism of the Republican domestic-policy bill now extends to calling for a new political party. Tesla shares were down sharply in premarket trading as investors worried about potential blowback to Musk’s company.
A new corner of the market for Home Depot
Home Depot struck its latest deal on Monday, announcing a $4.3 billion takeover of GMS, a large distributor of building products. (It beat out the building-products distributor QXO, which had offered $5 billion in cash.)
The transaction speaks to trends in the housing market, including a pullback in home improvement projects that has prompted retailers to look for growth elsewhere, Danielle Kaye reports.
Home Depot wants to increase sales to professionals. That means offering more supplies like drywall, ceilings and steel framing to roofers and renovators, not just to homeowners looking to fix things up.
The GMS acquisition comes after Home Depot’s purchase last year of SRS Distribution, another building-products company. (SRS is technically the buyer of GMS.)
The deal in part reflects a drop-off in D.I.Y. demand. “There’s a lot of pressure on the consumer right now, which means they’re not spending as much on home improvement projects,” Neil Saunders, managing director for retail at the consulting firm GlobalData, told DealBook. High interest rates are still dampening demand for big remodeling projects that require financing.
That backdrop means home-improvement retailers are reluctant to rely on the consumer market.
The housing market is still stuck. “You can see it simply through the very low level of home sales,” Chen Zhao, the head of economics research at Redfin, told DealBook. In May, existing-home sales inched up from a month earlier, according to the National Association of Realtors.
But existing home sales are still at an annual rate of around four million — “and we have just not seen numbers that low since the 1990s,” Zhao said.
More staying put means less remodeling tied to moves. In response, retailers are zeroing in on their professional portfolios, which they see as more stable. Lowe’s announced last month that it was acquiring Artisan Design Group, which provides services to home builders and property managers.
These businesses also handle commercial construction, including building data centers for tech companies. “Folks like Home Depot, Lowe’s, QXO and others want to be at the center of that growth,” Amol Shah, a manager director at the consulting firm AlixPartners, told DealBook. “This is a play for a lot of the home improvement retailers to fortify their position.”
THE SPEED READ
Deals
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Mike Moritz, the venture capitalist who got wealthy by investing early in Google and PayPal, is betting on news. (NYT)
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Circle’s stock has climbed nearly 500 percent since the company went public. Analysts at JPMorgan Chase, which helped underwrite that I.P.O., think that’s too much. (Bloomberg)
Tech and artificial intelligence
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Mark Zuckerberg officially announced Meta’s “superintelligence” A.I. unit, with leaders including Alexandr Wang, a founder of Scale AI, and Nat Friedman, the former C.E.O. of GitHub. (WSJ)
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Anthropic let its A.I. model run its in-house store for a month. Things went very wrong. (Business Insider)
Best of the rest
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The online retailers Shein and Temu have shed customers since President Trump ordered the closure of a tax loophole that helped them offer ultracheap items. (FT)
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“Caitlin Clark Is Worth Millions to the W.N.B.A. But She’s Not Paid Like It.” (The Athletic)
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Andrew Ross Sorkin is a columnist and the founder of DealBook, the flagship business and policy newsletter at The Times and an annual conference.
Bernhard Warner is a senior editor for DealBook, a newsletter from The Times, covering business trends, the economy and the markets.
Sarah Kessler is the weekend edition editor of the DealBook newsletter and writes features on business.
Michael J. de la Merced has covered global business and finance news for The Times since 2006.
Danielle Kaye is a Times business reporter and a 2024 David Carr Fellow, a program for journalists early in their careers.
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