Key Points
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A new budget bill in Congress promises to lower taxes, but threatens to explode the budget deficit higher as well.
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Bond yields are rising as investors demand additional compensation to invest in U.S. government debt.
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S&P 500 Glows Green in the End
The Vanguard S&P 500 ETF closed barely higher Thursday, up just 0.04% at 535.97 — but finally positive.
Mideast Gets Its Own Stargate
New details are emerging concerning President Trump’s announcement of a “Stargate” artificial intelligence campus to be built in Abu Dhabi, United Arab Emirates. As CNBC reports today, Softbank, OpenAI, Oracle (NYSE: ORCL), Nvidia (Nasdaq: NVDA), and Cisco Systems (Nasdaq: CSCO) will all be involved in the project, with Nvidia providing the AI chips, and Cisco and Softbank working on connectivity.
Open AI and Oracle will manage the “1-gigawatt compute cluster” and grow its capacity to 5 gigawatts over time.
Utilities Stocks Prospects Dim
Morgan Stanley is dimming optimism for utilities stocks this morning, lowering price targets on both Dominion Energy (NYSE: D) and Duke Energy (NYSE: DUK), to $62 and $125, respectively. Both stocks trade below the banker’s forecast prices, however, and MS noted that “utilities continue to see strong interest from both data centers and large load customers.” Nevertheless, the firm is keeping both stocks at just “equal weight” in its ratings.
Both stocks are S&P 500 components. The Voo is holding onto a tiny 0.1% gain for the day.
JPMorgan Loves Urban Outfitters
On what was already looking like a pretty nice day for investors in retail stocks, JPMorgan just upgraded Urban Outfitters (Nasdaq: URBN) stock to overweight with a $78 price target. JP was impressed by Urban’s 5% same-store-sales growth and 240 basis point improvement in adjusted gross margins. Moreover, says the banker, “we see the comp sales [in Q2] being very similar to the 1Q print.”
Urban Outfitters stock is up more than 20% in response to the earnings and the upgrade. And the Voo is now in positive territory, up 0.2%.
This article will be updated throughout the day, so check back often for more daily updates.
The Vanguard S&P 500 ETF (NYSEMKT: VOO) opened modestly higher on Thursday but quickly turned negative and is now down 0.2%, after plunging Thursday on bad news for the U.S. national debt.
In a party line vote Thursday, Republicans voted through President Trump’s “Big, Beautiful Bill” on, a budget bill that aims to lower taxes and increase spending, with the effect that the deficit will expand by trillions of dollars, and the further effect of ballooning the national debt.
Bond investors reacted to the nation’s increasingly tenuous financial position by selling bonds, pushing bond yields higher. The 30-year Treasury now yields 5.1%, its highest level since October 2023. The 10-year Treasury yields 4.6%.
And as treasury bills offer increasingly generous returns, stocks are becoming correspondingly less attractive investments.
Earnings
S&P 500 component companies Ralph Lauren (NYSE: RL) and Williams-Sonoma (NYSE: WSM) both beat analyst forecasts on both top and bottom lines this morning. Canadian bank Toronto-Dominion (NYSE: TD) reported stronger than expected earnings as well, with revenues significantly ahead of estimates.
Analyst Calls
Speaking of banks, investment bank Needham upgraded videoconferencing star Zoom Communications (Nasdaq: ZM) to buy with a nice, round $100 price target. “The company is at an interesting inflection point where revenue headwinds from Online are easing” and pricing power is growing “due to new embedded AI functionality as evidenced by the latest price increase for Online taking effect June 1st,” said Needham. Moreover, “dilution from stock-based compensation has peaked and the share count can decrease with buybacks moving forward.”
Conversely, DZ Bank this morning downgraded another tech favorite. Cybersecurity company CrowdStrike Holdings (Nasdaq: CRWD) is cut to sell with a $370 price target.
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