Sometimes the stock market and the economy are two ships passing in the night.

Markets have already been through some choppy waters. The S&P 500 dropped dramatically after tariffs were announced on April 2 and then steamed back higher this week. But traders are forward looking, and hard data are backward looking. Consumers and companies, while they may be worried, have yet to feel the blow of steep price hikes or empty shelves as international trade flows respond to the new reality.

Hard economic data are still coming in softly. Cooling inflation figures this week and a slight gain in retail sales paint a picture that activity is gradually weakening, rather than one where the economy is being buffeted by collapsing demand and runaway price gains.

That could be about to change. Walmart CEO Doug McMillion warned on Thursday that tariffs are already affecting costs -- and this is before supplies get shorter after a month of a virtual trade embargo with China. Home Depot and Target, two more consumer bellwethers, will say more on the subject when they report earnings next week.

The worry is that if Walmart, the world's largest retailer by revenue and known for its low prices, can't avoid raising them to remain profitable, then others won't be able to, either. And if there's one thing to remember from the recovery from Covid-19, it's that rising prices are contagious. Momentum builds as companies both see a window to greedily blame the hikes on the environment, or react to the fear that their own costs could spiral out of control.

This is part of what Federal Reserve Chair Jerome Powell was talking about Thursday when he warned about "more frequent, and potentially more persistent, supply shocks." In theory, the Fed can ignore short-term shortages and price increases because they'll blow over. In practice, they often lead to bigger problems.

For now, the economy and the stock market seem to be sending out signals by semaphore, but they're not sailing in the same direction.

-- Brian Swint

***

Walmart Warns Higher Tariffs Will Raise Its Retail Prices

Walmart beat April-quarter earnings forecasts but said higher import tariffs will inevitably mean higher consumer prices in coming months. Executives warned that fiscal 2025 guidance was subject to "substantial uncertainty" because of fluctuating tariff and trade policies, changing global economic and geopolitical conditions, customer demand, and inflation.

   -- Given the range of near-term outcomes that are "exceedingly wide and 
      difficult to predict," Walmart held off from providing specific guidance 
      for second-quarter operating income growth and EPS, CFO John David Rainey 
      said, adding that if tariffs resume at higher rates, the impact on 
      financials would be "significant." 
 
   -- President Donald Trump temporarily paused his 145% tariff on Chinese 
      imports on Monday, setting them at a 30% rate that still threatens profit 
      margins. Roughly one-third of Walmart's U.S. sales last year came from 
      imported goods, mostly from China and Mexico. 
 
   -- The magnitude of tariffs, even at the reduced levels announced this week, 
      means Walmart can't absorb all the pressures with its narrow retail 
      margins, CEO Doug McMillon said. Walmart imports numerous electronics and 
      toys from China, and imports bananas, avocados, coffee, and roses from 
      Costa Rica, Peru, and Colombia. 
 
   -- All of this comes amid signs of consumer fatigue. Retail sales edged 0.1% 
      higher in April, but slowed significantly from March's 1.7% surge, 
      perhaps because shoppers were trying to get ahead of tariffs. Home 
      improvement store sales increased 0.8% and spending in restaurants rose 
      1.2%, while auto sales fell 0.1%. 

What's Next: Walmart maintained its full-year outlook for net sales to increase 3% to 4%, and for earnings of $2.50 to $2.60 a share. It sees second-quarter sales increasing in a range of 3.5% to 4.5%, which would be higher than the midrange estimate of analysts.

-- Sabrina Escobar, Megan Leonhardt, and Janet H. Cho

***

The Fed's Era of Activism Could Be Nearing Its End

The Federal Reserve's 30-year Alan Greenspan-to-Jerome Powell era of central bank activism could be nearing its end. What comes next could be a narrower, more restrained version of the Fed on everything from balance sheet strategy to its very purpose.

   -- James Bullard, the former St. Louis Fed president, says the old model of 
      managing inflation in a world of "sticky" prices no longer reflects 
      reality because prices adjust quickly while contracts are rigid. The Fed 
      should go beyond stabilizing inflation and to ensuring money is 
      predictable enough to support those contracts. 
 
   -- Jason Furman, a top economist in the Obama White House, sees a different 
      problem: The Fed relies on an ever-shifting mix of indicators, leaving 
      everyone guessing. He advocates for a clearer framework. Others say the 
      Fed should lean more heavily on rule-based approaches, rather than 
      reacting to data in real time. 
 
   -- Cleveland Fed President Beth Hammack wants a re-examination of Fed 
      balance sheet maneuvers, including the long-term implications of 
      quantitative easing and tightening. Her predecessor, Loretta Mester, says 
      the Fed's policy decision memos push investors to read too much into the 
      Fed's every word. 
 
   -- During his term, Powell evolved from pragmatic centrist to economic 
      firefighter, dramatically cutting rates to zero during the pandemic only 
      to sharply raise them in response to the ensuing inflation. He's still 
      guiding toward 2% annual inflation but might not get there before his 
      term ends next May. 

What's Next: The Fed is preparing to unveil an updated policy framework this summer, a product of months of internal review. But insiders question whether it will matter. With new Fed leadership and a potentially reconstituted committee in 2026, this summer's changes may be short-lived. For more on this read here.

-- Nicole Goodkind

***

Berkshire Hathaway Trims BofA, Citigroup Stakes, Adds Mystery Holding

Warren Buffett's Berkshire Hathaway eliminated its stake in Citigroup and reduced its large holding in Bank of America while roughly doubling its investment in beer, wine, and spirits company Constellation Brands, according to its quarterly holdings filing with the Securities and Exchange Commission.

   -- Berkshire asked the SEC for confidentiality for stock it didn't report in 
      the filing, which reflects holdings at the end of March. It did the same 
      thing last year when it was amassing a stake in Chubb. Barron's estimates 
      the current mystery holding is between $1 billion and $2 billion. 
 
   -- Berkshire's position in Apple, the largest holding in its stock portfolio 
      of nearly $300 billion, was unchanged in the quarter at 300 million 
      shares. Berkshire also eliminated a 40-million share stake in Brazilian 
      digital bank operator Nu Holdings. 
 
   -- Among other big money managers, activist Carl Icahn nearly doubled his 
      stake in JetBlue Airways to 33.6 million shares, while Bill Ackman's 
      Pershing Square reported a new 30.3-million share stake of Uber 
      Technologies and eliminated his 18.8-million share stake in Nike. 
 
   -- Daniel Loeb's Third Point exited a 500,000-share Tesla stake and a 
      670,000-share stake in Meta Platforms. At the same time, it added a new 
      8.9-million share stake of Kenvue, 3.8 million shares of AT&T, and 1.45 
      million shares of Nvidia, among other holdings. 

What's Next: David Tepper's Appaloosa Management added a new 130,000-share stake in Broadcom while eliminating a 1.2-million share stake in AMD and a one-million-share stake in Intel. Appaloosa also reported trimmed-down stakes in a number of Chinese companies, including Alibaba, JD.com, Pinduoduo, and Baidu.

-- Janet H. Cho and Andrew Bary

***

Coinbase Hit By SEC Investigation and Cyberattack

Crypto exchange operator Coinbase dealt with a double-blow of bad news on Thursday. First it reported a data breach that could cost it up to $400 million, and then it acknowledged it was working with the Securities and Exchange Commission on an older investigation into its reported user numbers.

   -- Coinbase said it might have to pay out from $180 million to $400 million 
      for remediation costs and customer reimbursements following the data 
      breach. The news comes just days after the announcement that its stock 
      will be added to the S&P 500. Its stock closed down 7.2%. 
 
   -- The cyberattack began May 11. Coinbase said it got a message from an 
      unknown threat actor claiming to have internal corporate materials and 
      some customer account information. The cyberattacker demanded money and 
      may have paid Coinbase employees and contractors outside the U.S. to 
      obtain the files. 
 
   -- Coinbase said it fired the workers involved and said it hasn't paid the 
      attacker. But the indirect costs could still add up. It said its 
      investigation is ongoing and that law enforcement was investigating the 
      incident. The full impact of the attack isn't known. 
 
   -- Then, Coinbase responded to a New York Times report that the SEC was 
      investigating possible misrepresentation of its user numbers. Coinbase 
      told Barron's it was a holdover investigation from the prior 
      administration about a disclosed metric it stopped reporting two and a 
      half years ago. It is working with the SEC. 

What's Next: The Trump administration has vowed to be crypto-friendly, and Congress is doing its part. A bipartisan bill to regulate stablecoins, cryptos pegged to a currency, is expected to advance despite failing a procedural vote last week. Another Senate vote is planned next week.

-- Anita Hamilton, Adam Clark, and Liz Moyer

***

SpaceX Notches Win With Farmers

SpaceX launches a lot of rockets, but its best business might be its Starlink space-based Wi-Fi system. On Thursday, farm equipment maker CNH announced an agreement with Starlink to bring "satellite connectivity to farmers."

   -- Connectivity helps enable CNH's precision farming technology, which all 
      equipment makers, including Deere and AGCO, sell to farmers. 
 
   -- Precision farming can include anything from autonomous tractor operation 
      to better seed placement to targeted spraying of fertilizers and 
      pesticides. Some precision applications can even use artificial 
      intelligence to help distinguish weeds from plants. Those are all things 
      that can reduce input costs and boost crop yields. 
 
   -- The Starlink constellation comprises more than 7,000 satellites orbiting 
      the planet and is by far the largest satellite constellation. 
 
   -- In November, SpaceX COO Gwynne Shotwell said Starlink served five million 
      subscribers spread across 114 countries. Through mid-May, SpaceX launched 
      its Falcon 9 rocket 55 times in 2025, accounting for about 55% of all 
      orbital launches worldwide. 

What's Next: The CNH-SpaceX agreement is a tangible example of new applications and revenue streams that SpaceX can create with partners from pioneering reusable rockets that drive down costs.

-- Al Root and Elsa Ohlen

***

Do you remember this week's news? Take our quiz below to test your knowledge. Tell us how you did in an email to thebarronsdaily@barrons.com.

1. After holding trade talks in Switzerland last weekend, the U.S. and China said they had reached an agreement to keep talking, and in the meantime the U.S. would be lowering its levies on Chinese imports from 145% to how much?

a. 10% b. 20% c. 30% d. 40%

2. The asset-management industry is hoping the Trump administration will ease regulations that limit retail investors from access to private markets, a market the Investment Company Institute estimates to be how large?

a. $25 billion b. $2.5 billion c. $25 trillion d. $2.5 trillion

3. Artificial intelligence start-up Perplexity AI is reported to be raising another $500 million in funding, also raising the possibility of a new risk to Google's search dominance. What valuation would Perplexity reach at that level?

a. $14 billion b. $10 billion c. $6 billion d. $2 billion

4. April inflation slowed but progress in reining it in will likely end as the Trump administration's tariffs start to push up the cost of consumer goods. The CPI rose 2.3% last month, the lowest reading since when?

a. February 2023 b. February 2021 c. February 2019 d. February 2017

5. The White House said Boeing and GE Aerospace a $96 billion agreement with Qatar Airways to acquire how many of the American-made Boeing 787 Dreamliner and 777X aircraft powered by GE Aerospace engines?

a. 110 b. 120 c. 200 d. 210

Answers: 1( c); 2( c); 3( a); 4( b); 5( d)

-- Barron's staff

***

-- Newsletter edited by Liz Moyer, Rupert Steiner

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

May 16, 2025 06:52 ET (10:52 GMT)

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