Anyone hoping for a quiet summer while President Donald Trump's team hammered out the final details of trade deals just got a new shock.

The U.S. Court of International Trade ruled Wednesday that the White House exceeded its authority by imposing levies on virtually every country in the world on April 2. That puts Trump's so-called "reciprocal" tariffs, most of which have been suspended until July while trade negotiations take place, in jeopardy. It's far from the last word. The Trump administration immediately filed notice that it would appeal and has a bunch of other options open to it.

Stock futures rallied in out-of-hours trading with a little help from Nvidia, which posted earnings after the bell. Even though the chip maker provided disappointing sales guidance, investors were pleased with CEO Jensen Huang's prediction that demand for artificial intelligence will accelerate. With a market value of $3.3 trillion, when Nvidia shares jump some 5%, as they did after hours, it has a big impact on the S&P 500 and the Nasdaq indexes.

To be clear, the court ruling doesn't affect sector-specific levies. Nor does it lift the export ban on Nvidia's advanced H20 chips, which the company estimates will cost it $8 billion this quarter. And that's after already missing out on $2.5 billion in sales in the first quarter. Without those setbacks, Nvidia earnings would have been even more impressive.

The stock market euphoria may not last long. It's clear that investors don't like tariffs because they threaten earnings, and they love it when Big Tech does well. But yesterday's ruling turbo charges uncertainty about trade policy to new levels -- indeed, it stretches it out for longer. It weakens Trump's hand in trade talks, but Trump also still has plenty of other legal avenues to explore before tariffs are defeated.

Traders now have to guess again about what happens next after the courts muddied the trade waters. The beach and pina coladas seem like a distant dream.

-- Brian Swint

***

Nvidia Revenue Jumps Despite Restrictions on Sales to China

Nvidia is notching double-digit revenue gains from sales of its artificial intelligence chips despite effectively being shut out of the market in China. It beat April quarter expectations and said July quarter revenue should be slightly below estimates despite losing out on $8 billion in sales to China.

   -- For its April quarter, Nvidia reported adjusted earnings of 81 cents a 
      share and revenue of $44.1 billion, up 69% from a year earlier. Nvidia 
      projects July quarter revenue of $45 billion at the midpoint, which 
      reflects lost sales of its H20 chip in China because of U.S. 
      restrictions. 
 
   -- Data center revenue jumped 73% in the first quarter from a year ago, to 
      $39.1 billion, and Nvidia highlighted its efforts to build U.S. factories 
      and partnerships to produce Nvidia AI supercomputers in the U.S. Gaming 
      revenue rose 42% from a year ago, to a record $3.8 billion. 
 
   -- CEO Jensen Huang sounded as bullish as ever about the future of AI, 
      saying that as AI agents become mainstream, demand for AI computing will 
      accelerate. "Countries around the world are recognizing AI as essential 
      infrastructure -- just like electricity and the internet," he said, with 
      Nvidia at the center of it. 
 
   -- Nvidia's cash pile also continues to accumulate rapidly, with $53.7 
      billion of cash and cash equivalents as of the April quarter. That's up 
      24% from $43.2 billion in the January quarter and $31.4 billion a year 
      ago. 

What's Next: Among the risk factors it cites in its quarterly financial filing, Nvidia said U.S. export controls mean it may be unable to create a competitive product for China's data center market that gets U.S. government approval. That would have a material and adverse effect on its business, it said.

-- Tae Kim and Liz Moyer

***

Fed Meeting Notes Reflect Increased Recession Risks

Federal Reserve officials are worried about rising recession risks as President Donald Trump's tariffs lead to concerns about persistent inflation and rising unemployment. Rising uncertainty caused by the administration's trade policies convinced policymakers to hold off on any interest-rate changes this month.

   -- The minutes from the Fed's May meeting, which came out before the U.S. 
      trade court blocked the tariffs from going into effect, put the chances 
      of a recession at "almost as likely" as the officials' main forecast. 
      Officials also worried about an economic slowdown and the difficult 
      trade-offs they may have to consider. While the U.S. labor market remains 
      strong, they worry cracks are showing. 
 
   -- A number of Fed officials have noted in recent weeks that they would be 
      willing to alter their "wait-and-see" stance on changes to interest rates 
      if tariffs exacerbate inflation enough to weaken the labor market. 
 
   -- Officials also expressed concern about recent market volatility, 
      especially in longer-dated Treasuries. Sustained elevated Treasury yields 
      or a diminution in the perceived safe-haven status of U.S. assets could 
      have long-lasting implications for the economy, the minutes said. 
 
   -- Businesses have indicated they plan to partially or fully raise prices 
      for consumers in the face of tariff costs, and even companies not subject 
      to tariffs could raise prices to match competitors who are. Tariffs on 
      intermediate goods like steel and aluminum, could also add to inflation. 

What's Next: Futures markets put a nearly 98% probability of the Fed leaving rates alone for a fourth consecutive meeting in June, according to the CME's FedWatch tool late Wednesday. That meeting comes three weeks before Trump's July 9 decision deadline on so-called reciprocal tariffs on imports from around the world.

-- Nicole Goodkind and Liz Moyer

***

Retailers Brace for Tariffs Amid Softening Consumer Spending

Retailers are offering mixed outlooks amid the tariff uncertainty. Case in point: Macy's. The department store operator beat expectations for the first quarter but cut its profit outlook for the fiscal year, citing a moderation in consumer spending, tariffs, and a more promotional retail landscape.

   -- Macy's now sees adjusted earnings of $1.60 to $2 a share, down from the 
      prior guidance that called for a range of $2.05 to $2.25 a share. The 
      revised forecast is below analysts' expectations at the midpoint of the 
      range. Sales guidance was unchanged. 
 
   -- Under CEO Tony Spring's "Bold New Chapter" turnaround plan, Macy's plans 
      to close 150 stores -- it has already closed more than 60 -- and has been 
      gradually rolling out improvements. Same-store sales at the 125 stores 
      where Macy's is testing out new initiatives dropped 1.3%. 
 
   -- Abercrombie & Fitch also cut its outlook for net income, to a range of 
      $9.50 and $10.40 a share, a dollar lower than its previous guidance. CFO 
      Robert Ball said Abercrombie had priced tariff effects into its updated 
      guidance. Its outlook assumes 10% tariffs on global imports and 30% 
      tariffs on imports from China. 
 
   -- That would be the same levels where tariffs sit now while the Trump 
      administration presses ahead with trade talks. Ball noted that 
      Abercrombie had worked "for some time now" to adjust supply chains, and 
      sourcing volume from China will be in the low single digits this year. It 
      is diversified across 16 countries. 

What's Next: Dick's Sporting Goods said it continues to face a "dynamic macroeconomic environment" of tariffs and other challenges, but still stuck to its full-year projection for earnings of $13.80 to $14.40 a share and same-store sales rising 1% to 3%.

-- Sabrina Escobar and Mackenzie Tatananni

***

Fannie, Freddie Would Keep Government Guarantees, Trump Says

President Trump has talked about taking the mortgage giants Fannie Mae and Freddie Mac public, but there are still unresolved questions about what that would mean. He did answer one of them, however. Fannie and Freddie would keep their government guarantees on securitized mortgage loans.

   -- Losing those guarantees would have changed the way mortgage-backed 
      securities investors view their risk and potentially send mortgage rates 
      higher. Fannie and Freddie, which play a crucial role in keeping the 
      mortgage market liquid, have been under government conservatorship since 
      2008. 
 
   -- Ending that conservatorship has gained traction in Washington and on Wall 
      Street in recent years. But bringing Fannie and Freddie "public" doesn't 
      necessarily mean anything for their conservatorship, according to Bill 
      Pulte, the director of Fannie Mae and Freddie Mac regulator Federal 
      Housing Finance Agency. 
 
   -- Pulte told CNBC they were studying potentially keeping them in 
      conservatorship while taking them public. Their shares trade over the 
      counter, so taking them public could mean transitioning Fannie and 
      Freddie into private investor ownership. Right now the Treasury owns 
      warrants on 80% of their common equity. 
 
   -- When asked about the administration's plans for privatizing the companies 
      at a Wednesday morning press event announcing a Fannie Mae partnership 
      with Palantir Technologies to detect mortgage fraud, Pulte pointed to the 
      president's wording: that he said he was investigating taking the 
      companies public, not private. 

What's Next: One plan that has been floated by Trump administration officials examining Fannie and Freddie estimates their privatized value around $330 billion, The Wall Street Journal reported. The plan sees Fannie and Freddie raising $20 billion to $30 billion more from new investors, the report said, like an initial public offering.

-- Shaina Mishkin and Liz Moyer

***

-- Newsletter edited by Liz Moyer, Rupert Steiner

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May 29, 2025 06:50 ET (10:50 GMT)

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