Nvidia tops $4 trillion. Bitcoin hits a high above $112,000. And the technology-heavy Nasdaq climbs to a record close. That all sounds great, but it leaves a lot for Federal Reserve Chair Jerome Powell to ponder.
Powell has one of the easiest jobs in Washington, according to President Donald Trump. But the latest stocks rally Wednesday highlights a key dilemma -- are the market and the economy going to stay strong, or will Trump's tariffs derail them?
The answer will go a long way to determining if and when interest rates go lower -- something Trump has made very clear he would like to see. Minutes from last month's meeting, released Wednesday, show a divide emerging among policy makers, with some ready to start cutting sooner rather than later.
For his part, Powell says there is still a risk that tariffs drive up inflation, which is the main reason for the wait-and-see approach even as the labor market shows signs of weakening. But there is also a chance that tariffs slam the brakes on growth -- the new 50% levy on copper, which is crucial for everything from electronics to homebuilding, looks particularly risky in that regard.
If that is what's happening, then waiting for more evidence could put the Fed behind the curve -- and it would add weight to Trump's accusations that Powell is always too late to act. The upcoming earnings season could provide more clues.
It's not just the Fed and Powell facing tough choices -- it's investors, too. The stock market is powering ahead as if tariffs aren't a threat to the economy. The bond market is holding up as if tariffs won't be inflationary and Fed cuts are coming.
It's hard to see how they can both be right. And the worst-case scenario is stagflation, when growth tanks and inflation takes off. Everyone loses if that comes to pass. It would make Nvidia and the market's recent milestones look like hollow victories, and Powell's job harder still.
-- Brian Swint
***
Federal Reserve Split Over When to Cut Rates: Minutes
Minutes from the Federal Reserve's June 17-18 meeting revealed that policymakers increasingly disagree over when, why, and by how much to cut interest rates this year, as they consider conflicting signals from inflation, the labor market, and fiscal policy.
-- The June dot plot, a chart showing individual member's forecasts for
rates, showed 10 members of the Federal Open Market Committee projected
two cuts in 2025, while nine predicted fewer. Some members argued for no
cuts this year, citing the risk that inflation could rise, including
because of tariffs.
-- Most members consider that some reduction in the Fed's benchmark target
range -- currently at 4.25% to 4.5%--would likely be appropriate, but a
couple said that if the data evolve as they expect, they could consider
cutting rates "as soon as the next meeting," which is later this month.
-- Those officials were likely Vice Chair for Supervision Michelle Bowman
and Gov. Christopher Waller, both of whom have publicly endorsed the
possibility of a cut at the July 29-30 meeting. Markets see that as
unlikely after the strong June jobs report.
-- President Donald Trump repeated his demand for rate cuts in a social
media post on Wednesday, saying the current Fed rate is "AT LEAST 3
Points too high." He blames Chair Jerome Powell for costing the U.S. $360
billion annually in refinancing costs. "Lower the Rate!!!" Trump posted.
What's Next: Officials were particularly concerned about potential stagflation, where inflation stays persistent while the labor market weakens. Some Fed members said lower-income households are shifting to cheaper goods, a sign of increasing financial strain that could be amplified by tariff-related price hikes.
-- Nicole Goodkind and Janet H. Cho
***
Brazil Promises Response to 50% U.S. Tariff
Brazil vowed to respond after President Donald Trump singled out the country for the highest tariff rates of his Liberation Day reset thus far -- attacking the South American nation for the treatment of its former leader, a Trump ally who is currently facing trial for allegedly trying to stage a coup against the sitting president.
-- Trump said Brazil's products will have a 50% tariff entering the U.S.
starting Aug. 1. He also said the U.S. would start an investigation into
Brazil's trade practices under Section 301 of U.S. trade law. Current
Section 301 investigations include China's practices in the semiconductor
and shipbuilding sectors.
-- The tariff level is significantly higher than the 25% to 40% rate Trump
has chosen for imports from 21 other countries as he restarts his
so-called "reciprocal" tariffs. Trump is unilaterally setting tariffs on
goods from around the world after moving his deadline for trade deals to
August.
-- Brazil's President Luiz Inácio Lula da Silva fired back, in a social
media post, saying he won't take the levy lying down and citing the
nation's own laws on economic reciprocity. Trump's letter to Brazil was a
major departure from the form-like letters sent to other nations so far.
He called the country's treatment of former President Jair Bolsonaro "an
international disgrace." He also lashed out at Brazil's censorship of
American social-media platforms.
-- Earlier on Wednesday, Trump announced he was setting tariff rates on
imports from seven other countries, including 20% for products from the
Philippines, 25% for imports from Brunei and Moldova, and 30% for
products from Algeria, Iraq, Sri Lanka, and Libya.
What's Next: New trade deals could also be announced shortly, with Trump's new August deadline approaching in just three weeks. People are closely watching the European Union, which trades even more with the U.S. than China. On Tuesday, Trump said a letter to the EU might come out today.
-- Brian Swint, Anita Hamilton, and Liz Moyer
***
Chip Maker Hits Historic $4 Trillion Valuation Amid Tech Rally
Nvidia's record rally just hit another milestone. The chip maker became the first company ever to hit a $4 trillion valuation in intraday trading on Wednesday, according to Dow Jones Market Data.
-- The company, which is led by CEO Jensen Huang, reached a market
capitalization of $4.012 trillion shortly after the market opened. Shares
pulled back slightly after the milestone, closing at $162.88, up 1.8% to
$3.97 trillion.
-- Nvidia did manage a closing market cap record, overtaking Apple. The
iPhone maker's valuation peaked at $3.915 trillion on Dec. 26, which was
the highest for any company on record before Wednesday, according to the
Dow Jones research team. Apple's current market cap is roughly $3.15
trillion.
-- Nvidia shares have jumped 51% over the past three months, rebounding with
the broader market after the April selloff that followed President Donald
Trump's announcement of sweeping tariffs. The tech-heavy Nasdaq Composite
index also closed at a record high on Wednesday.
-- "This is a historical moment for Nvidia, the tech space flexing its
muscles, and speaks to the AI Revolution hitting its next stage of growth,
" Wedbush analyst Dan Ives said. He has an Outperform rating on the stock
with a $175 price target.
What's Next: Don't expect the rally to slow down soon -- on Tuesday, asset manager Bernstein estimated total investment in coming and under-construction data centers driven by AI demand has surged to $750 billion. The increase in AI expenditures is good news for Nvidia, which is the market leader for AI computing hardware and solutions.
-- George Glover and Tae Kim
***
Elon Musk Has Something Else to Deal With: X CEO Resigns
In another distraction for Tesla CEO Elon Musk (and potentially, for Tesla shareholders), the CEO of Musk's X social-media platform abruptly announced her resignation. Linda Yaccarino spent two years at X and credited her time there with a "historic" business turn around. Musk thanked her for her contributions.
-- X recently merged with Musk's artificial-intelligence company xAI, which
could be a reason for the change. X didn't respond to a request for
comment. Musk also owns the SpaceX, The Boring Company, and Neuralink and
recently worked in the Trump administration as a senior advisor to
President Donald Trump.
-- Changes at X, Tesla, or any of Musk's other companies draw a little extra
scrutiny. Tesla's Vice President of Manufacturing and Sales Omead Afshar
recently left the EV maker, and Musk was going to oversee North American
and European sales in his stead. Tesla didn't respond to a request for
comment.
-- Before Yaccarino's replacement arrives, Musk could be burdened with
additional work for X as he's also trying to turn around Tesla's sales
slump and launch its robo-taxi business. "Her leaving takes more time for
Musk towards X," says Wedbush's Tesla analyst Dan Ives. It's "another
ball to juggle."
-- Musk also has a politics side-hustle, announcing he was forming a new
political party to target select campaigns in next year's midterm
elections. And as many 220 million X followers know, Musk is an active
participant on the social-media platform throughout the day and night.
What's Next: Ives suggested that Tesla's board act to rein in Musk, offering a carrot in the form of a new compensation package worth billions of dollars and a stick with requirements for the amount of time Musk spends at Tesla. "Shut up, Dan," was Musk's response to the idea -- posted on X.
-- Al Root and Liz Moyer
***
Merck Strikes $10 Billion Deal in Search of Next Blockbuster
Merck is buying London-based biotech Verona Pharma and its promising lung-disease drug in a $10 billion deal that's part of its latest effort to expand its drug offerings. Analysts expect Verona's drug will become a hit seller, and Merck CEO Rob Davis calls it an important building block for Merck's future.
-- Merck is facing the 2028 expiration of the U.S. patents protecting its
top-selling cancer immunotherapy drug Keytruda, which generated 2024
sales of nearly $29.5 billion, or nearly half of Merck's revenue last
year.
-- The Food and Drug Administration approved Verona's drug Ohtuvayre in June
2024, the first treatment of its type approved in more than two decades.
First-quarter 2025 sales were $71.3 million. Analysts expect Ohtuvayre's
U.S. sales to hit $2.6 billion in 2030, according to FactSet.
-- Merck is paying a 23% premium to acquire Verona in a deal that could
reduce Merck's adjusted earnings by about 16 cents a share over the first
year after it closes, CFO Caroline Litchfield said. Davis said Merck has
more appetite for deals as Ketruda's patent expiration nears.
-- In 2021, Merck made a big bet on the biotech Acceleron Pharma, paying
$11.5 billion even though its lead cardiopulmonary drug was still in
late-stage trials. Analysts expect sales of that drug, now named
Winrevair, to reach $5.1 billion in 2029.
What's Next: Jannie Oosthuizen, president of Merck's Human Health U.S. business, said the therapy market for chronic obstructive pulmonary disease is projected to grow to $27 billion a year by 2032. The deal is expected to close in the fourth quarter.
-- Josh Nathan-Kazis and Janet H. Cho
***
Much of the controversy surrounding the newly enacted Republican megabill are focused on its provisions that cut taxes and slash the social safety net. But it is also quietly ushering in a new era in higher education and student lending. It's part of a broader and higher-profile effort by the Trump administration to reshape U.S. higher education.
MarketWatch asked around and came up with five things student borrowers should know.
For more on this, read here.
-- Jillian Berman
***
-- Newsletter edited by Liz Moyer, Patrick O'Donnell, Callum Keown
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
July 10, 2025 06:59 ET (10:59 GMT)
Copyright (c) 2025 Dow Jones & Company, Inc.
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