| TQ Morning Briefing | The Supreme Court struck down Trump's emergency tariffs Friday in a 6-3 ruling. By Saturday, he had replaced them with a 15% global levy under a different law. The legal authority changed. The trade war didn't. Now the market has to price a 150-day clock, a potential $170 billion refund wave, and the question of whether Section 122 survives its first court challenge. | | | | | | The week starts in legal limbo, not resolution. | S&P 500 futures are down 0.3% and Nasdaq futures are off 0.4%. Friday's rally on the SCOTUS ruling has reversed. Traders bought the headline and then got the counterpunch. Trump's 15% replacement levy takes effect at 12:01 a.m. Monday, and U.S. Customs hasn't even updated its system to remove the old IEEPA duties. Some importers may be paying both. | The 10-year yield closed Friday at 4.08% after a sticky core PCE print of 3.0% and a GDP miss at 1.4%. Rates are stuck. The Fed cannot ease into 3% core PCE and cannot tighten into 1.4% GDP. That is why the 10-year is pinned near 4.08%. | Nikkei was closed for a holiday. Kospi added 2.0%. The dollar slipped and oil eased ahead of Iran nuclear talks Thursday. | Trade Implication | If the dollar keeps sliding on legal uncertainty, rate-sensitive names and exporters benefit. If Section 122 faces an early injunction, the entire tariff trade resets. Watch XLI and KWEB for the first signals. |
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| | | | | WHAT ACTUALLY MOVED MARKETS |
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| | | The SCOTUS ruling didn't end tariffs. It changed the rules. | Friday's 6-3 decision said IEEPA cannot be used to impose tariffs. That invalidated most of Trump's "Liberation Day" levies from April 2025 and raised the question of $133.5 billion in refunds to importers. Sector-specific tariffs on autos, steel, and semiconductors under Section 232 remain in place. | Trump responded within hours. He signed a 15% global levy under Section 122 of the Trade Act of 1974. The statute caps tariffs at 15% for 150 days to address "large and serious" balance-of-payments deficits. Congress must vote to extend. No president has ever used this authority to impose tariffs. | The old tariffs were legally dead by Friday afternoon. The replacements are narrower, temporary, and already facing questions about whether a balance-of-payments crisis actually exists. Ed Yardeni called the shift from IEEPA to Section 122 a move from "a sledgehammer to a rubber mallet." |
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| | | Stagflation data is boxing the Fed in. | Friday's PCE report showed core inflation at 0.4% month over month, pushing the annual rate to 3.0%. Q4 GDP printed at just 1.4%, missing expectations of 3.0%. The government shutdown was the main drag, but rising prices and slowing output is exactly what the Fed doesn't want to see. | Two weeks ago, markets priced the June cut at 85%. That number is 57% today. March sits at just 5%. | Execution Bias | Tariff uncertainty favors domestic defensive names over trade-exposed cyclicals. Utilities (XLU) and healthcare (XLV) have the cleanest setup. Importers face the worst of both worlds. They owe potential refunds on old tariffs while paying new ones. |
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| | | | | | Tariff-sensitive sectors are doing the math. The numbers don't add up yet. | Friday's session told a split story. The S&P 500 gained 0.69% and the Dow added 230 points as the SCOTUS ruling read as a tariff rollback. Amazon added 2.6% on the idea that the $170 billion refund pool would flow back to importers. Home Depot gained 1% on the same logic. | That logic collapses under Section 122. Trump's 15% replacement levy means importers are not getting relief. They're getting a different bill. And the new authority is capped at 150 days, which means every company with international supply chains has to plan for a tariff that might expire in July. | Software stocks stayed weak. CrowdStrike, Salesforce, and Oracle remain under pressure going into Wednesday's Nvidia report. | Breadth was decent at about 5-to-2 on the NYSE, but volume was light. More short-covering than conviction. | Execution Bias | The Section 122 clock matters more than the SCOTUS celebration. The 150-day expiry lands in mid-July. Any company guiding next quarter has to footnote that uncertainty. Watch Home Depot (HD) earnings Tuesday for the first read on how management handles it. |
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| | | | Three catalysts in three days. Each one can move the tape. | Trump delivers the State of the Union Tuesday at 9 p.m. This is the first address since the SCOTUS ruling, and the tariff response will be a centerpiece. His approval sits at 37% in the latest Pew poll. Markets will price any signal on escalation, fiscal expansion, or further trade authority. | Iran nuclear talks resume Thursday in Geneva. Trump has given Iran "10 to 15 days" to reach a deal and has deployed the largest U.S. military presence in the Middle East in decades. Two carrier groups, over 200 warplanes. Tehran has called the signals "encouraging" while saying it is "prepared for any scenario." Oil eased Monday, but a breakdown in talks could send Brent above $75 fast. | China's commerce ministry is conducting a "full assessment" of the SCOTUS ruling. India has delayed its planned trade visit to Washington. The ruling gave U.S. trading partners leverage they didn't have a week ago. | Investor Signal | If Trump uses the SOTU to announce new Section 301 investigations, watch agricultural names with China exposure. ADM, BG, and CTVA price that risk first. If Iran talks collapse Thursday, defense names (LMT, RTX, NOC) and oil (XLE) reprice within hours. |
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| | | | The $170 billion question nobody can answer yet. | The SCOTUS ruling created a refund problem the Treasury didn't plan for. An estimated $133.5 to $175 billion was collected under IEEPA authority in 2025. That money now has a legal question mark over it. | If importers get refunds, it widens the federal deficit by about half a percentage point to 6.6% of GDP. That means more Treasury supply when the market is already nervous about duration. The 10-year at 4.08% is holding for now. A refund wave would test that floor. | But $170 billion flowing back to importers is also accidental fiscal stimulus. Companies that absorbed tariff costs get a cash injection. Retailers that passed costs to consumers have room to cut prices. If it plays out over six to twelve months, it functions like a one-time tax cut hitting corporate balance sheets as the economy slows. | The bond market is weighing two forces that partly offset each other. Wider deficits push yields up. Refund stimulus supports growth and equity earnings. The net effect depends on timing. | Edge Setup | If refunds come fast, consumer discretionary (XLY) and retail (XRT) benefit first. If they come slowly or get tied up in litigation, the deficit widening hits Treasuries and the long end sells off. Neither the courts nor Treasury has a playbook for this. |
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| | | | Economic Data: Chicago Fed National Activity Index, Factory Orders, Dallas Fed Manufacturing Index | Fed Speakers: Fed Governor Christopher Waller | Earnings: Dominion Energy (D), Domino's Pizza (DPZ), Diamondback Energy (FANG), ONEOK (OKE) | Overnight: Nikkei -1.12%, Shanghai -1.26%, FTSE 100 +0.06%, DAX -0.41% |
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| | | | | | This AI Stock Just Had Its Biggest Jump in 20 Years | Eric Fry was one of the first to say "Sell Nvidia." Instead, he pointed to a little-known AI hardware company with almost no competition. | While Nvidia's customers turn into rivals, hyperscalers are fighting to buy more from this firm, not replace it. | This week? A historic $6B deal and the biggest surge in two decades. | And Fry says this may only be the beginning. | Get the full story here. |
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| | | | This week comes down to a single question. Did the Supreme Court actually change anything? | On paper, yes. IEEPA tariffs are dead. Refunds are owed. The president's broadest trade tool was taken away. | In practice, the 15% Section 122 levy restores most of the burden. Companies still pay. Consumers still absorb it. | But Section 122 has a fuse. It expires in 150 days. Congress has to vote to extend it. And the legal challenges are already forming. | Nvidia reports Wednesday after the close. If Nvidia absorbs tariff risk and still guides above $75 billion for Q1, capital ignores Washington. If it stumbles, policy risk becomes the macro. | The legal ground under U.S. trade policy is weaker than it's been in a year. And the market's biggest single-name event of Q1 lands in 48 hours. Which one wins the week will depend on which one forces capital to move first. |
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