MARKET WRAPS

STOCKS: U.S. stocks were modestly lower as investors parsed comments from Federal Reserve Chairman Kevin Warsh for clues about the path of interest rates.

TREASURYS: Treasurys sold off sending yields higher as investors digest a busy day of U.S. economic indicators and comments from Fed chairman Warsh ahead of tomorrow's payrolls report.

FOREX: The dollar strengthened. There is speculation among traders that Japanese authorities could take advantage of U.S. holiday-thinned trade on Friday to intervene against the yen's weakness.

COMMODITIES: Crude futures posted back-to-back losses as ships moved through the Strait of Hormuz while the U.S. and Iran continue talks though mediators. Gold and silver futures had a positive start to July, with both up for the second consecutive session.

HEADLINES

Warsh Says Inflation Outlook Has Improved but Won't Say if Fed Should Hike

Federal Reserve Chairman Kevin Warsh declined to say Wednesday whether the central bank needed to consider a rate increase later this month but said his first weeks in the job have seen risks of higher inflation recede. That was evidence, he said, that markets have already grasped his hard line on prices.

"Expectations of future inflation [over the last four weeks] have come down. Inflation risks have come down," Warsh said at a conference in Portugal alongside foreign counterparts. Anyone expecting the Fed would tolerate inflation running above its 2% goal "would be disappointed," he added.

Warsh demurred when pressed on the tactics he might deploy to deliver on his pledge to restore price stability, including the prospect of a rate increase at the Fed's meeting later this month. He said only that he wanted a "good family fight" among colleagues before they decide.

SpaceX Showed Investors Prototype of Elon Musk's New AI Device

Elon Musk's SpaceX has developed a prototype for a handset-like device designed to reshape how humans interact with artificial intelligence that SpaceX has shown investors recently.

The rocket and AI company showed the prototype, which features a sleek design that is slimmer than an iPhone, to some investors and other stakeholders ahead of the company's mega initial public offering, according to people familiar with the matter.

The prototype was designed to run on a proprietary operating system and integrate AI technology from SpaceX's xAI, some of the people said. The device would use a Qualcomm Snapdragon chipset, they said.

Kroger to Buy Food & Pharmacy Retailer Giant Eagle for $1.65 Billion

Kroger agreed to acquire food and pharmacy retailer Giant Eagle for $1.65 billion in cash and assumed liabilities.

The grocery giant on Wednesday said its board has already approved the deal, with the acquisition slated to close sometime next year.

Kroger said it expects the deal to add to adjusted earnings per share in the second full year after closing, before transaction and integration costs.

The World's Top Economists Are Sounding the Alarm on AI

SINTRA, Portugal-One question has dominated the annual gathering of the world's top central bankers and economists: Is artificial intelligence a boon or a threat to the global economy?

Economists at the European Central Bank's symposium have laid out a number of reasons to be worried: rising debt issuance from AI hyperscalers, increasing leverage used by investors to bet on AI and rising unemployment if the technology replaces jobs.

"What worries me the most is there's leverage by the borrowers and there's leverage by the investors," said Tobias Adrian, director of the monetary and capital markets department at the International Monetary Fund. "The leverage on both sides is very worrisome for financial stability."

Google Must Pay Nearly $2 Billion to Klarna in Antitrust Case

A Swedish court ordered Alphabet's Google to pay Klarna $1.97 billion in damages after the buy now, pay later company won an antitrust case alleging that the search giant engaged in anticompetitive practices.

Klarna's price-comparison unit, PriceRunner, sued Google in 2022 in Swedish court. PriceRunner alleged Google was giving preferential treatment to its own price-comparison service in its search results.

"This ruling supports a healthier, more competitive market for the way people compare products and services," said Klarna spokesman Dan Greaves.

U.S. Factory Activity Continued to Expand in June

Factory activity continued to expand in the U.S. for the sixth consecutive month in June, according to a survey of manufacturing firms.

The Institute for Supply Management's purchasing managers' index was 53.3 last month, 0.7 percentage point lower than in May. Still, readings above 50 indicate sectoral expansion. Analysts polled by The Wall Street Journal had expected a reading of 53.9.

The new orders and production index expanded, although at a slower pace than the last reading. The prices index remained in expansion, but fell 9.1 percentage points from May's reading.

Trump Made More Than $1 Billion on Crypto Deals, Part of 2025 Windfall

President Trump's forays into cryptocurrency delivered him a windfall of more than $1 billion last year, according to his latest financial disclosure report, an unprecedented surge in income that came alongside earnings from royalty deals, real estate and legal settlements.

Trump and his family invested heavily in crypto businesses during the first year of his second term. That isn't just generating on-paper wealth, but real-world profits.

The earnings last year included $635 million in royalties through an entity linked to Trump's memecoin, which launched just days before his inauguration, and more than $500 million in proceeds from token sales by World Liberty Financial, the Trumps' flagship crypto venture, according to the filing from the Office of Government Ethics.

Alibaba, U.S. Payment Processor to Pay $600 Million in DOJ Settlement Over Illegal Drug Sales

Alibaba Group and a U.S.-based payment processor agreed to pay $600 million to resolve allegations from the Justice Department that they allowed merchants to sell and import illegal pharmaceuticals and other restricted items into the U.S.

The operator of Chinese e-commerce site Alibaba.com admitted that it failed to prevent merchants from engaging in around 80,000 sales that involved importing illegal items into the U.S. as part of a non-prosecution agreement, the DOJ said.

Those products included illegal pharmaceuticals, pharmaceutical counterfeiting equipment, and listed chemicals, and had a combined gross merchandise value of about $200 million, the DOJ said. The sales took place between 2016 and 2024.

TALKING POINT This Bond Maven Is Worried About 'Excesses' in the Market. How He's Investing.

Jeffrey Sherman, deputy chief investment officer at bond shop DoubleLine, thinks the U.S. economy and markets look solid through this summer, but he is more cautious after that. He sees excesses building in capital spending related to artificial intelligence and thinks inflation may not be tamed, particularly if hostilities in Iran resume and oil prices turn higher.

Sherman, a member of DoubleLine's fixed-income and global asset allocation committees, is managing portfolios that aim to earn extra yield over Treasuries without taking on too much risk. Barron's spoke with him on June 23 about his strategies: diversifying across fixed-income asset classes including mortgage-backed and asset-backed securities, and largely avoiding higher-risk and longer-term bonds. An edited version of the conversation follows.

Barron's: How does the U.S. economy look to you?

Jeffrey Sherman: When I use a short-term lens, through the summer or the fourth quarter, things look pretty rosy. The business cycle remains strong. We have a relatively low unemployment rate, and we have the tailwinds of this massive capital expenditure boom.

It's not completely spread across all sectors of the economy-it's highly concentrated in tech and AI-but there are signs of an economic boom right now. We've had the most phenomenal sporting events-the NBA finals, the Stanley Cup, the World Cup is going on in all of our cities right now-there is a lot of economic activity.

The average American may not feel an economic boom, and it's true the upper end is driving the spending, but the upper end always drives the economy. The U.S. consumer in aggregate continues to perform extremely well, so it's difficult to see in the very short term how this could get derailed.

I sense a "but" coming.

  • Amey Stone, Barron's

Expected Major Events for Thursday

06:00/JPN: May Revised Machine Tool Orders

08:00/ITA: May Unemployment

08:30/UK: 2Q Bank of England Credit Conditions Survey

08:30/UK: 2Q Bank of England Bank Liabilities Survey

12:30/US: 06/27 Unemployment Insurance Weekly Claims Report - Initial Claims

12:30/US: Jun U.S. Employment Report

13:00/RUS: Weekly International Reserves

13:30/CAN: Jun Canada Manufacturing PMI

14:00/US: May Manufacturers' Shipments, Inventories & Orders (M3)

14:30/US: 06/26 EIA Weekly Natural Gas Storage Report

20:30/US: Foreign Central Bank Holdings

20:30/US: Federal Discount Window Borrowings

All times in GMT. Powered by Onclusive and Dow Jones.

Expected Earnings for Thursday

America's Car-Mart Inc (CRMT) is expected to report $-0.66 for 4Q.

Lindsay Corp (LNN) is expected to report $1.14 for 3Q.

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This article is a text version of a Wall Street Journal newsletter published earlier today.