Three Red Lines.
Buffers and shock absorbers.
News Items is the most valuable newsletter out there. — Peggy Noonan.
1. The War in the Gulf:
The US and Iran have reached a preliminary deal to extend a ceasefire by 60 days and discuss the future of Tehran’s nuclear program, a person with knowledge of the matter said, buoying hopes for a resolution to a three-month conflict that has killed thousands and roiled the global economy.
The person, who spoke on condition of anonymity because the negotiations are private, confirmed an earlier report from Axios. President Trump has yet to agree to the terms. Both countries have previously hailed progress, with Trump repeatedly indicating the US was close to securing an agreement — only for the standoff to drag on.
Vice President JD Vance told reporters Thursday that the US and Iran are “going back and forth on a couple of language points,” including over issues relating to Tehran’s nuclear capabilities. Iran appears to be negotiating in good faith and progress is being made, he added.
Iran’s semi-official Tasnim news agency said in a post on X that the text of the possible memorandum of understanding between the US and Iran hadn’t been finalized, citing a source it didn’t identify.
US Treasury Secretary Scott Bessent declined to confirm an interim deal had been reached, saying only that negotiations continued. He reiterated Trump’s three “red lines” — reopening the Strait of Hormuz, Iran surrendering highly enriched uranium and ending its nuclear program — remain in place. (Sources: bloomberg.com, axios.com, x.com)
2. To understand why people are so miserable about the economy, look no further than Thursday’s report on gross domestic product. Not how much GDP grew, but how it was divvied up. Worker compensation—wages and benefits—grew 0.8% in the first quarter from the fourth, while domestic corporate profits jumped 2.7%. As a result, labor’s share of gross domestic income (conceptually similar to GDP) sank to 51%, the lowest since records began in 1947. Profits’ share climbed to 12.1%, the highest since 1950. (Source: wsj.com)
3. U.S. inflation increased at its fastest pace in three years in April, driven by higher energy prices due to the Iran war and cementing economists' views that the Federal Reserve would hold interest rates unchanged well into next year. Surging price pressures are eroding household income and threatening to restrain consumer spending and economic growth this year. Income at the disposal of households after adjusting for inflation dropped for a third straight month in April, with the saving rate hitting a four-year low, other data from the Commerce Department showed on Thursday. The Personal Consumption Expenditures Price Index jumped 3.8% in the 12 months through April, the largest rise since May 2023, the Commerce Department's Bureau of Economic Analysis said. (Source: reuters.com)
4. In the first quarter of this year, the percentage of credit-card balances that were at least 90 days delinquent rose to 13.12%, according to data released in May by the Federal Reserve Bank of New York. That’s the highest level in 15 years, and the most since the period following the 2008 financial crisis. America’s total credit-card balance stood at $1.25 trillion in the first quarter, according to the New York Fed, up from $1.18 trillion in that quarter last year. That’s the highest first-quarter balance since the New York Fed began recording the measurement in 1999. (Source: wsj.com)
5. Confidence among chief executive officers about the US economy tumbled in the second quarter as concerns intensified about supply chains and energy. The Conference Board’s Measure of CEO Confidence dropped to 47 from 59 in the first three months of the year, according to results published Thursday. Readings below 50 indicate more negative than positive responses. Some 141 CEOs participated in the survey, which was conducted May 4-18 and released in collaboration with the Business Council. (Source: bloomberg.com)
6. Chevron chief executive Mike Wirth has warned oil prices are likely to rise over the next two months as crude inventories continue to decline due to the Iran war. “The buffers and the shock absorbers are being steadily drawn down, and the ability for the market to absorb this imbalance is drastically diminished today versus where we started,” he said at a conference organized by the investment bank Bernstein on Thursday. “Over the next few weeks, we’re likely to see those pressures flow through more directly to physical prices and there’s more upwards pressure that I would expect as we get into June and certainly into July.” (Sources: ft.com, chevron.com)
