DailyBrief: May 29
PCE inflation surges, GDP revised down, Cohere-Aleph AI merger
Markets & Economics
PCE Inflation Jumps to 3.8%, Near Three-Year High — Markets Rally Anyway
The Federal Reserve's preferred inflation gauge, the Personal Consumption Expenditures (PCE) price index, rose 3.8% year-over-year in April, the highest reading since May 2023 and nearly double the Fed's 2% target. Core PCE came in at 3.3%. Despite the hotter print, equity markets pushed higher: the S&P 500 rose 0.58% to a record close of 7,563.63, and the Nasdaq gained 0.91% to 26,917.47, lifted in part by optimism over a reported U.S.-Iran diplomatic development. Bond yields fell, with the 10-year Treasury declining 3.2 basis points, as softer underlying components, including a slowdown in services ex-housing inflation, offered some comfort. Personal income was flat in April versus expectations for a 0.4% rise, and personal spending grew just 0.1%, signaling emerging consumer strain. Source: Wolf Street, CNBC
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U.S. Q1 GDP Revised Down to 1.6% as Consumer Spending and Corporate Profits Slow
The Bureau of Economic Analysis revised its first-quarter 2026 GDP growth estimate down to 1.6% annualized, from the initial 2.0% advance reading. The revision was driven almost entirely by a larger-than-expected drawdown in inventories, alongside weaker consumer spending and investment. Corporate profits slowed sharply, growing just 0.9% quarter-over-quarter, though this follows a combined 10.7% surge over the prior two quarters. Domestic nonfinancial profits rose $105 billion while rest-of-world profits fell $61 billion, reflecting ongoing strain from trade disruptions. Source: Yahoo Finance, Haver Analytics
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Federal Circuit Stays Lower Court Ruling, Keeping Section 122 Tariffs in Place
The U.S. Court of Appeals for the Federal Circuit on May 12 issued an administrative stay of a lower court ruling that had struck down the administration's 10% across-the-board import surcharge under Section 122 of the Trade Act of 1974. The Court of International Trade had ruled on May 7 that the statutory conditions for invoking Section 122 were not met, but its injunction applied only to three named plaintiff importers. The Federal Circuit's stay means the tariffs continue to be collected from virtually all other importers while the appeal proceeds. The Section 122 authority expires July 24, 2026 unless extended by Congress. Source: Skadden, Gibson Dunn
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Fed Holds Rates at 3.50%-3.75%, Projects One Cut in Late 2026
The Federal Reserve held its benchmark rate in the 3.50%-3.75% range at its April 28-29 meeting, as policymakers navigate elevated inflation and a softening labor market. The median projection still calls for one 25-basis-point cut in 2026, though expectations have shifted toward Q3 or Q4, with some forecasters pushing the first cut into Q1 2027. Officials raised their inflation forecasts, citing ongoing tariff effects and higher energy prices. Core PCE has remained above 2% for over five years and sits at 3.3%, well above the Fed's target. Source: Federal Reserve
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Tech & AI
Cohere Acquires Germany's Aleph Alpha in $20 Billion Sovereign AI Deal
Canadian AI company Cohere has agreed to acquire German AI startup Aleph Alpha in a deal valuing the combined entity at approximately $20 billion. Schwarz Group, parent of retail giant Lidl, is committing $600 million in structured financing as lead investor in Cohere's upcoming Series E round. The merger, backed by both the Canadian and German governments, is designed to offer enterprises and public-sector institutions a sovereign alternative to the U.S.-dominated AI landscape, particularly for regulated industries including finance, defense, healthcare, and government. Cohere will retain its name and maintain operating headquarters in both Canada and Germany. The deal remains subject to regulatory approval. Source: TechCrunch, CNBC
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OpenAI Acquires Tech Media Property TBPN in First-Ever Media Deal
OpenAI has acquired TBPN, a Silicon Valley-based daily tech talk show on track to generate $30 million in revenue this year, marking the company's first acquisition of a media property. The deal was valued in the "low hundreds of millions." The move reflects OpenAI's push into content and distribution as competition in the AI space intensifies. Separately, Shield AI closed a $1.5 billion Series G round at a $12.7 billion valuation, a 140% increase in just one year, underscoring continued strong venture appetite for defense-focused AI. Source: Crunchbase
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