Key Takeaways
- Markets Rebound As Earnings Drive Gains Despite Weekly Losses
- Tariff Threats Raise Concerns Over Economic Growth And Currency Volatility
- Gold Hits Highs Amid Inflation, Tariff Uncertainty, And Rate Cuts
Although they are down on the week, markets have rebounded from their lows following a big week for earnings. Major indices moved slightly higher on Thursday with the S&P 500 up 0.52% and Nasdaq Composite up 0.25%. The Dow Jones Industrial Average pushed higher by just under 0.4% while the Russell 2000 was the biggest gainer at 1%. We’ll see what effect, if any, today’s Personal Consumption Expenditures (PCE) report has on markets.
After the close on Thursday, Apple announced earnings with revenues coming in as expected and profits beating expectations. iPhone sales were down 1% and sales in China fell 11%. Still, the street seems to like what Apple offered up with their outlook and shares are trading higher by 4% in premarket. We also heard from Intel. The chipmaker has certainly seen its share of struggles lately. Despite beating on both the top and bottom lines, management offered a weak outlook. Still, shares are higher in premarket, trading up 1%. Visa reported their earnings as well, beating on both earnings and revenues. That stock is higher by just under 2% overnight.
Earnings season continues today with Exxon Mobil beating on earnings. That stock is relatively unchanged in premarket. Chevron is also out with their earnings, beating on revenues but missing on profits. Shares of Chevron are lower in premarket by 2%.
Two companies that didn’t report earnings but are in the news none the less are Walgreens Boots Alliance and UPS. The beleaguered chain of pharmacies has seen its stock fall 50% in the past year. This morning the company announced it is suspending its dividend to shore up its balance sheet. Walgreens had been paying a dividend for the past 92 years. In premarket trading, shares are lower by 10%. UPS also announced they will slash business with Amazon by 50%. UPS said Amazon deliveries were not profitable, despite accounting for 11.8% of annual revenues, and the company wants to instead focus on more complex deliveries. That stock is higher by 0.5% in premarket.
On the economic front, 2024 GDP came in at 2.5%, which was down from 3.2% in 2023. In the fourth quarter, GDP slowed to 2.3% following growth of 3.1% in the third quarter. Much of 2024 was spent monitoring inflation and what the Fed might do with respect to interest rates. But the attention was much more a result of domestic inflation. As we move into the next four years, while I don’t think inflation concerns are going anywhere, I do expect we’re going to begin hearing a lot more about tariffs and strength of the dollar when companies report earnings.
President Trump is threatening both Canada and Mexico with 25% tariffs that will go into effect this weekend. In 2018 – 2019, during his first term in office, Trump placed 25% tariffs on steel and aluminum coming in from both these countries before lifting them in conjunction with the new USCMA trade agreement. While those tariffs were not the whole economic story, it’s worth noting GDP fell 0.6% in that period.
Most economists believe tariffs are a net negative (an op-ed piece by Phil Gramm and Larry Summers in today’s Wall Street Journal is a case in point), but the Trump Administration believes its plans to cut regulations can more than offset any drag tariffs may cause. While that remains to be seen, I believe we could be in for some currency volatility over the next several years as countries look for ways to navigate around tariffs. Specifically, I think we’re likely to see other currencies weaken against the U.S. dollar. For instance, the European Central Bank (ECB) cut interest rates by one-quarter point Thursday. That cut was expected, and I think it was, in part, an effort to offset potential tariffs by weakening the Euro.
For today, I’m keeping an eye on gold prices. Gold is making new highs as a result of the tariff threats. I’m also interested to see how markets ultimately digest today’s PCE report. Thus far in premarket trading, the report has had little to no impact on futures. I’m also watching AI related stocks after what’s been a volatile week. Shares of Nvidia are down 14% this week and right at their 200 day moving average. Looking ahead to next week, we’ll have a slew of earnings reports, a jobs report and members of the Fed speaking throughout the week. If tariffs do go into effect this weekend, I expect we’ll hear more about their potential impact next week. As always, I would stick with your investing plan and long-term objectives.
tastytrade, Inc. commentary for educational purposes only. This content is not, nor is intended to be, trading or investment advice or a recommendation that any investment product or strategy is suitable for any person.