Key Takeaways
- Tech Stocks Slide As AI Investments Raise Profitability Questions
- Trade War Escalates With New Tariffs And Retaliatory Measures
- Gold Hits New High Amid Market Uncertainty And Economic Tensions
Stocks posted small gains on Tuesday with the S&P 500 up 0.7%. The Nasdaq Composite gained 1.4% while the Russell 2000 and Dow Jones Industrial Average gained 1.4% and 0.3%, respectively. Some of the biggest movers this week have been earnings related stocks as we continue to hear from a number of companies this week.
After the close on Tuesday, Alphabet announced earnings that beat forecasts; however, the company posted a miss on revenues as ad sales continue coming under pressure. Growth in the company’s Cloud division, which is where the company accounts for Artificial Intelligence (AI), failed to meet forecasts. Alphabet also announced they will increase spending on AI, a theme we’re once again seeing play out with tech companies. The question remains, however, when will there be a demonstrable return on investment for this spending. Also, China announced on Tuesday they will investigate Google for anti-monopolistic practices in what many see as a retaliation for the Trump tariffs. Shares of Alphabet are lower by 7% in premarket.
Other companies announcing earnings overnight include Advanced Micro Devices. The chipmaker missed forecasts for sales of AI chips and that stock is down 10% in premarket. Shares of Disney are higher by 1.4% in premarket after the company beat on both the top and bottom line. Disney’s streaming service was profitable for the second straight quarter; however, the company did lose 1% of its subscriber base. Uber shares are down 2% in premarket after operating income missed on forecasts. Gross bookings, which is the value of transactions done on the Uber app, beat forecasts, rising 18%.
The trade war with China heated up Tuesday after U.S. tariffs on Chinese goods of 10% went into effect. In response to U.S. actions, China placed 15% tariffs on coal and liquified natural gas. Existing tariffs on crude oil, farm equipment and certain automobiles were also raised. President Trump has responded by suggesting he could raise tariffs higher yet.
Some of the fallout to the escalating trade war is also playing out in other ways. As I mentioned above, China announced an investigation into Alphabet. There are also concerns China is planning to investigate Apple for its App Store practices. That news has shares of Apple lower by 2% premarket. Back here at home, the U.S. Post Office announced it will stop accepting shipments from China (letters will still be delivered). The decision was made following a measure contained within U.S. tariffs which closed a loophole that allowed shipments valued at under $800 to avoid being tariffed.
For today, I’m watching for any signs of further escalation in the trade war. This is a fluid situation and one that I think investors might want to pay attention to as there are a number of companies that risk being affected. In addition to individual companies, the economic hostilities are also affecting certain commodities. Yesterday, we saw gold make a new all-time high and in premarket, gold is higher by 0.6%. I’m also interested in how companies scheduled to announce after today’s close perform. Some of the names on today’s calendar include ARM Holdings, Ford and MicroStrategy. As always, I would stick with your investing plan and long-term strategy.
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.