On Thursday (08 May), we had the announcement of a trade agreement with the UK by the Trump administration, this has given hopes for similar agreements with other nations, which could possibly reduced the fears and impact of tariffs on the global economy.
Commerce Secretary Howard Lutnick confirmed that the 10% baseline tariff would remain, while the UK committed to purchasing $10 billion worth of Boeing (BA, Financial) aircraft.
Possible Reduced Tariffs On China If Meeting Successful
President Trump, during a media interaction, mentioned that the US is on the brink of securing further deals with other countries. He hinted at the possibility of reducing tariffs on China if the upcoming weekend meeting is successful, and indicated a potential conversation with President Xi thereafter. Later in the day, reports suggested that the US might reduce tariffs on China by 50% next week to set the stage for comprehensive trade discussions.
Market React Positively With These Potential Tariffs Development
With the potential tariffs development heading in a positive direction, the stock market was in a positive vibes and all major indices managed to close higher.
S&P 500 was up by 0.58%, NASDAQ was the biggest winner with 1.07% gains while DJIA did well as well by gaining 0.62%. These gains was driven by encouraging trade developments and President Trump's endorsement to invest in stocks.
Latest Economic Data Show Robust Labor Market
We have the weekly initial claims which came in at 228K and it is below the consensus of 238K, which the previous was revised to 241K, this decline in initial jobless claims suggest that there is a robust labor market, far from recessionary conditions.
The Q1 Productivity Preliminary data which was worse than the consensus (-0.8% vs -0.4%) while the previous was revised to 1.7% indicate that there is a rise in unit labor costs, due to weak productivity, has not yet significantly pressured profit margins in Q1 earnings reports.
We have the March Wholesale Inventories which came in at 0.4% though slightly below consensus of 0.5%); while the previous was recorded at 0.3%.
S&P 500 Sector Mixed Performance
Though we saw a positive market reaction after the encouraging trade development, the S&P 500 sectors exhibit a mixed performance.
We can see strong performance from the major tech stocks and semiconductor stocks.
We have performers gaining between 0.60% to 1.35%, with Consumer Discretionary leading with 1.35% gain with contribution from Mohawk Industries Inc (MHK), following by Industrials which was helped by stock like Axon Enterprise Inc (AXON) which gained 14.13%.
Health Care was the biggest losers with -0.91% which was dragged by Eli Lilly & Co (LLY) with 3.25% loss.
$Philadelphia Semiconductor Index(SOX)$ Performance
We are seeing a good push by the SOX bulls higher from the 50-day period, which would mean that they are gaining momentum from what we see in RSI, and the attempt to create a daily uptrend continuation might continue well.
I think we should be seeing some good development for the chipmakers as the restriction of chips export might be coming off slowly in following weeks. I will be monitoring the development of this alongside with the trade talks.
Note Yield Was Up Influenced By Disappointing Q1 Productivity Report
In the bond market, Treasuries faced selling pressure, causing the 10-year yield to rise by ten basis points to 4.37%.
The 2-year yield also increase by the same margin to 3.89%. This movement was influenced by a disappointing Q1 Productivity report, which showed a larger-than-expected decline in productivity and a significant rise in Unit Labor Costs.
The New York Federal Reserve's April Survey of Consumer Expectations revealed that the one-year inflation outlook remained steady at 3.6%, while the three-year outlook rose to 3.2% from 3.0%. Conversely, the five-year outlook declined to 2.7% from 2.9%. Additionally, the U.S. Treasury's sale of $25 billion in 30-year bonds attracted weak demand.
Stocks To Watch
$Lyft, Inc.(LYFT)$ has reported a 14% increase in net revenue, reaching $1.45 billion in the first quarter, driven by record gross bookings and an all-time high in driver hours. The company is also expanding its share repurchase program to $750 million, with $500 million to be deployed in the next twelve months, which represents 13% to 14% of its market cap. This strategic move is expected to enhance shareholder value and support the company's growth trajectory.
The Trade Desk (TTD) exceeded expectations with a Q1 Non-GAAP EPS of $0.33, beating estimates by $0.08, and revenue of $616 million, surpassing forecasts by $40.72 million. The company maintained a customer retention rate of over 95% for the eleventh consecutive year. Shares surged by 13% following the announcement, reflecting investor confidence in its continued performance.
$Meta Platforms, Inc.(META)$ has appointed Robert Fergus to lead its Facebook AI Research lab, FAIR. Fergus, who co-founded FAIR in 2014, returns to Meta after a stint at Google DeepMind. This leadership change comes as Meta aims to advance its AI capabilities, particularly in memory and personalization through the Llama models. It is also in preliminary discussions with crypto companies to introduce stablecoins for managing payouts. This initiative aims to leverage stablecoins' ability to facilitate cross-border payments with lower fees compared to traditional methods. Meta's exploration into stablecoins is part of its broader strategy to integrate fintech and payments into its platforms.
With these development and venture into crypto space, looks like META is trying to break out from its sideway trading of its share price, we are seeing increased momentum from the RSI and the bulls looks to regain control, now we need to see a daily uptrend push and once that is clear, then we could be seeing META returning back to its previous highs.
Coinbase (COIN) reported a Q1 Non-GAAP EPS of $1.94, which slightly missed estimates by $0.04, with revenue reaching $2.03 billion. Despite a 19% quarter-over-quarter decline in transaction revenue, the company outperformed the broader global spot market. Coinbase is also making strategic moves with its acquisition of crypto options giant Deribit for $2.9 billion.
$Cloudflare, Inc.(NET)$ reported Q1 revenue of $479.09 million, a 26.5% year-over-year increase, beating expectations by $9.39 million. However, shares fell by 3.87% as the company projects a cautious outlook for the second quarter, with expected revenue of $500 million to $501 million and non-GAAP income from operations between $62.5 million and $63.5 million.
$NVIDIA(NVDA)$ expressed support for the revocation of the AI Diffusion Rule by the Trump administration, viewing it as an opportunity for the U.S. to lead the next industrial revolution. This policy change is anticipated to create high-paying jobs and boost U.S. infrastructure, though analysts caution that uncertainty remains regarding its full implementation.
With this new development, this could help to boost the demand for U.S. chipmakers, hence, could be another way to bring the work back to U.S. Looking at how NVDA have managed to push close to 200-day period and now the bulls are back in control, we need to see a strong daily uptrend, and RSI is showing increased momentum, if the trade talks progress well, we could be seeing NVDA attempting to clear the 120 level.
I am holding my positions and might add more if the signal become clearer.
Summary
The market have reacted well with the encouraging development in trade talks and also Trump administration have provided some easing to the fears and concerns of tariffs impact on the global economy.
So we need to continue to monitor and move with the wave as we navigate these development over the next two weeks, we might see some mixed market trading along the way, we can adjust as we go.
Appreciate if you could share your thoughts in the comment section whether you think market would continue to react positively with more updates from the trade development.
@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.
Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.
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