Weekly Wrap

The stock market was mostly lower at the end of this turbulent week. The market started the week strong amid relief that smartphones, laptops, semiconductors, solar cells, and other electronic items will be exempt from the 10% global tariffs and the 125% tariff rate on imports from China.

Enthusiasm was limited due to the understanding that imports from China are still subject to the 20% fentanyl-related tariff.

Other tariff-related headlines this week included:

• Section 232 investigations have been announced for semiconductor, semiconductor equipment, pharmaceuticals, and pharmaceutical ingredients, laying the groundwork for likely tariff increases
• Bloomberg reports that the EU and US have made little progress on trade talks and that the EU expects most tariffs to remain in place.
• Bloomberg reports that China has ordered airlines to stop taking Boeing (BA) deliveries.
• President Trump also suggested there may be tariff adjustments for the auto sector

In corporate news, NVIDIA (NVDA) announced that it expects Q1 results to include up to $5.5 billion of charges associated with H20 products due to export restrictions for China. AMD (AMD) also announced an expected impact of $800 million.

UnitedHealth (UNH) suffered a significant decline after reporting disappointing earnings and guidance. 

• Nasdaq Composite: -2.6% for the week / -15.7% YTD
• S&P 500: -1.5% for the week / -10.2% YTD
• Dow Jones Industrial Average: -2.7% for the week / -8.0% YTD
• S&P Midcap 400: +0.8% for the week / -12.7% YTD
• Russell 2000: +0.0% for the week / -15.7% YTD

Monday:

The stock market logged gains to start the week. An early surge saw the S&P 500 trade up as much as 1.8%, but the index settled 0.8% higher than Friday after briefly turning negative and bouncing off its session low around mid-day.

Buying interest was rooted in relief that smartphones, laptops, semiconductors, solar cells, and other electronic items will be exempt from the 10% global tariffs and the 125% tariff rate on imports from China. The subsequent deterioration was related in part to the understanding that imports from China are still subject to the 20% fentanyl-related tariff.

Also, Commerce Secretary Lutnick clarified that the exemptions will be temporary and President Trump said that he will soon announce a tariff rate for semiconductors.

The ebb and flow of equities was also driven by choppy action in mega caps.

There was no notable US economic data on Monday.

Tuesday:

The stock market headed higher at the open, yet closed with modest declines at the index level. The S&P 500 was 0.2% lower, the Nasdaq Composite registered a 0.1% decline, and the Dow Jones Industrial Average settled 0.4% lower. Moves in either direction were limited as investors continue to weigh the potential impact of tariffs after a slate of trade-related headlines.

Comments from President Trump suggested there may be tariff adjustments for the auto sector, a Bloomberg report suggested that the EU and US have made little progress on trade talks, and the Department of Commerce launched Section 232 investigations into imports of semiconductors, semiconductor manufacturing equipment, pharmaceuticals, and pharmaceutical ingredients, piquing concerns about tariff increases.

Market participants were also digesting earnings news from Bank of America (BAC) and Citigroup (C), which received positive responses and boosted the overall equity market. Breadth was positive despite the slightly negative finish for major indices. Advancers had a 3-to-2 lead at the NYSE and a 4-to-3 lead at the Nasdaq.

Reviewing Tuesday's economic data:

• April Empire State Manufacturing -8.1 (Briefing.com consensus -14.8); Prior -20.0
• March Export Prices 0.0%; Prior was revised to 0.5% from 0.1%
• March Export Prices ex-ag. -0.1%; Prior was revised to 0.5% from 0.1%
• March Import Prices -0.1%; Prior was revised to 0.2% from 0.4%
• March Import Prices ex-oil 0.1%; Prior was revised to 0.1% from 0.3%

Wednesday:

Stocks struggled under selling activity, leading the major indices to close sharply lower. The S&P 500 dropped 2.2%, the Nasdaq Composite fell 3.1%, and the Dow Jones Industrial Average declined 1.7%.

There was a negative bias through the entire session following NVIDIA's (NVDA) announcement that it expects Q1 results to include up to $5.5 billion of charges associated with H20 products due to export restrictions for China. AMD (AMD) also announced an expected impact of $800 million.

Selling increased noticeably in the afternoon following remarks from Fed Chair Powell, who appeared at an event in Chicago, indicating that he doesn't think the Fed will make progress on its dual mandate goals this year and that there isn't a "Fed put."

The economic data also contributed to the downside bias despite solid headline numbers in the retail sales report. Total retail sales increased 1.4% month-over-month in March (Briefing.com consensus 1.3%) following an unrevised 0.2% increase in February. Excluding autos, retail sales rose 0.5% month-over-month (Briefing.com consensus 0.2%) following an upwardly revised 0.7% increase (from 0.3%) in February.

The negative takeaway related to the belief that last month's data may have been inflated by buying activity ahead of the tariff impacts and may decrease in the future.

Reviewing Wednesday's economic data:

• Weekly MBA Mortgage Applications Index -8.5%; Prior 20.0%
• March Retail Sales 1.4% (Briefing.com consensus 1.3%); Prior 0.2%, March Retail Sales ex-auto 0.5% (Briefing.com consensus 0.2%); Prior was revised to 0.7% from 0.3%
  • The complicated element -- and key takeaway from the report -- is that the strength has a lot to do ostensibly with getting ahead of the tariff actions, which is to say the strength may not be sustained. If there is a counterargument to that point, it is that sales at food services and drinking places were up a robust 1.8% in March after declining 0.8% in February.
• March Industrial Production -0.3% (Briefing.com consensus -0.3%); Prior was revised to 0.8% from 0.7%, March Capacity Utilization 77.8% (Briefing.com consensus 77.9%); Prior 78.2%
  • The key takeaway from the report is that the large decline in the output of utilities overshadowed the increase in manufacturing output and mining output, so the headline decline isn't as bad as it looks at first blush.
• February Business Inventories 0.2% (Briefing.com consensus 0.3%); Prior 0.3%
• April NAHB Housing Market Index 40 (Briefing.com consensus 39); Prior 39

Thursday:

The stock market exhibited some turbulence at the index level amid mixed headlines and corporate news. The S&P 500 (+0.1%) and the Nasdaq Composite (-0.1%) traded above and below prior closing levels while the Dow Jones Industrial Average (-1.3%) lagged its peers.

The underperformance of the DJIA was due to a significant earnings-related loss in UnitedHealth (UNH), which is among the heaviest components in the price-weighted average.

The overall bias in the market was positive, however.

Outsized moves were mostly reserved for individual stocks with specific catalysts. Eli Lilly (LLY) was an influential winner after announcing positive trial results for its weight-loss drug pill.

Reviewing Thursday's economic data:

• March Housing Starts 1.324 mln (Briefing.com consensus 1.418 mln); Prior was revised to 1.494 mln from 1.501 mln, March Building Permits 1.482 mln (Briefing.com consensus 1.455 mln); Prior was revised to 1.459 mln from 1.456 mln
  • The key takeaway from the report is that single-unit starts (-14.2%) and permits (-2.0%) were both down during the month, as affordability constraints driven by higher mortgage rates and building costs presumably curtailed homebuilder activity.
• April Philadelphia Fed Index -26.4 (Briefing.com consensus 10.0); Prior 12.5
  • The key takeaway from the report is that the index for new orders dropped sharply to -34.2 from 8.7, signaling a notable dropoff in demand; meanwhile, the prices paid index rose to 51.0 from 48.3.
• Weekly Initial Claims 215K (Briefing.com consensus 225K); Prior was revised to 224K from 223K, Weekly Continuing Claims 1.885 mln; Prior was revised to 1.844 mln from 1.850 mln
  • The key takeaway from the report is that the low level of initial jobless claims will support the idea that the labor market is still in a solid position overall. Additionally, this should factor well in forecasts for April nonfarm payrolls since it covers the period in which the employment survey is conducted.