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Forget tariffs. It's all about earnings this week on Wall Street

Forget tariffs. It's all about earnings this week on Wall Street

CNBC2 days ago
Commerce Secretary Howard Lutnick said Aug. 1 is the " hard deadline " for countries to reach a trade deal with the United States. The market, however, didn't care. Stocks instead looked to start the week on a high note as investors turned their focus to a slew of major corporate reports due out this week. More than 100 S & P 500 companies are slated to post results, including Tesla and Google-parent Alphabet. Wall Street has a lot riding on some of these reports, as most of second-quarter earnings growth is expected to come from megacap tech. (For more on what to expect from some of the biggest reports this week, check out my latest Earnings Playbook .) .SPX YTD mountain S & P 500 year to date "Our view is you are going to need a notable 'beat and raise' across the board here for the most part, outside of an Alphabet where the expectations, valuations are a little bit more reasonable in nature," CFRA analyst Angelo Zino told CNBC's Frank Holland on "Worldwide Exchange" Monday morning. Alphabet, which reports Wednesday after the bell, trades at around 19 times forward earnings. Big Tech rivals Meta Platforms and Apple sport respective multiples of 27 and 29. One thing that can provide some comfort to Wall Street for now is that the reporting period is off to a strong start. FactSet data shows that of the 62 S & P 500 companies that have already posted results, 85% have exceeded expectations. However, RBC isn't fully sold just yet. "Overall, we exited week 1 of 2Q25 reporting season feeling like everything is fine, but not fabulous, and wondering if investors generally got what they expected but were hoping for a bit more," Lori Calvasina, the bank's head of U.S. equity strategy, wrote in a note Monday. She noted that companies reporting in the weeks ahead could signal trade-related pressure will hurt their bottom lines. This is despite investors looking beyond the recent tariff headlines. Morgan Stanley's chief investment officer Michael Wilson holds a more positive view, however. "Earnings momentum, positive operating leverage and cash tax savings are underappreciated tailwinds, in our view. We lean more toward our bull case (7200) by the middle of next year. While there should be some consolidation during 3Q, we think dips are meant to be bought," he said. Wilson's bull-case target signals 14% upside from Friday's close.
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Trade optimism drove global stock markets higher Wednesday after the U.S. struck agreements with Japan, the Philippines and Indonesia. For Japan in particular, the lowering of tariffs on carmakers to 15% from their current 25% provided a big boost to a core industry and powered a global jump in auto-sector stocks. Meanwhile, U.S. Treasury Secretary Scott Bessent said on Fox Business on Tuesday that he would be meeting Chinese officials to extend the two countries' trade truce, which expires Aug. 12. It's a big day for earnings, with Alphabet and Tesla set to report, as also IBM and AT&T.

How the dropping dollar could scramble Trump's agenda
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How the dropping dollar could scramble Trump's agenda

President Trump and his aides are closely watching the US dollar's drop over the first six months of this year as they track a change that could have wide-ranging effects, from how tariffs are felt to Federal Reserve policy to America's role in the world. The question, which notably remains a somewhat open one even among Trump's aides, is whether the net effects may include at least some positive short-term consequences for the president's agenda or whether the dollar needs to be strengthened at all costs. Commerce Secretary Howard Lutnick offered a limited case for a weaker dollar on CBS over the weekend when he responded to a question about rising consumer prices by saying that "the dollar declining sort of softens tariffs completely." The currency's moves so far this year — which have surprised some economists who expected Trump's tariffs to put pressure in the other direction — could indeed boost exports but could also complicate Trump's goals for the coming months, primarily by pushing prices up for US consumers of foreign goods. Trump himself remains very much in the strong dollar camp, as he reiterated just a few days ago, saying that he is "never going to let the dollar slide." The only way that could happen, he added, is "if you have a dummy" as president. The somewhat mixed messaging comes as the US dollar index — a measure of the US currency against various foreign currencies — has fallen significantly and is now down almost 10% since Inauguration Day. Declines in recent days have put the currency, as of Tuesday afternoon, near two-year lows. It's a change that, if it sticks, will have varied consequences for Trump's agenda — and not just on the trade front. RSM's Joe Brusuelas offered in a note this week that a weakening dollar tends to be followed by inflation pressure — "but it usually takes nine to 12 months" — which could work most directly against Trump's keen interest in lower interest rates. If the dollar holds or declines further, the economist wrote, "such a scenario will most likely lead the Federal Reserve to hold its policy rate steady through the end of the year at best" due to inflation uncertainty. 'People vote with their feet' The somewhat surprising dollar moves so far this year have also spurred some concerns that recent declines could be early signs of a loss of faith from global investors. As JPMorgan Chase (JPM) CEO Jamie Dimon put it recently, "people vote with their feet," and "if people decide that the U.S. dollar isn't the place to be ... that will become a problem." Eurasia Group's Ian Bremmer added in a recent analysis that the dollar's role as the world's global reserve currency is likely safe for now, but the US is entering a period where investment trends "could start a long term slide to become closer to parity in trust and utility with the Euro." Some analysts are pushing back, saying the evidence isn't there (at least yet) for a long-term slide. A recent analysis from Monty Gandhi at the SMBC Group called the flows away from the dollar "still more myth than reality" and found that "speculative positioning may reflect short-term bearishness on the dollar, actual capital flows continue to favor U.S. assets." Another note of skepticism about any long-term effects came from Torsten Sløk, chief economist at Apollo Global Management, who wrote in a note that his expectation is that if the trade uncertainty is resolved, "the US dollar is expected to appreciate again" after what he describes as a rebound in demand for US assets that began in May. (Disclosure: Yahoo Finance is owned by Apollo Global Management.) It's also a narrative that the White House pushes hard against, with Trump taking an aggressive stance against BRICs, an intergovernmental organization comprising 10 countries that had floated a long-shot idea of a common currency. "They wanted to try and take over the dollar," the president said. Trump promised a 10% tariff in response and gloated last week that the group's influence is "fading out fast," likening the possible loss of the dollar's status as a reserve currency to "losing a world war." "Ten-year Treasury yields rallying down since Inauguration Day, four consecutive expectation-beating inflation reports, and the trillions in historic investment commitments that have poured into the United States since Election Day are all indicative of the confidence that investors and markets continue to have in our economy and currency," added White House spokesperson Kush Desai in a statement. Read more: What is the 10-year Treasury note, and how does it affect your finances? A long-simmering Trump-world debate This summer's focus on the dollar is just the latest in a debate within Trump's orbit that stretches back even before the 2024 election around whether the dollar is overvalued. As the Atlantic Council recently put it: "What's the Trump administration's dollar strategy? It depends on who you ask." On one side historically are figures like Stephen Miran, the chair of Trump's Council of Economic Advisers, who touted the idea of a "Mar-A-Lago accord" last year, before he joined the administration, that was largely built on a premise that the US dollar is "persistently overvalued" and that tariff inflation can be avoided if currency issues are also addressed simultaneously. 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Asian markets gain, with Japan's Nikkei up 3.5%, lifted by deal on Trump's tariffs
Asian markets gain, with Japan's Nikkei up 3.5%, lifted by deal on Trump's tariffs

San Francisco Chronicle​

time30 minutes ago

  • San Francisco Chronicle​

Asian markets gain, with Japan's Nikkei up 3.5%, lifted by deal on Trump's tariffs

TOKYO (AP) — Asian shares rallied on Wednesday, with Tokyo's benchmark Nikkei 225 index up 3.5% after Japan and the U.S. announced a deal on President Donald Trump's tariffs. The agreement as announced calls for a 15% import duty on goods imported from Japan, apart from certain products such as steel and aluminum that are subject to much higher tariffs. That's down from the 25% Trump had said would kick in on Aug. 1 if a deal was not reached. 'This Deal will create Hundreds of Thousands of Jobs — There has never been anything like it,' Trump posted on Truth Social, noting that Japan was also investing 'at my direction' $550 billion into the U.S. He said Japan would 'open' its economy to American autos and rice. Japan's benchmark Nikkei 225 gained 3.5% in afternoon trading to 41,171.32. Hong Kong's Hang Seng jumped 1.4% to 25,470.25, while the Shanghai Composite index was little changed, gaining less than 0.1% to 3,582.30. Australia's S&P/ASX 200 edged up 0.7% to 8,737.20 and the Kospi in South Korea edged 0.4% higher to 3,183.77. 'President Trump has signed two trade deals this week with the Philippines and Japan which is likely to keep market sentiment propped up despite deals with the likes of the EU and South Korea remaining elusive, for now at least,' Tim Waterer, chief market analyst at Kohle Capital Markets, said in a report. Japanese companies tend to be cautious about their public reactions, and some business officials have privately remarked in off-record comments that they hesitate to say anything because Trump keeps changing his mind. The Japan Automobile Manufacturers' Association also said it had no comment, noting there was no official statement yet. Japan's Prime Minister Shigeru Ishiba welcomed the agreement as beneficial to both sides. Toyota stock jumped 14% in Tokyo trading, while Honda was up nearly 11% and Nissan added 8%. In other sectors, Nippon Steel, which is acquiring U.S. Steel, rose 2.4% while video game maker and significant exporter Nintendo Co. added 0.7%. Sony Group surged 4.6%. Wall Street inched to another record on Tuesday following some mixed profit reports, as General Motors and other big U.S. companies gave updates on how much Trump's tariffs are hurting or helping them. The S&P 500 added 0.1% to the all-time high it had set the day before, closing at 6,309.62. The Dow Jones Industrial Average rose 0.4% to 44,502.44. The Nasdaq composite slipped 0.4% from its own record, to 20,892.68. So far, the U.S. economy seems to be powering through the uncertainty created by Trump's on-and-off tariffs. Many of Trump's proposed taxes on imports are currently on pause, and the next big deadline is Aug. 1. Talks are underway on possible trade deals with other countries that could lower the stiff proposals before they kick in. Trump said he reached a trade agreement with the Philippines following a meeting Tuesday at the White House, that will see the U.S. slightly drop its tariff rate for the Philippines without paying import taxes for what it sells there. In the bond market, Treasury yields sank as traders continue to expect the Federal Reserve to wait until September at the earliest to resume cutting interest rates. The yield on the 10-year Treasury eased to 4.34% from 4.38% late Monday. In other dealings early Wednesday, U.S. benchmark crude oil gained 15 cents to $65.46 a barrel. Brent crude, the international standard added 16 cents to $68.74 a barrel.

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