- Stock Bulls Fuel Best Winning Run Since March 2022: Markets Wrap
Wall Street traders are cautiously adding fuel to the stock rebound, in a high-stakes bet that Corporate America
will weather slowing economic growth and tariff-fueled disruptions to earnings. Investors looked past weak
consumer confidence and labor data to send the S&P 500 up 0.6%. The gauge notched its best six-day run since
March 2022, rising about 8% in the span. The Nasdaq 100 is close to erasing all of its losses since April 2, when
President Donald Trump announced his trade offensive. Treasuries extended their April gains, with 10-year
yields dropping below 4.2%. The dollar rose against most major currencies. - S&P 500 ekes out fifth winning day as Big Tech earnings loom
The Dow Jones Industrial Average rose on Tuesday, hitting its highs of the day as the White House said a major
trade deal was close to being announced. The blue-chip Dow climbed 300.03 points, or 0.75%, to close at
40,527.62. The S&P 500 gained 0.58%, ending at 5,560.83. Both indexes posted a sixth straight positive day,
marking the longest win streak since July for the Dow and since November for the S&P 500. The Nasdaq
Composite advanced 0.55%, settling at 17,461.32. “I have a deal done, done, done, done, but I need to wait for
their prime minister and their parliament to give its approval, which I expect shortly,” Commerce Secretary
Howard Lutnick told CNBC in the afternoon, without naming the country. Stocks were treading water for most
of the session before Lutnick’s comments. - Oil prices falls more than 2% as trade war concerns dampen demand outlook
Oil prices fell more than 2% on Tuesday, as investors braced for OPEC+ to boost output and worried U.S.
President Donald Trump’s tariffs would hit the global economy and slow demand for the fuel. Brent crude
futures fell by $1.61, or 2.44%, to close at $64.25 per barrel. U.S. West Texas Intermediate crude dropped by
$1.63, or 2.63%, to settle at $60.42 per barrel. Trump’s aggressive tariffs on imports into the U.S. have made
it probable the global economy will slip into recession this year, according to a majority of economists in a
Reuters poll. China, hit with the steepest tariffs, has responded with its own levies against U.S. imports, stoking
a trade war between the top two oil-consuming nations. Analysts have sharply lowered their oil demand and
price forecasts. “Trade between China and the U.S. has slowed to a semi-embargo type flow. Every day that
passes without some kind of deal with any of our significant trade partners brings us one day closer to a global
demand destruction situation,” Bob Yawger, director of energy futures at Mizuho, said in a note. The U.S. trade
deficit in goods widened to a record high in March as businesses ramped up efforts to bring in merchandise
ahead of Trump’s sweeping tariffs, suggesting trade was a large drag on economic growth in the first quarter.
The fallout from Trump’s trade war reverberated through the corporate world on Tuesday, as delivery giant
UPS said it would cut 20,000 jobs to lower costs. Auto maker General Motors pulled its outlook and pushed its
investor call to Thursday pending possible changes to trade policy. Trump was set to soften the blow of his auto
tariffs through an executive order mixing credits with relief from other levies on parts and materials, after
automakers pressed their case with the administration. UK oil major BP reported a deeper-than-expected 48%
drop in net profit to $1.4 billion on weaker refining and gas trading. The energy market awaits earnings from
U.S. oil majors Exxon Mobil and Chevron this week. - Gold falls as trade tensions soften, U.S. data on tap
Gold fell nearly 1% on Tuesday as signals of easing U.S.-China trade tensions reduced some safe-haven demand,
while investors braced for key economic data this week to gauge the Federal Reserve’s policy outlook. Spot
gold was down 0.8% at $3,315.84 an ounce. U.S. gold futures settled 0.4% lower at $3,333.6.,“There is some
optimism that there will be some de-escalation of the trade war between the U.S. and China,” said David
Meger, director of metals trading at High Ridge Futures. President Donald Trump’s administration plans to
lessen the effect of auto tariffs by lowering taxes on foreign parts used in U.S.-made cars and making sure
imported cars are not hit with multiple tariffs, officials said. Softening trade tensions has caused a sell-off in
safe-haven gold, a traditional hedge against rising global instabilities, which had risen in an unprecedented rally
to notch a record high at $3,500.05/oz last week. U.S. Treasury Secretary Scott Bessent said on Monday several
top trading partners had made “very good” proposals to avoid U.S. tariffs. China’s recent moves to exempt
certain U.S. goods from its retaliatory tariffs showed a willingness to de-escalate trade tensions, Bessent added.
Investors’ radar is now on a slew of important U.S. economic data this week, including the personal
consumption expenditures price index on Wednesday, and a monthly non-farm payrolls report on Friday.
“Looking at the key level in the near-term, $3,500 would be a fair level where you’re going to see people
stepping in and starting to liquidate which is normal ebb and flow of the market,” said Michael Matousek, head
trader at U.S. Global Investors. “For quarter-end, we could probably see gold up at $3,590. For the year-end, I
would put the forecast at $3,800 an ounce.” Spot silver shed 0.4% to $33.02 an ounce, platinum eased about
1% to $976.50 and palladium fell 1.3% to $936.41. - Australia first-quarter inflation holds steady at 4-year low of 2.4%
Australia’s first-quarter inflation rose 2.4% compared to the same period last year, staying at a four-year low.
This was higher than the Reuters expectations of a 2.3% climb, and unchanged from the 2.4% rise in the
previous quarter. Data from the Australian Bureau of Statistics said that the most significant price rises this
quarter were in housing, education, as well as food and non-alcoholic beverages. This was partially offset by
falls in the prices of recreation and culture activities, as well as furnishings, household equipment and services.
Inflation in the country has largely been softening after hitting a multi-year high of 7.8% since the quarter
ended December 2022, with the headline inflation rate declining for seven of the nine quarters since then. The
declining inflation has also afforded the Reserve Bank of Australia room to cut rates to 4.1% from 4.35%, which
was its highest level since December 2011. For 2025, growth in Australia’s economy is expected to pick up and
the labor market will remain strong, the RBA said, but also added that “it is unclear what will happen globally.”
Sean Langcake, head of macroeconomic forecasting at Oxford Economics, noted after the CPI release that
“underlying inflation measures paint a better picture, with trimmed-mean inflation falling back to within the
RBA’s target range.” Trimmed mean inflation, which excludes extreme price changes in consumer goods and
services, rose 0.7% on a quarter-on-quarter basis and 2.9% on an annual basis. The RBA has an inflation target
range of 2%-3%. “With underlying inflation within the RBA’s target range, the Bank has greater scope to help
support the economy through this coming shock,” Langcake pointed out. He projected a 25-basis point cut in
May, and two more cuts in the second half of the year. The release also comes as Australia gears up for an
election on May 3, with all 150 seats in the lower House of Representatives, and 40 of the 76 seats in the
country’s Senate up for grabs. Reuters, citing Newspoll, reported on April 28 that the Labor Party, led by current
Prime Minister Anthony Albanese, currently holds a four-point lead over the conservative Liberal-National
opposition when votes from smaller parties are redistributed. - China’s factory activity drops to a near two-year low in April as trade tariffs bite
China’s manufacturing activity fell more than expected to a near two-year low, sliding into contractionary
territory in April as the escalating trade war with the U.S. hurts bilateral trade. The official purchasing
managers’ index came in at 49.0 in April, according to data from the National Bureau of Statistics on
Wednesday, falling below the 50-level threshold, which determines expansion from contraction, for the first
time since January. That reading missed analysts’ expectations for a 49.8 contraction in a Reuters poll and
marked the weakest level since May 2023, according to LSEG data. The slowdown came after China’s
manufacturing activity grew at its fastest rate in a year in March, as exporters front-loaded outbound
shipments to avoid higher duties. - Super Micro shares dive after server maker issues weak preliminary financials
Super Micro shares plunged as much as 19% on Tuesday after the server maker announced preliminary results
for the fiscal third quarter that were lower than analysts had projected. Here’s how the company’s preliminary
numbers compare with the LSEG consensus: Earnings per share: 29 to 31 cents, adjusted vs. 54 cents expected;
Revenue: $4.5 billion to $4.6 billion vs. $5.5 billion expected. Super Micro lowered the ranges from earlier
guidance for the quarter, which ended on March 31, according to a statement. The new revenue range implies
expansion of 18% growth, down from the 200% growth Super Micro delivered a year ago. “During Q3 some
delayed customer platform decisions moved sales into Q4,” the company said in the statement. Super Micro
said it also saw “higher inventory reserves resulting from older generation products.” The company had
previously called for revenue of $5 billion to $6 billion and earnings per share of 46 cents to 62 cents. Super
Micro said its gross margin for the quarter was 220 basis points lower than the prior period. Shares of server
competitor Dell were down almost 5% in after-hours trading, while Hewlett Packard Enterprise fell about
2%. Nvidia shares dropped roughly 2%. - Swiss giant UBS posts profit beat, warns of ‘material risk’ to global growth from U.S. tariffs
Swiss giant UBS on Wednesday beat bottom line expectations amid sharp returns in investment banking while
warning of the global trade impact of sweeping U.S. tariffs as it seeks to rein in steep share declines. Net profit
attributable to shareholders hit $1.692 billion in the first quarter, compared with a mean forecast of $1.359
billion in a LSEG poll of analysts. Group revenue over the stretch stood at $12.557 billion, versus analyst
expectations of $12.99 billion. Other first-quarter highlights included: Return on tangible equity reached 8.5%,
versus 3.9% in the fourth quarter. CET 1 capital ratio, a measure of bank solvency, was 14.3%, unchanged from
the December quarter. The lender said it delivered a 32% year-on-year hike in revenues of the global markets
unit of its investment banking arm, largely driven by “higher client activity in equities and FX with gains across
all regions.” Critically, the lender posted $1.629 billion in its net interest income (NII) — the difference between
earnings from loans and investments and the payments on deposits — down 16% year-on-year and 11% from
the fourth quarter, guiding for further declines in the June quarter. “In the second quarter we expect net
interest income (NII) in Global Wealth Management to decline sequentially by a low single-digit percentage,
and we see a similar decline in Personal & Corporate Banking’s NII in Swiss francs. In US dollar terms, Personal
& Corporate Banking’s NII is expected to increase sequentially by a mid-single-digit percentage, based on
current foreign exchange rates,” UBS said. Investors are keenly watching these metrics as European banks
transition to an environment of monetary easing, particularly in Switzerland, which has been combating a
strong franc and depressed inflation with interest rates as low as 0.25%. - Auto giant Volkswagen posts 37% drop in first-quarter profit as Trump tariffs jolt industry
German auto giant Volkswagen on Wednesday reported a substantial drop in first-quarter profit as the
carmaker navigates the disruptive impact of U.S. tariffs on the global car industry. Europe’s biggest carmaker
reported operating profit of 2.9 billion euros ($3.3 billion) for the first three months of the year, down 37%
from the same period last year. Volkswagen reported first-quarter sales revenue of 77.6 billion euros, up 2.8%
from the first quarter of 2024. The company cited higher vehicle sales in markets outside China as underpinning
the increase. Earlier this month, Volkswagen warned that first-quarter operating profit would likely come in at
2.8 billion euros, citing special effects in the magnitude of 1.1 billion euros. In an ad hoc statement on April 9,
the company recognized that the preliminary first-quarter result deviated significantly from analyst
expectations of around 4 billion euros. “As expected, the Volkswagen Group experienced a mixed start to the
fiscal year,” Arno Antlitz, chief financial officer and chief operating officer at Volkswagen Group, said in a
statement. “Given the current volatile global economic situation, it is even more important to focus on the
levers within our control. This means complementing our great product range with a competitive cost base –
so we can ensure to succeed also in rapidly changing global markets,” Antlitz said. Volkswagen posted operating
profit of 4.59 billion euros for the first quarter of 2024 and 6.15 billion euros for the final three months of 2024.
The results come as carmakers face uncertainty regarding U.S. President Donald Trump’s ongoing auto tariffs.
The sector is known to be acutely vulnerable to Trump’s back-and-forth trade policy, particularly given the high
globalization of supply chains and the heavy reliance on manufacturing operations across North America.
Shares of Volkswagen are up nearly 10% year-to-date. - Porsche AG shares fall as much as 7.6%, their steepest drop since early February, after the luxury
carmaker once again issued a profit warning. The German firm faces a host of challenges including US tariffs
and higher costs from weak electric-vehicle adoption. The company said its profit margin is set to slip into
single digits this year
ANALYST COMMENTARY: Morgan Stanley (underweight): Analyst Javier Martinez de Olcoz Cerdan says yet
another warning from Porsche after February’s guidance cut, with new outlook about 13% below Ebit
consensus; So far this only incorporates negative tariff impact for April and May, which implies potential for
further declines in case of automotive tariffs persisting; Porsche’s strong US exposure and primary European
production leaves it with clear challenges. JPMorgan (overweight, PT €64 vs €78): JPMorgan cuts its earnings
estimates by 20% on average for FY25 and FY26 following Monday evening’s statement, analyst Jose Asumendi
writes; Investors may question how many of the issues affecting Porsche are one-time events in FY25; The
company may be “taking the opportunity to kitchen-sink estimates” in FY25, and Porsche can return to double
digit margins in FY26. Citi (buy): Analyst Harald Hendrikse says “piecemeal nature” of Porsche’s release,
highlighting a swathe of issues, makes it “natural for investors” to become wary of investing in the firm; Porsche
warns of further exceptional costs related to stop in battery-investment activities, alongside additional hit from
April-May tariff costs; Citi says Porsche has “work to do to exhibit greater control of its problems”. - Lufthansa shares fall as much as 2.9%. Results for the first quarter are largely in line and the carrier
expects strong demand during the second quarter, though analysts note that weakening demand on the
North Atlantic presents warning signs ahead of the peak summer season. However, the airline group
reconfirmed its guidance for the full year
Jefferies (hold): Analyst Jaina Mistry sees 1Q results positively, noting that underlying Ebit was in line despite
net profit miss on lack of tax benefits; Fuel guidance for the full year came in ~€500m below consensus, driving
upgrades to Ebit view of ~27% and “more than offsetting” 1Q’s net profit miss; Notes commentary pointing to
a “strong summer season ahead” and expectations of a “robust” 2Q. Morgan Stanley (equal-weight): Analysts
including Conor Dwyer note some demand weakness on the horizon, seen on the North Atlantic during peak
summer (though 2Q bookings remain strong in all regions); Weakness “primarily driven by non-premium cabins
on European point-of-sale, which has been a theme for a while”; Also attributes 1Q Ebit loss to weak cost
performance in the passenger business. Barclays (underweight): “Warning lights are flashing,” according to
analyst Andrew Lobbenberg, with company flagging weakening non-premium European point-of-service
demand to the US; Notes that 1Q Ebit loss was in line and FY25 Ebit guidance unchanged, though risks increase;
Key focus of call (set for 11:30 a.m. CET) to be revenue outlook (especially on the Atlantic and in cargo), labor
relations and ITA implementation. FIRST QUARTER RESULTS: Adjusted Ebit loss EU722 million, -15% y/y,
estimate loss EU747.2 million (Bloomberg Consensus); Passenger airlines adjusted Ebit loss EU934 million,
+1.7% y/y, estimate loss EU828.5 million; Adjusted Ebit margin -8.9% vs. -11.5% y/y, estimate -9.41%; Revenue
EU8.13 billion, +9.9% y/y, estimate EU7.95 billion; Passenger airlines revenue EU5.90 billion, +5.4% y/y,
estimate EU5.92 billion; Net loss EU885 million, +21% y/y, estimate loss EU633.5 million; Loss per share EU0.74
vs. loss/shr EU0.61 y/y, estimate loss/shr EU0.51; Adjusted free cash flow EU835 million vs. EU305 million y/y;
ASK (Available Seat Kilometers) 69.92 billion, +4.6% y/y, estimate 69.58 billion; Seat load factor 78.7% vs. 79.7%
y/y, estimate 80.3%; Passengers 24.29 million, -0.3% y/y, estimate 26.37 million; Revenue seat-kilometers
55.02 billion, +3.3% y/y, estimate 60.87 billion. - Pfizer shares rise as much as 3.9%, the most intraday since December, after CEO Albert Bourla said
during an earnings call that he is “cautiously optimistic” that the pharmaceutical industry will avoid tariffs
following discussions with the White House
Earlier, the drugmaker reported adjusted profit for the first quarter that exceeded the average estimate from
analysts. The company also said it’s cutting at least another $1.2 billion from its spending and maintained its
outlook for the full year. YEAR FORECAST: Still sees revenue $61.0 billion to $64.0 billion; Still sees adjusted
EPS $2.80 to $3.00; Trending Towards Upper End of 2025 Adj EPS Range; Still sees adj. SI&A expenses $13.3
billion to $14.3 billion. FIRST QUARTER RESULTS: Revenue $13.72 billion, estimate $14.01 billion (Bloomberg
Consensus); Comirnaty revenue $565 million, +60% y/y, estimate $325.5 million; Paxlovid rev. $491 million,
down 76%; Prevnar franchise revenue $1.66 billion, -1.8% y/y, estimate $1.67 billion; Ibrance revenue $977
million, -7.3% y/y, estimate $912.4 million; Eliquis revenue $1.92 billion, -5.7% y/y, estimate $1.96 billion;
Vyndaqel family revenue $1.49 billion, +31% y/y, estimate $1.38 billion; Xeljanz revenue $128 million, -34%
y/y, estimate $161.6 million; Adj. diluted EPS $0.92, estimate $0.67; Adj. R&D expense $2.17 billion; Adj. SI&A
expenses $3.01 billion. - Rheinmetall shares rise as much as 6.2% after smashing expectations across the board with analysts
praising a blowout quarter. Analysts remain bullish on the German defense group’s momentum, with
Jefferies hiking its price target after the report
JPMorgan (overweight): Analyst David Perry sees results “well ahead of expectations” with sales 18% ahead
and Ebita 20% ahead of consensus estimates; Notes that while Defense division’s Ebita rose 96% year on year,
it is “typically the least important quarter” for the company, only contributing around 10% of yearly Ebita; Still,
JPMorgan maintains “very positive view” on the firm’s multi-year outlook, and says “these results certainly
support this view”. Morgan Stanley (overweight): Analyst Marie-Ange Riggio sees a “promising” beat, with
Defense division continuing to show record-level sales and profitability; 1Q suggests “strong” Defense margins
of 11%; While company highlighted pull-forward effects starting in 2Q, believes FY2025 to be derisked “as it
implies the rest of the year at the low-end of guidance range”; “The promising 1Q25 earnings is reassuring on
the continued strong momentum, both on orders and financials, which leaves room for upgrade at 1H”.
Jefferies (buy): Analyst Chloe Lemarie says that while the company maintained its full-year outlook, she still
expects “significant upside” on stronger defense growth; Notes that the company attributed the strong growth
to pull-forward effects from 2Q to 1Q, though she expects strong results throughout the year; Rheinmetall
remains her defense top pick, as she says “this release confirms our case that RHM will be among the fastest
beneficiaries of the new defense spending environment”. PRELIMINARY FIRST QUARTER RESULTS: Prelim sales
EU2.31 billion, estimate EU1.95 billion (Bloomberg Consensus); Prelim operating profit EU199 million; Prelim
operating margin 8.7%. YEAR FORECAST: Still sees operating margin about 15.5%, estimate 15.7%; Still sees
sales +25% to +30%. - Elon Musk prepares to step back from White House role, NY Post reports
Elon Musk is winding down his in-person role at the White House and preparing to exit his official post with
the Department of Government Efficiency (DOGE), the New York Post reported on Wednesday, citing an
interview with White House Chief of Staff Susie Wiles. Musk, who has served as an unpaid special government
employee since President Donald Trump returned to office in January, is no longer regularly working from the
White House campus, Wiles told the Post. She informed that while Musk has not been here physically, he
remains active in his advisory capacity via phone. The report said that Musk’s team remains embedded in the
Eisenhower Executive Office Building. The Tesla Inc (NASDAQ:TSLA) CEO had become a central figure in early
Trump administration efforts to cut federal spending, personally briefing Trump, attending cabinet meetings,
and backing efforts to downsize agencies like USAID and the Consumer Financial Protection Bureau. Musk
indicated on a recent Tesla earnings call that he will shift more of his focus back to the company starting in May, while maintaining a part-time advisory role with DOGE.
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