Zeitgeist: Beach time: we’ve had a stunning run to record highs and now tariffs are back on the minds of investors and the Fed is less likely to cut in September. Apple was a bit better than we thought and Amazon guided a bit light. Big tech looks solid but it’s beneath the Mag 7 where the trouble lies. Stocks are down quite hard today and European stock are starting to look concerning. The dollar has surged and is on course for its best week in three years. Gold is back below $3,300 and oil retreated sharply to retest its 200-day line. August is always a fun time.
Tariff redux: We knew 1 August was the deadline and whilst the UK, EU and Japan had secured deals, President Trump was true to his word and set reciprocal tariffs between 10% and 41% on U.S. imports from various countries. India's exports to the U.S. face a 25% tariff, Taiwan's 20%, Switzerland’s 39%, and South Africa's 30%.
But at least on one front the TACO trade came home: Trump gave Mexico another 90 days to agree a deal.
Pharma stocks including AstraZeneca and GSK sold off after Trump sent letter to 17 of largest pharmaceutical companies in a bid to lower prices. Sectoral tariffs are the concern.
Stocks were generally lower on Friday as investors head into August with record highs on their backs and a lot of risk ahead. The FTSE 100 finished up 4.2% for July, its best month since January, but trades down 0.8% early on Friday, sitting just below the 9,100. There wasn’t much to shout about – Melrose up a lot with profits +29% and IAG hit a post-Covid high with Q2 profits +35%. Intertek was down after results.
European stocks are down hard again after a tough day on Thursday. The STOXX 50 fell 1.3% and STOXX 600 dropped 0.7% with some big names hit hard - Ferrari (-11.7%) and AB InBev (-11.6%) plunged after missing estimates, while Sanofi (-7%) and Schneider Electric (-4.5%) also declined. Hermes and Adidas fell over 4% each. This morning both the DAX and CAC fell 1.5% early on.
In the US, the S&P 500 closed down for a third day and the Nasdaq composite also fell. Both had hit record intraday highs during the session but couldn’t sustain the momentum as trouble in the broader market outweighed the gains for Microsoft and Meta after their earnings. 9 of 11 S&P 500 sectors fell with UnitedHealth and Merck leading declines on the Dow. Futures are indicated lower again this morning. On a technical basis it's possible the 127% Fib extension just above 23,700 for the Nasdaq 100 was the line in the sand.
Amazon dropped 6.6% on weak operating income guidance despite beating on earnings, while Apple gained 2.4% after exceeding estimates. Microsoft ended the session up 4%, while Meta rose a staggering 11%. Nvidia was down a touch.
US inflation - PCE price index rose 0.3% in June, in line with expectations but nevertheless its highest in four months. The stage is set for it to incrementally tick up, forcing the Fed to stand pat and ending with Trump appointing a shadow chair. Key nonfarm payrolls numbers due out later with 110k expected. The dollar has rebounded and at +2.5% heading for its best week in three years. GBPUSD trades below 1.32 and looks likely to test the 12 May low at 1.3140.
Companies
Apple beat with Q3 revenues $94.04bn vs $89.3bn est, largely driven by iPhone revenues at $44.58bn vs $40.06bn est. Mac revenues also beat estimates while iPad & Wearables miss. Greater China revenues slightly better than expected.
Amazon was good but not good enough – operating income guidance of between $15.5bn and $20.5bn was a tad soft versus the expectations of about $19.4bn.
Roblox shares soared as bookings blew past expectations. Despite a wider loss, bookings were up 51% YoY, supporting the move higher, while revenues rose 21% on the same quarter a year before. Daily active users increased 41% to 111.8 million and engagement time was up 58% to 27.4 billion hours. Average monthly unique payers rose 42% to 23.4 million.
CoreWeave share soared 12% after an upgrade to Buy from Citi, which cited Microsoft earnings as a signal that AI demand remains strong.
Coinbase shares dropped 7% in after-hours trading following lower-than-expected Q2 revenue, at $1.5bn, missing analysts' $1.59bn estimate. Revenue rose 3.3% YOY but fell from $2bn in Q1. Net income hit $1.43bn due to crypto valuation gains.
Figma shares soared on IPO day. It had priced its initial public offering at $33 per share and started trading yesterday under the FIG symbol on the NYSE. Shares rocketed about 300% or so – the price we have on the extended hours trading is $125.34...We’ve had some interesting floats on the US market this year – Chime, Circle and CoreWeave as well as Hinge Health and Omada Health. These have been among the most popular stocks among clients in recent months.