Stocks Pressured by US Tariffs

The S&P 500 Index ($SPX) (SPY) today is down -0.95%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.51%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -1.12%.  March E-mini S&P futures (ESH25) are down by -0.72%, and March E-mini Nasdaq futures (NQH25) are down by -0.79%. 

Stock indexes today are moderately lower, with the S&P 500 falling to a 2-week low, the Dow Jones Industrials dropping to a 1-1/2 week low, and the Nasdaq 100 sliding to a 1-week low.  Stocks are falling globally today after President Trump on Saturday announced 25% tariffs on Canada and Mexico and 10% on China and warned that European tariffs are coming.  The tariffs are set to take effect on Tuesday and could spark a trade war that threatens economic growth worldwide.  Goldman Sachs warned there's a risk of a 5% slump in US stocks because of the hit on corporate earnings, and RBC Capital Markets estimates stock declines of 5% to 10%. 

However, stocks recovered from their worst levels after Mexican President Sheinbaum said the US will delay tariffs on Mexico for one month after she spoke with President Trump today. Stocks also found some support on today's better-than-expected US economic news on Jan ISM manufacturing and Dec construction spending.

The US Jan ISM manufacturing index rose +1.7 to 50.9, stronger than expectations of 50.0 and the highest level in 2-1/3 years.

US Dec construction spending rose +0.5% m/m, stronger than expectations of +0.2% m/m.

Earnings season is in full swing as companies report Q4 earnings results.  Megacap technology companies Alphabet and Advanced Micro Devices are set to report earnings on Tuesday.  Qualcomm will release earnings on Wednesday, and Amazon.com will release its quarterly results on Thursday.  According to Bloomberg Intelligence, analysts estimate S&P 500 earnings grew by +7.5% y/y in Q4, the second-highest pre-season forecast in the past three years.

The markets are discounting the chances at 17% for a -25 bp rate cut at the next FOMC meeting on March 18-19.

Overseas stock markets today are sharply lower.  The Euro Stoxx 50 fell to a 1-week low and is down -1.25%.  China's Shanghai Composite Index did not trade today and will be closed through Tuesday for the week-long Lunar New Year holiday.  Japan's Nikkei Stock 225 dropped to a 2-week low and closed down -2.66%.

Interest Rates

March 10-year T-notes (ZNH25) today are up +10 ticks.  The 10-year T-note yield is down -1.8 bp to 4.521%.  March T-notes today are climbing on positive carryover from strength in European government bonds.  Also, today's selloff in stocks has boosted safe-haven demand for T-notes.  T-note prices are also seeing support from concern that President Trump's tariffs will stifle economic growth.

Limiting gains in T-notes are US plans to impose a 25% tariff on goods from Canada and Mexico and a 10% levy on China, which are inflationary and hawkish for Fed policy.  Also, today's US ISM manufacturing and construction spending reports were stronger than expected and hawkish for Fed policy. 

European government bond yields today are moving lower.  The 10-year German bund yield dropped to a 1-month low of 2.358% and is down -6.0 bp to 2.399%.  The 10-year UK gilt yield fell to a 7-week low of 4.445% and is down -4.4 bp to 4.495%.

The Eurozone Jan CPI rose +2.5% y/y, stronger than expectations of +2.4% y/y.  Also, the Jan core CPI rose +2.7% y/y, stronger than expectations of +2.6% y/y.

The Eurozone Jan S&P manufacturing PMI was revised upward by +0.5 to an 8-month high of 46.6 from the previously reported 46.1.

ECB Governing Council member Simkus said, "Going forward, we can allow ourselves a looser policy," and the ECB is likely to lower borrowing costs beyond its next meeting in March.

Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at the March 6 policy meeting.

US Stock Movers

Companies exposed to manufacturing or imports from China are sliding on the US tariff announcements, with Apple (AAPL) down more than -3% to lead losers in the Dow Jones Industrials and Dell Technologies (DELL) down more than -3%. 

PDD Holdings (PDD) is down more than -4% to lead losers in the Nasdaq 100 as China-exposed stocks retreated after President Trump imposed a 10% tariff on Chinese goods. 

Automobile makers are falling today after President Trump followed through on pledges to impose tariffs on Canada, Mexico, and China.  Tesla (TSLA) is down more than -4% to lead losers in the Nasdaq 100.  Also, General Motors (GM) and Ford Motor (F) are down more than -1%.  Auto parts makers are also falling, with Aptiv Plc (APTV) down more than -3% and Autoliv (ALV) down nearly -1%.

FedEx (FDX) is down more than -5% after Loop Capital Markets downgraded the stock to hold from buy.  

Moderna (MRNA) is down more than -5% to lead losers in the S&P 500 as vaccine makers tumble on expectations that vaccine critic Robert Kennedy Jr will be appointed as head of the US Department of Health and Human Services. 

Constellation Brands (STZ) is down more than -2% after Piper Sandler downgraded the stock to neutral from overweight.

Union Pacific Corp (UNP) is down more than -1% after Loop Capital Markets downgraded the stock to sell from hold with a price target of $200.

Lennox International (LII) is down more than -1% after Wells Fargo Securities downgraded the stock to underweight from equal weight. 

Triumph Group (TGI) is up more than +36% after Warburg Pincus and Berkshire Hathaway partnered to acquire the company for $26 a share or about $3 billion, including debt.

IDEXX Laboratories (IDXX) is up more than +10% to lead gainers in the S&P 500 and Nasdaq 100 after reporting Q4 RPS of $2.62, better than the consensus of $2.41 and forecast 2025 EPS of $11.74-$12.24, the midpoint above the consensus of $11.94. 

Defensive healthcare stocks are climbing today with the rout in the broader market.  As a result, Molina Healthcare (MOH) is up more than +3%.  Also, HCA Healthcare (HCA) and Universal Health Services (UHS) are up more than +2%.  In addition, Elevance Health (ELV), Centene (CNC), UnitedHealth Group (UNH), and Cigna Group (CI) are up more than +1%.

Meta Platforms (META) is up more than +2% after the Insider reported the company plans to release 6 AI-powered wearable devices this year. 

Tyson Foods (TSN) is up more than +2% after reporting Q1 adjusted EPS of $1.14, stronger than the consensus of 91 cents. 

Baker Hughes (BKR) is up more than +2% after Argus Research raised its price target on the stock to $55 from $43.

Tempur Sealy International (TPX) is up more than +6% after Wedbush upgraded the stock to outperform from neutral with a price target of $80. 

Earnings Reports (2/3/2025)

Clorox Co/The (CLX), Equity Residential (EQR), Everest Group Ltd (EG), Healthpeak Properties Inc (DOC), IDEXX Laboratories Inc (IDXX), NXP Semiconductors NV (NXPI), Palantir Technologies Inc (PLTR), Tyson Foods Inc (TSN).