Stocks slide as White House curbs chip exports, despite strong economic data
Stocks slide as White House curbs chip exports, despite strong economic data
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Senator Van Hollen travels to El Salvador for Abrego Garcia
"We are going to keep fighting." Senator Van Hollen of Maryland left for El Salvador to push for Kilmar Abrego Garcia's release.
A broad sell-off in the stock market intensified Wednesday as investors grappled with another twist in the ongoing U.S. trade war.
The Dow 30 Industrials shed 140 points, 0.4%, to trade near 40,229 at midday, while the broad S&P 500 was off 1.1%, or 58 points, near 5,338. The tech-heavy Nasdaq Composite Index slid 2% to trade near 16,498, a loss of 325 points.
Shares of behemoth chipmaker Nvidia tumbled nearly 6%. The company on Tuesday night announced that the U.S. government was limiting exports of one of its chips to China.
Read next: White House's 245% tariff figure for some Chinese products causes confusion
The 10-year U.S. Treasury note was little changed at 4.32%, down more than 20 basis points from its level last week, when a sharp sell-off rattled markets. Bond yields rise as prices fall, and vice versa. Gold tacked on another 3% to push above $3,300, a fresh record. The precious metal is now up more than 27% in the year so far.
Corporate news
Abbott Labs shares gained 5.5% after the healthcare products company reported results before the bell. Earnings slightly topped analyst expectations, but revenue missed.
Share of semiconductor companies sank: the iShares Semiconductor ETF, which tracks those stocks, was off nearly 4%.
Hertz shares surged more than 14% after hedge-fund manager Bill Ackman disclosed a stake in the rental car company.
Economic news
More: Imports to US remained at near record levels in February as tariff fears persisted
Industrial production, or manufacturing and mining activity, rose by 0.7% in February 2025, the third consecutive month of increases and topping analyst expectations of a 0.2% rise.
Retail sales rose 1.4% in March, the strongest monthly gain since January 2023, the government said, as shoppers hurried to get ahead of fresh tariff announcements.
Federal Reserve Chair Jerome Powell is due to talk about the economic outlook in the afternoon.
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Business Insider
33 minutes ago
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Morgan Stanley shares a chart that fuels the argument for new stock-market highs
Morgan Stanley is growing more optimistic about the stock market as earnings revisions breadth improves. Improving breadth is being driven by more upward revisions, the bank said. The market is likely to overlook softer hard data in favor of forward-looking views of strong earnings. The vibes in the stock market are improving, and it's boosting the case for prices to rise from here. That's according to a note from Morgan Stanley's Mike Wilson. The bank's CIO and chief stock strategist pointed to a key signal that's sending a bullish signal: a sharp rebound in earnings revisions breadth, or the proportion of analysts who have raised their estimates minus the proportion who have lowered them. The indicator is now at -10%, a noticeable improvement from -25% during the height of tariff uncertainty in April, an indication that sentiment is recovering. The bank believes the indicator will continue to trend upward. A weak dollar could further bolster this earnings gauge, as US companies that do a lot of business overseas receive a boost in sales when the dollar is weaker. Once earnings revisions breadth turns positive, investors should expect forward EPS predictions to trend higher. Earnings revision breadth can be driven by either fewer downward revisions or more upward revisions. According to Morgan Stanley, the latter is the case today, which is good news for investors. More upward revisions tend to result in stronger overall stock market performance, historically leading to a 13% increase in the S&P 500 over a 12-month span. When fewer downward revisions are the driving factor, the S&P 500 has historically returned 8% over the next 12 months. Morgan Stanley's 12-month price target for the S&P 500 is 6,500, a potential gain of 8% from current levels. Investors should pay more attention to the improvement in forward-looking earnings revision breadth rather than lagging hard data, according to Morgan Stanley. The bank sees April stock market lows as the end of a year-long trend of downward earnings revisions, and expects the rate of change on earnings revision breadth to be the primary driver of equity prices going forward. "In our experience, when revisions breadth is accelerating in a V-shaped manner from an extreme low, equity markets typically remain supported and pullbacks remain shallow and unsatisfying (like the past 6 weeks)," Wilson wrote. The recent outperformance of cyclical stocks also points to a market more focused on forward-looking earnings revisions than backward-looking hard data. These areas of the market are especially sensitive to economic growth and earnings, and they're picking up momentum and providing a tailwind to the overall stock market. While it's possible that inflation could creep up over the summer as the pull-forward effect of tariffs fades, Morgan Stanley believes the bulk of the tariff pain appears to be already priced in following the April 2 tariff announcements. Policy headwinds should ease soon, as Trump's term began by front-loading disruptive tariff policies and will transition to more pro-growth initiatives like deregulation and tax cuts. Over the last month, the market has has rallied over 20% from April lows despite a first quarter GDP contraction weakening manufacturing data. As long as earnings revisions breadth continues trending upwards, Morgan Stanley believes the stock market will continue to overlook short term weakness in hard data.
Yahoo
43 minutes ago
- Yahoo
The bull case for stocks is growing among Wall Street strategists
Wall Street strategists aren't scared of a summer slowdown for stocks despite some indications of a cooling labor market and slowing economic activity. In the past month, several strategists have defended their S&P 500 year-end targets in the range of 6,300 to 6,500, noting that the most dire outcomes from tariffs may no longer be on the table. On Monday, the benchmark index was trading around 6,010, about 2% from the record closing high. In a note titled "Don't fight it," Morgan Stanley chief investment officer Mike Wilson pointed out that a "moderate slowdown in growth" was likely already priced in earlier this year when the average S&P 500 stock fell nearly 30%. "In our experience, stocks and equity market internals move well ahead of lagging economic data and earnings results," Wilson said. To be clear, there are certainly signs of softening in economic data. Last week, ADP data showed that the private sector added 37,000 jobs in May, the lowest monthly total in more than two years. Weekly filings for unemployment claims hit their highest level since October 2024. And monthly nonfarm payroll revisions revealed 95,000 fewer jobs were added in March and April than initially thought. But the slowdown in this data has been widely expected. The equity research team at Goldman Sachs analyzed prior "event driven recessions" such as the bursting of the dot-com bubble and the 1970s interest rate shock. Goldman's team, led by chief US equity strategist David Kostin, found that so-called soft economic data, which encapsulates data points like consumer surveys, usually hits its cycle bottom before hard economic data, like monthly readings on inflation or job additions, does. That's been playing out over the past month. In May, the Conference Board's future expectations index saw its largest monthly increase since May 2009. But data on Monday showed inflation expectations in the New York Federal Reserve's monthly survey moved lower in May for the first time this year, perhaps marking that the worst tariff-driven inflation fears might be behind markets too. Read more: How to protect your savings against inflation Kostin's work shows the S&P 500 typically will follow the soft data's return higher, even if hard economic data, like monthly jobs reports, continues to move lower. "S&P 500 returns are currently more correlated with soft data than hard data," wrote Kostin, who projects the S&P 500 will hit 6,500 in the next 12 months. "If the recovery in soft data is sustained, it should support equity returns even as hard data weaken." Citi equity strategist Scott Chronert boosted his S&P 500 target to 6,300 on Monday from a prior forecast of 5,800. Chronert, like other strategists, pointed out that peak tariff uncertainty has likely passed following the pause on duties between the US and China. With that headwind easing, Chronert pointed out that economic growth forecasts are no longer falling either. After tumbling to a recent bottom of 1.35% in early May, consensus is now projecting the US economy to grow at an annualized pace of 1.4% in 2025. Chronert and other strategists agree that the key risk moving forward would be that economic growth data slows more than consensus is now expecting. But barring that outcome, Chronert likes growth stocks such as Big Tech names amid a market environment that features elevated interest rates and high stock valuations. "Our growth preference continues for now as the AI theme regains momentum," Chronert wrote. Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer. Sign in to access your portfolio
Yahoo
an hour ago
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Opinion - Despite military purges, China's next war ‘could be imminent' and spread fast
'There's no reason to sugarcoat it,' Defense Secretary Pete Hegseth said on May 31 at the Shangri-La Dialogue, Asia's premier security conference. 'The threat China poses is real. And it could be imminent.' Hegseth is right: America needs to urgently prepare for war. War is coming to East Asia, and Taiwan — to which Hegseth was referring — is a target of Chinese aggression. Chinese President Xi Jinping, after all, has staked his personal legitimacy on annexing it as China's 34th province. Yet the U.S. and its partners have to be ready for anything at any place and at any time. Why? The Chinese regime, which is mobilizing all of society for war, is now unstable. It is not clear who, if anyone, is in charge. Therefore, the regime could take us by surprise. One thing we know: Xi's most senior loyalist in uniform has disappeared from public view. Gen. He Weidong, a vice chairman of the Communist Party's Central Military Commission and the second highest-ranked uniformed officer, was last seen in public on March 11, at the end of the Communist Party's major political event of the year, the so-called Two Sessions. Many report that Xi sacked He. It's true that Xi, since being named general secretary of the party in November 2012, has purged many military officers, ostensibly for 'corruption,' and restructured the People's Liberation Army. Both moves resulted in his taking firm control of the military. Some have therefore assumed that Xi, for some reason, turned on his most important supporter in the military in March. However, it is not likely that Xi took down He. On the contrary, it is much more probable that Xi's adversaries removed that general. While Xi loyalists were being removed from public view, PLA Daily, the Chinese military's main propaganda organ, ran a series of articles praising 'collective leadership,' a direct rejection of Xi's continual calls for unity, centralization of control and complete obedience to his rule. These articles, which began appearing last July, were written by people aligned with the top-ranked uniformed officer, Central Military Commission Vice Chairman Gen. Zhang Youxia. The propaganda pieces could not have appeared if Xi were in complete control of the military. Moreover, He's disappearance was followed by the disappearance of another Xi loyalist, Gen. He Hongjun. Rumors started that both generals had died by suicide in May at the military's 301 Hospital in Beijing. Whether they are alive or not, they are out of the way, so their disappearance spells trouble for Xi. 'Gen. He Weidong was instrumental in Xi's earlier purges in the military, so his disappearance could indicate a great threat to Xi's authority,' Charles Burton of the Sinopsis think tank noted in comments to me this month. The recent disappearances follow the sackings of, among others, Gen. Li Shangfu, a defense minister, Gen. Wei Fenghe, one of Li's predecessors and perhaps as many as 70 in the Rocket Force, the branch responsible for the country's nuclear weapons. Given all the turmoil in the Chinese military, America and its partners need to focus on more than just Taiwan. In fact, the main island of Taiwan might be the least likely target. To start hostilities by attacking Taiwan's main island, China would need to launch a combined air-land-sea operation. To do that, Xi would have to give a general or admiral almost complete control over the military. The appointed flag officer would thereby become the most powerful figure in China. Even in the calmest of times, Xi would be reluctant to create such a rival for power, but this is by no means a calm moment in Beijing. China's leader seems to have lost substantial influence recently — so much so that there is speculation he could be pushed out of power in the coming months. Whoever is controlling the purges — Xi or his political enemies — the Chinese military does not look ready to launch a complex operation such as a Taiwan invasion. Either Xi does not have the power to order an invasion because the military no longer answers to him, or Xi does not trust the most senior officers, a precondition for such a complex undertaking. Despite all the turmoil in the leadership ranks, Hegseth was right to talk about an imminent war. The disruptive leadership moves in China have not prevented the Chinese military from engaging in low-level but especially provocative actions in the last couple of months against countries to China's south and east. We do not know whether China's regime has made the decision to go to war, but its series of dangerous actions clearly reveals it has made the decision to risk war. And war, if it begins somewhere, will likely spread. For one thing, the Chinese leadership will not be able to deal with incidents responsibly. In senior Communist Party circles these days, only the most hostile answers are considered acceptable. Another factor is the existence of alliance and semi-alliance networks in the region. Four of China's targets, South Korea, Japan, the Philippines, and Australia, are U.S. treaty allies, and one, Taiwan, is protected by the United States. China, for its part, could bring in its friends. Moreover, the U.S. should be prepared for conflict with the world's most destructive weapons. 'China has spent the last five decades investing in building nuclear proxy forces in Pakistan, North Korea and Iran to create nuclear crises to divert Washington's attention away from the Taiwan Strait,' Richard Fisher of the International Assessment and Strategy Center told me this month. 'China's investment in Russia's war in Ukraine is in the same vein.' As Blaine Holt, a retired U.S. Air Force brigadier general, said after Hegseth's comments, 'Millions of lives now hang in the balance.' Gordon G. Chang is the author of 'Plan Red: China's Project to Destroy America' and 'The Coming Collapse of China.' Copyright 2025 Nexstar Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
