Investors Look for Tariff Impact in Tech Earnings
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30 minutes ago
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S&P 500's Humming Profit Engine Can Keep Powering Stocks Rally
(Bloomberg) -- A solid earnings season shows Corporate America's profit engine is humming along, potentially easing worries that the record-setting rally in US stocks is starting to overheat. Trump Awards $1.26 Billion Contract to Build Biggest Immigrant Detention Center in US The High Costs of Trump's 'Big Beautiful' New Car Loan Deduction Can This Bridge Ease the Troubled US-Canadian Relationship? Salt Lake City Turns Winter Olympic Bid Into Statewide Bond Boom With about a third of S&P 500 Index members reporting by Thursday's close, this earnings cycle is turning out to be much more robust than expected. Around 83% of companies have exceeded analysts' profit estimates, according to data compiled by Bloomberg Intelligence. That's on track for the highest share of beats since the second quarter of 2021. The S&P 500 is up 28% since hitting a low on April 8, setting a series of record highs over the past few weeks. Even a version of the US benchmark that weights all members equally, rather than by market value, has notched a record. Those advances have come as fears about the impact of tariffs on the economy ebbed and investors slowly returned to stocks, abandoning an extreme aversion to risk. For the gains to persist, corporate earnings will need to keep impressing investors, and Mark Hackett at Nationwide says the earnings season is pointing in that direction. 'As some of the pessimistic scenarios are fading, management commentary is less conservative and estimates for 2025 and 2026 are beginning to increase, which provides that tailwind,' said the firm's chief market strategist. Several major companies have been upbeat. Alphabet Inc. saw demand for artificial intelligence products boosting quarterly sales. Homebuilders D.R. Horton Inc. and PulteGroup Inc. reported better-than-expected earnings, sparking a relief rally in the stocks. Netflix Inc. raised its forecast for full-year sales and profit margins. And Levi Strauss & Co. said it expected sales growth to outweigh the effect of tariffs. Most companies are topping estimates for a quarter where many analysts lowered their expectations, anticipating a weak reporting period amid heightened uncertainty about trade policy and economic growth. Before the cycle started, S&P 500 companies were expected to post a profit increase of 2.8% year-over-year in the second quarter, according to data compiled by BI. So far, overall earnings growth is 4.5%. Meanwhile, economic data is also showing no immediate cause for alarm. Applications for US unemployment benefits fell for a sixth straight week, Labor Department data showed on Thursday, suggesting the job market is staying resilient. 'While the labor market is not firing on all cylinders, it's not showing signs of distress either,' said Bret Kenwell, US investment analyst at EToro. That should help investors breathe easy, Kenwell said. Still, the runway isn't completely clear for US stocks. Equity valuations are high, with the S&P 500 trading at around 22.5 times projected earnings, compared to a 10-year average of 18.6. That's sparked concerns that there may be little room for error. In fact, companies missing both earnings and sales estimates are being punished the hardest since the third quarter of 2022. Moreover, signs of froth are emerging, with a manic rally in so-called meme stocks offering a reminder of 2021's extreme investor euphoria. 'Overly bullish sentiment is still the market's biggest risk factor,' said John Kolovos, chief technical market strategist at Macro Risk Advisors. Some Wall Street trading desks are telling clients to hedge against potential losses in case developments from the Federal Reserve or on the tariff front sour investor sentiment. Pricey valuations are the reason why Dec Mullarkey, managing director at SLC Management, is keeping a close eye on profit beats, but an even closer one on guidance. 'Stronger-than-expected results are a support for equities, but this is an exacting market,' Mullarkey said. 'Companies need to have a decent story and a strong outlook.' Burning Man Is Burning Through Cash Elon Musk's Empire Is Creaking Under the Strain of Elon Musk It's Not Just Tokyo and Kyoto: Tourists Descend on Rural Japan Confessions of a Laptop Farmer: How an American Helped North Korea's Wild Remote Worker Scheme A Rebel Army Is Building a Rare-Earth Empire on China's Border ©2025 Bloomberg L.P. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
an hour ago
- Yahoo
China Budget Gap Hits Record in Spending Blitz to Offset Tariffs
(Bloomberg) -- China's budget deficit climbed to a fresh record in the first half, highlighting intensified government efforts to shore up domestic demand as Donald Trump's tariffs reduce exports to the US. Trump Awards $1.26 Billion Contract to Build Biggest Immigrant Detention Center in US The High Costs of Trump's 'Big Beautiful' New Car Loan Deduction Can This Bridge Ease the Troubled US-Canadian Relationship? Salt Lake City Turns Winter Olympic Bid Into Statewide Bond Boom The broad fiscal gap reached 5.25 trillion yuan ($733 billion) in January-June, according to Bloomberg calculations based on data released by the Finance Ministry during a briefing on Friday. The shortfall widened 45% from a year earlier. Chinese authorities have front-loaded fiscal stimulus to boost infrastructure investment and household consumption, aiming to support growth in the face of a sluggish property market and mounting deflationary pressures. Despite a recent tariff truce, exports to the US have contracted as average American levies on Chinese goods remain about 30 percentage points higher than last year. Government spending and resilient shipments to markets other than the US underpinned China's growth in the first half, with gross domestic product expanding 5.3% — well above the official annual target of around 5%. Top leaders are set to convene toward the end of this month to discuss economic policy for the rest of the year, just as Chinese and US negotiators prepare to meet next week for another round of trade talks. Their outcome will be key to deciding whether more stimulus is needed. Total expenditure increased 9% to 18.8 trillion yuan in the first six months from a year ago, the Finance Ministry's numbers showed. That figure combines spending under the general budget, which mainly includes everyday outlays, with expenditure in the government fund budget, which is weighted more toward capital investment projects. Total income in China's two main fiscal books fell 0.6% on year to 13.5 trillion yuan in the first six months. Tax revenue declined 1.2%. Government income from selling land continued to contract, dropping 6.5% in the first half of the year in reflection of persistent property market woes. --With assistance from Yujing Liu and James Mayger. Burning Man Is Burning Through Cash Elon Musk's Empire Is Creaking Under the Strain of Elon Musk It's Not Just Tokyo and Kyoto: Tourists Descend on Rural Japan Confessions of a Laptop Farmer: How an American Helped North Korea's Wild Remote Worker Scheme A Rebel Army Is Building a Rare-Earth Empire on China's Border ©2025 Bloomberg L.P.
Yahoo
2 hours ago
- Yahoo
US Trade Talk Delays Jolt South Korean Leader's Honeymoon Phase
(Bloomberg) -- Less than two months into his presidency, South Korean leader Lee Jae Myung is facing an early diplomatic and economic test, as his top negotiators struggle to make headway in trade talks with the US before higher levies kick in next week. Trump Awards $1.26 Billion Contract to Build Biggest Immigrant Detention Center in US The High Costs of Trump's 'Big Beautiful' New Car Loan Deduction Can This Bridge Ease the Troubled US-Canadian Relationship? Salt Lake City Turns Winter Olympic Bid Into Statewide Bond Boom South Korean negotiators faced a series of canceled meetings this week, a setback in their push to finalize a trade deal ahead of the looming Aug. 1 deadline, when across-the-board tariffs on US imports of Korean goods are set to rise to 25% from 10%. While some meetings may be rescheduled in the coming days, the delays stand in stark contrast to the progress made by countries like Japan, the Philippines, Indonesia, and Vietnam, all of which have secured agreements that helped them avoid the worst-case tariff scenarios. Lee is enjoying strong support on hopes for an economic recovery after months of political turmoil sparked by the impeachment of former President Yoon Suk Yeol. But he needs a breakthrough in trade negotiations to shield Korea's export-reliant economy. In 2024, overseas shipments were equivalent to more than 40% of South Korea's GDP, making the stakes especially high. The back-to-back, last-minute cancellations come at a precarious moment. South Korea's National Security Adviser Wi Sung-lac said the talks are at their 'final stages' and a 'critical juncture,' but he was unable to meet with his US counterpart, Secretary of State Marco Rubio, during a four-day visit to Washington that concluded Thursday. Wi said he made a planned visit to the White House, but Rubio was called away at the last minute after receiving an 'urgent call' from Trump. The two officials spoke by phone instead. Treasury Secretary Scott Bessent canceled a scheduled meeting with South Korean Finance Minister Koo Yun-cheol, just hours before Koo was due to board a plane to the US. Bessent cited a scheduling conflict. Adding urgency is the freshly signed US–Japan trade agreement this week, which Trump has hailed as a 'great deal for everybody.' Under the agreement, the US will impose 15% tariffs on most imports of goods from Japan, including automobiles, in exchange for Tokyo creating a $550 billion fund to make investments in the US. 'You know the Koreans also like the Europeans, they very very much want to make a deal,' Trump's Commerce Secretary, Howard Lutnick, said on CNBC on Thursday. 'I mean you could hear the expletives out of Korea when they read the Japanese deal because the Koreans and the Japanese they stare at each other.' What Bloomberg Economics Says... 'With US President Donald Trump striking a 'massive Deal with Japan,' the task for South Korea now is to ensure its automakers don't get a raw deal that puts them at a competitive disadvantage to Japanese rivals.' — Hyosung Kwon, economist Click here to see full report Despite the setback, South Korean officials are working to keep the momentum alive, focusing on meetings with Lutnick and US Trade Representative Jamieson Greer. After a meeting on Thursday, Lutnick and South Korean Industry Minister Kim Jung-kwan reaffirmed their commitment to pursue a mutually beneficial agreement ahead of the Aug. 1 deadline, Kim's office said. The more talks drag on, the more people question the capability of the negotiators. But Rintaro Nishimura, a Tokyo-based associate with strategic advisory firm the Asia Group, said the US trading partners are dealing with a 'very challenging negotiation with three different people who have three different kinds of interests at play.' 'I don't think the US side had one singular idea in terms of what they wanted,' he said, referring to the Japan deal. 'And then Trump would just come in at some point and then say something else.' Burning Man Is Burning Through Cash Elon Musk's Empire Is Creaking Under the Strain of Elon Musk It's Not Just Tokyo and Kyoto: Tourists Descend on Rural Japan Confessions of a Laptop Farmer: How an American Helped North Korea's Wild Remote Worker Scheme A Rebel Army Is Building a Rare-Earth Empire on China's Border ©2025 Bloomberg L.P. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
