Breakfast News: Tariff Tit For Tat
February 4, 2025
| S&P 500 5,995 (-0.76%) |
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| Nasdaq 19,392 (-1.2%) |
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| Dow 44,422 (-0.28%) |
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| Bitcoin $101,235 (+4.18%) |
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Source: Image created by JesterAI.
1. China Hits Back With Tariffs
China has retaliated to the 10% tariff imposed by President Trump by placing additional tariffs of up to 15% on certain U.S. imports, including coal and natural gas. Trump said he's set to speak to President Xi "probably over the next 24 hours," though the tariffs are due to take effect today.
- Plans to partner on border security sees tariff delay: The S&P 500 whipsawed in both directions, trading almost 2% lower early in the day due to the pending implementation of tariffs on Mexico and Canada. After speaking with both parties, President Trump agreed to delay the actions by one month.
- Tech reliance on Chinese manufacturing: Trump has indicated he's considering tariffs on chips and related products, which would provide headaches for Big Tech bosses and chipmakers. It would force companies either to raise prices on their goods or absorb the increase, reducing profit margins.
2. Car Industry Under Pressure
Tariff imposition threatens to be disruptive to the auto industry, with the traditional 'Big Three' of Ford (F 1.53%), General Motors (GM 0.85%), and Stellantis (STLA 2.12%) exposed due to the 1994 North American Free Trade Agreement.
- "A billion dollar headwind seems like a manageable scenario right now": BNP Paribas analyst James Picariello flags that GM produces Chevrolets in Mexico and Canada, with the cost of moving production to the U.S. adding $1 billion just in labor costs. Yet the move would likely cause only a 7% drop in operating earnings, in comparison to a possible 50% fall coming from a 25% tariff.
- "Over the years, we've tried to localize our supply chain in every market": Tesla (TSLA 3.85%) is one of the few potential winners, with the CFO last week saying they are still reliant on parts from around the world, but have tried to localize efforts wherever possible. Elon Musk's close ties with the President could shield Tesla from some of the fallout from the trade wars.
3. Palantir Rockets Higher on Results
Palantir (PLTR 6.56%) soared as much as 24% after the closing bell as it beat forecasts for quarterly earnings, as well as providing upbeat guidance for the year ahead.
- "Our business results continue to astound": Strong growth was seen in the commercial division, with a record-setting $803 million of total contract value signed in the quarter, a 134% jump from the same time last year. CEO Alex Karp talked up the outlook, expecting revenue above analyst forecasts.
- Valued at over 170 times forward earnings: Some investors might be concerned regarding the valuation, after the stock has vaulted 392% in the last year. Interestingly, Palantir had the most insider sales of any S&P 500 company in the past three months!
4. Next Up: Digital Pioneers Report
Dividend Investor recommendation PayPal (PYPL 1.44%) and Hidden Gems rec Spotify (SPOT -0.08%) report earnings before the market opens today, with both companies being pioneers of the modern digital economy.
- Renegotiating merchant contracts to increase margins: One of Stock Advisor's highest-conviction ideas to consider in January to beat the market over 5 years, investors will be watching to see how much the push of contract profitability over payment volume has reduced PayPal's growth rate.
- Forecasting 25 million new users: After reporting record profitability last quarter, Spotify shareholders will be looking to see how high the retention rate is for new subscribers. Management should also be able to shed more light on the new publishing license agreement with Universal Music Group.
5. Foolish Fun
Alphabet (GOOG 3.02%), Advanced Micro Devices (AMD 0.46%), and Chipotle (CMG -0.14%) all release earnings later today, but the similarities don't end there: Each are recommendations in both Stock Advisor (our latest SA rec drops this Thursday!) and Rule Breakers.
Which of the three – and you can only pick one – would you consider selling if the CEO were to step down, and why? Become a member to hear what your fellow Fools are saying.
