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Breakfast News: Further Tariffs Floated

February 19, 2025

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Photorealistic illustration of three rubber ducks with 25% tariffs written on them floating in water in front of White House

Source: Image created by JesterAI.

1. Auto, Drug, Chip Import Bills Set to Rise

President Trump yesterday announced plans for tariffs "in the neighborhood of 25%" on imported automobiles. He said he'll probably provide final details on April 2 in an escalating battle against, for example, the 10% duty on vehicle imports into the EU.

  • "Very substantially higher over the course of a year": The President also spoke of levies on pharmaceuticals and semiconductors, starting at the same level and then escalating. Asian chip makers, including Taiwan Semiconductor (TSM 0.84%), could be among those hit.
  • What to watch: The administration's economic team is working on Trump's plan for reciprocal tariffs to match countries globally, product by product.

2. S&P 500 Reaches New Levels

The S&P 500 hit an all-time closing high yesterday at 6,129.58 points, as we await the minutes of the Federal Reserve's January rate-setting meeting today. All three main indexes edged up, though Meta Platforms (META 1.95%) broke its 20-session winning streak with a 2.8% dip.

  • Up 83% year to date: Super Micro Computer (SMCI 1.89%) led the S&P 500 with a 16% rise, making it the best-performing stock on the index so far in 2025. Super Micro has climbed in recent days as investors bet the upcoming annual report will not show any big issues.
  • "The stock market's resiliency has been impressive": Craig Johnson of investment bank Piper Sandler (PIPR 2.83%) reflected on a background of inflation and tariff concerns, and expects "choppy" markets in the face of declining oil prices and Treasury yields, plus a weakening dollar.

3. Arista Sees Strong Demand

Hidden Gems recommendation Arista Networks (ANET 2.24%) fell 5% in after-hours trading yesterday, even though the cloud networking provider beat analyst estimates in the fourth quarter. Investors appear concerned over back-end networking delays involving prominent customer Microsoft (MSFT 0.58%).

  • AI is the driver: Arista expects 45% of its long-term revenue to come from the big AI and cloud computing companies. That could expose it to any slowdown in AI spend, even from a single customer.
  • "From the looks of things, the hyperscaler business remains in 'spend on' mode, with partners like Arista taking advantage of the largesse": Fool analyst Seth Jayson doesn't see any slowdown just yet, as key Arista customers Microsoft and Meta have big AI investing plans. All four recs of Arista in the Hidden Gems service over the past seven years are comfortably beating the S&P 500.

4. Next Up: Q4 Earnings From 3 Rule Breakers

Online marketplace Etsy (ETSY 1.72%) will post fourth-quarter results, covering the vital holiday season, before today's opening bell. Investors have seen its stock fall 24% in the past 12 months: The company did beat third-quarter revenue estimates, but missed on earnings per share. Analysts expect earnings ahead of last year's Q4.

  • 2020 recommendation beating the S&P 500 by 38%: Restaurant chain Wingstop (WING 0.85%) will also report this morning, after seeing revenue surge by 39% in its previous quarter. Watch out for expansion news, with the company having targeted 320-330 new units in 2024.
  • Stock down 32% since 2021 IPO: Earnings from Toast (TOST 3.00%) come after market close, after the point-of-sale provider for the restaurant industry posted revenue and earnings beats in Q3. Forecasts are optimistic, but there are signs that spending on eating out is slowing.

5. Foolish Fun

Cloud-based web developer services provider Wix.com (WIX -0.69%) reports this morning. Down 27% since being recommended in Stock Advisor in 2020, do you think this or online payroll/HR software platform Paycom (PAYC 0.66%) – down by the same amount since its 2023 recommendation in the same service – has the best chance of recovering and beating the market over the next 5 years? Become a member to hear what your fellow Fools are saying!