Breakfast News: E.U. Tariff Deal Sealed

Breakfast News: E.U. Tariff Deal Sealed

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1. Futures Up as U.S. and E.U. Reach 15% Tariff Agreement

The U.S. and European Union announced an agreement Sunday, which President Trump called "the biggest of them all." It means a baseline tariff rate of 15% on imports from the E.U., with no tax in the other direction. Futures are edging up in response, after a perfect week for the S&P 500 – which hit five record closes in five days. The index gained 1.46% on the week, with the Nasdaq up 1.02%.

• "15% is not to be underestimated, but it is the best we could get": European Commission President Ursula von der Leyen said the deal – in line with the 15% agreed with Japan last week – will bring stability.
• "Beijing and Washington are expected to extend their tariff truce": The South China Morning Post reported a three-month trade talk extension with China is on the cards.

2. Abel's Tough Job: Can Berkshire Grow?

Berkshire Hathaway (BRK.B -0.55%) stock has fallen 10% since Warren Buffett announced his pending retirement on May 3, as commentators claim it's losing its "Buffett Premium." Fool analyst Buck Hartzell suggests successor Greg Abel is "inheriting the toughest job in corporate America," but thinks he's "a very capable leader for Berkshire."

• Maintain a long-term investing perspective: Fools should see dips as potential buying opportunities if the underlying picture is fine. Berkshire – recommended by various TMF services since 2007 – is now valued in line with the S&P 500. And that's with over $330 billion (a third of its market cap) in cash.
• Moneyball Superscore of 67: Berkshire will post a Q2 report on Saturday. It missed Wall Street expectations last time, but that was more due to market moves, which could continue to cloud the outlook.

3. Fracture at the Fed?

Signs of dissent among Federal Reserve Board governors are growing, ahead of the rate-setting meeting Tuesday and Wednesday. The CME FedWatch tool shows a 96.9% likelihood of the rate remaining unchanged.

• First major split in 30 years?: Barron's notes we haven't seen two governors break ranks at a Federal Open Market Committee meeting since 1993, but Christopher Waller and Michelle Bowman have said they'd support a cut.
• Is there a valid danger to waiting?: While Fed Chair Jerome Powell still urges patience, the dissenters argue tariff inflation should pass quickly, and point to declining spending and labor demand bringing their own risks.

4. The Week in Economics

Most of the week's main economic news will come too late for the Fed's meeting, aside from June's job openings figure due Tuesday morning. Forecasts suggest a dip to 7.4 million from 7.8 million in May.

• Inflation says keep interest rates steady...: Thursday brings June's Personal Consumption Expenditures (PCE) data, with a year-over-year rise to 2.5% expected, from 2.3%. The Fed's favored inflation metric, core PCE, is expected to remain steady at 2.7% year over year.
• ...But employment could use a cut: Forecasts put Friday's July unemployment rate at 4.2%, up from 4.1%, with wage inflation set to reach 3.8%, from 3.7%.

5. Key Earnings Ahead: V, SBUX, and the Rest of the Mag 7

Recommended by Hidden Gems in 2023, Visa (V -0.54%) will report after close Tuesday. Visa beat top- and bottom-line Q2 estimates, with revenue and transactions up 9% year over year – as "consumer spending remained resilient," in the words of CEO Ryan McInerney.

• No 7 in July Stock Advisor rankings: Q3 earnings are also due from Starbucks (SBUX -0.96%) Tuesday afternoon. Watch for further progress in the turnaround plan under Brian Niccol.
• Magnificent 7 continued: Wednesday brings quarterly updates from Microsoft (MSFT -0.61%) and Meta Platforms (META 0.15%), with Amazon (AMZN 0.64%) and Apple (AAPL -0.06%) reporting Thursday.

6. Your Take

On Friday's Motley Fool Money podcast, the hosts picked their fantasy stock drafts. The rules are simple: 4 S&P 500 stocks, cumulative scores, aim to beat the market by as much as possible over the next 12 months.

Over to you, Fools! Which four S&P companies are you picking, and – importantly – why? Finally, who would you have as the CEO as 'coach' to manage this cohort of four stocks? Discuss with friends and family, or become a member to hear what your fellow Fools are saying.