Markets Rebound Amid Earnings, But Markets Brace for Uncertainty

Fed policy and the possibility of tariffs raise concern

• Markets have rebounded amid earnings reports, with tech and energy stocks turning in mixed nperformances.
• The threat of tariffs on Canada and Mexico is raising concern about economic growth, currency volatility and trade policies.
• Investors are monitoring gold prices, AI stocks and Fed announcements for economic insight and clues on market direction.

Markets have shown resilience this week, rebounding from earlier losses following a significant round of earnings reports. Yesterday, major indices closed higher, with the S&P 500 gaining 0.52% and the Nasdaq Composite rising 0.25%. The Dow Jones Industrial Average increased by nearly 0.4%, while the Russell 2000 led with a 1% gain.

Attention now turns to the personal consumption expenditures (PCE) report to see if it influences market direction. Meanwhile, companies continued to announce quarterly results, driving investor sentiment.

Earnings reports

After yesterday’s close, Apple (AAPL) announced its results, meeting revenue expectations and surpassing profit forecasts. However, iPhone sales declined by 1%, with sales in China dropping 11%. Despite those declines, Apple’s positive outlook pushed shares up 4% in premarket trading.

Intel (INTC), which has struggled recently, reported earnings that exceeded both top- and bottom-line expectations, though it issued a weak outlook. Nonetheless, its shares rose 1% in premarket trading.

Visa (V) also reported strong earnings and revenue, driving its stock up nearly 2% overnight.

Energy sector earnings were also in focus. Exxon Mobil (XOM) beat earnings estimates but remained relatively unchanged in premarket trading. Chevron (CVX) reported stronger-than-expected revenue but missed profit expectations, leading to a 2% decline in its stock before the market opened.

Beyond earnings, Walgreens Boots Alliance (WBA) and UPS (UPS) made headlines. Walgreens, facing a 50% decline in stock value over the past year, announced the suspension of its dividend after 92 years to stabilize its balance sheet, causing shares to drop 10% in premarket trading. UPS, meanwhile, revealed plans to cut business with Amazon by 50%, citing unprofitability despite Amazon contributing 11.8% of its annual revenue. This strategic shift led to a modest 0.5% gain in premarket trading.

On the economic front

Growth in the U.S. gross domestic product (GDP) for 2024 was reported at 2.5%, down from 3.2% in 2023. The fourth quarter saw a slowdown to 2.3%, following 3.1% growth in Q3. Inflation and Federal Reserve policy have dominated economic discussions, but tariffs and the strength of currency appear likely become the key concerns.

President Trump has threatened to impose 25% tariffs on Canada and Mexico starting this weekend. A similar move in 2018-2019 resulted in a 0.6% GDP decline before the tariffs were lifted under the USMCA agreement. While many economists argue tariffs are economically harmful, the Trump Administration believes deregulation could offset the negative affects . Currency markets may experience volatility as nations adjust, with the European Central Bank recently cutting interest rates by 0.25% in a possible response to trade tensions.

Looking ahead, gold prices have surged amid tariff concerns, while AI-related stocks, particularly Nvidia (NVDA), remain volatile. Next week will bring key earnings reports, a jobs report and insight from Federal Reserve officials. If tariffs take effect, their economic implications will likely dominate market discussions.

JJ Kinahan is CEO of IG North America—which includes tastylive, tastytrade and IG's FX Business. Kinahan traded for 21 years at the Chicago Board Options Exchange. He serves on the CBOE Advisory Board and the SIFMA Options Committee. @thejjkinahan

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