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It is another day, and like other days, the market has tariff, trade, and economic concerns on its mind. NVIDIA (NVDA) is the chief signpost in that regard. It is down nearly 7% in pre-market trading after announcing that it will take a $5.5 billion charge related to H20 export restrictions for China.
NVIDIA's weakness is unduly influencing the behavior of the equity futures market, which, somewhat surprisingly, hasn't reacted better to a better-than-expected retail sales report for March and a Bloomberg report that suggests China is open for trade talks if certain conditions are met, including U.S. cabinet members showing China more respect.
Currently, the S&P 500 futures are down 49 points and are trading 0.9% below fair value, the Nasdaq 100 futures are down 302 points and are trading 1.7% below fair value, and the Dow Jones Industrial Average futures are down 83 points and are trading 0.2% below fair value.
The NVIDIA disclosure has been coupled with a cautious-sounding FY25 revenue outlook from ASML (ASML) that was attributed to some customer uncertainty. Additionally, United Airlines (UAL) put up some good results for Q1 but then gave two full-year outlooks due to what it calls an "impossible to predict" economy. The first outlook is for $11.50-13.50 per adjusted share; however, a recession outlook pegs the forecast at $7.00-9.00 per adjusted share.
That is a super wide range from worst-case outlook to best-case outlook, which underscores the heightened sense of earnings uncertainty that is curtailing investors' willingness to buy stocks with conviction.
The uncertainty over trade negotiations is another factor. While it sounds like a good thing that China could be open to trade talks, there is an offsetting report in The Wall Street Journal that indicates Treasury Secretary Bessent is planning to use the tariff negotiations to pressure U.S. partners to limit their dealings with China.
In other words, China won't like that approach, which will complicate any trade discussions with the U.S.
The March Retail Sales Report has a bit of a complicated twist to it. The data were pretty stellar. Total retail sales increased 1.4% month-over-month in March (Briefing.com consensus 1.3%) following an unrevised 0.2% increase in February. Excluding autos, retail sales rose 0.5% month-over-month (Briefing.com consensus 0.2%) following an upwardly revised 0.7% increase (from 0.3%) in February.
The complicated element -- and key takeaway from the report -- is that the strength has a lot to do ostensibly with getting ahead of the tariff actions, which is to say the strength may not be sustained. If there is a counterargument to that point, it is that sales at food services and drinking places were up a robust 1.8% in March after declining 0.8% in February.
Strikingly, the equity futures market weakened further after the report, the 10-yr note yield moved up slightly to 4.35 from 4.33%, and the U.S. Dollar Index (-0.6% to 99.62), already weak, didn't show much change.
There are a lot of economic views to unpack right now, yet the prevailing view is that the economic outlook is looking more half empty now versus half full when the year began.
It is a perfect time, then, to hear from Fed Chair Powell, who will be giving a speech at 1:30 p.m. ET on the economic outlook. We wish him well trying to sort things out.
