Morning in New York: Trump defied the "bulls" once again

Daily review and forecast of events on the U.S. stock market from Mikhail Denislamov, Deputy Director of Freedom Capital Markets Research.

Foreign trade policy once again moved to the center of attention. The White House has set the basic import tariff rate at 10% for a number of countries, including those without trade agreements with the US. The amount of the duty depends on the trade balance with the US. If there is a surplus, it will correspond to the base level, if there is a moderate deficit it will be 15%, and if there is a significant deficit and no signed mutual trade agreement, it may be higher. These terms are due to come into force in seven days, which means that there is still room for further negotiations.

At the same time, the import duty for Canadian products, supplies of which are not regulated by the USMCA treaty, was raised from 25% to 35%. In addition, to prevent circumvention of its sanctions, the White House imposed a 40% tariff on all goods in transit. This move removes hopes of a softening of the US position and makes corporate earnings forecasting more difficult. We assume that all this news will lead to a market decline at the opening of the main trades on August 1.

The main macroeconomic event of the day will be the publication of the July report of the Ministry of Labor. The consensus on jobs outside of agriculture suggests an increase in their number by 109 thousand after 147 thousand a month earlier. Freedom Broker analysts believe that there is a 30% probability that the indicator will fall below 70 thousand, and this will be regarded by the market as an alarm signal. The average market benchmark for unemployment: 4.2% against June's 4.12%. The realization of these expectations contributes to the reduction of the labor force, including due to the deportation of illegal migrants. If the July report is weaker than expected, it will be the basis for renewed discussion on the Fed rate cut in September.

The publication of the index of business activity in industry (PMI) from ISM and evaluation of consumer sentiment from the University of Michigan (first of all, the dynamics of inflation expectations) will help traders to supplement their understanding of the situation in the economy.

Prior to the opening of the main session, ExxonMobil (XOM), Chevron (CVX), Regeneron (REGN),Colgate-Palmolive (CL), W.W. Grainger (GWW), Kimberly-Clark (KMB) and CNH Industrial (CNH).

Futures on American indices demonstrate negative dynamics on the background of news about tariffs. There is a negative balance of risks with increased volatility. We focus on S&P 500 fluctuations in the range of 6250-6400 points (from -1.4% to +1% of the previous session's closing level).

- Apple's (AAPL) fiscal third quarter revenue rose 10% YoY to $94.04 billion and earnings per share (EPS) were $1.57 with FactSet consensus of $89.41 billion and $1.43, respectively. This performance was attributed to a 13% increase in iPhone sales and service segment revenues. Expenses in the current quarter due to import duties, the management of the corporation estimates about $1.1 billion, but its revenue guidance was higher than the consensus of Wall Street. Against this background, AAPL quotations on the postmarket rose by more than 2%.

- Amazon's (AMZN) second-quarter revenue rose 13% YoY to $167.7 billion, with EPS of $1.68, well ahead of consensus. Nevertheless, the company's shares lost more than 7% after the close of major trading the day before amid a too conservative, according to investors, guidance on operating profit for the third quarter. AWS' cloud division's revenue grew only 18% YoY, compared to 39% for Microsoft Azure and 32% for Google Cloud. This casts doubt on the previously announced rate of return from the company's massive AI investments.

- Shares of Reddit (RDDT) soared more than 16% in the postmarket after posting a strong second-quarter report. The company's revenue rose 78% YoY to $500 million (FactSet consensus: $426 million) and EPS was $0.45 (FactSet consensus: $0.19). The financial performance was driven by a 21% increase in the number of daily active users to 110.4 million. The company's revenue guidance for the third quarter was significantly above Wall Street's expectations, which boosted investor confidence in the platform's monetization prospects.

- Shares of cryptocurrency exchange Coinbase (COIN) fell more than 8% after the publication of its second quarter report. Adjusted EPS reached $1.96, beating average expectations, but total revenue amounted to $1.5 billion with consensus of $1.6 billion. The main reason for the negative reaction of investors was the deterioration of operational performance, in particular trading volumes.

Trades on July 31 on American stock exchanges were held in conditions of increased volatility and ended near the daily minimums. S&P 500 fell by 0.37%, Nasdaq 100 lost 0.55%, Dow Jones fell by 0.74%, Russell 2000 fell by 0.93%.

Strong reports from Microsoft (MSFT) and Meta (META), members of the "Magnificent Seven," kept the broad market down. Three of the 11 sectors comprising the S&P 500 closed in positive territory. The telecom sector (XLC: +0.9%) emerged as a growth leader, supported by the aforementioned Meta quarterly release. The healthcare industry (XLV: -2.8%) was the outsider. It was pressurized by the weak report of Cigna Group (CI) and the White House's demand to major pharmaceutical companies to change their pricing policy.

The key macroeconomic event of the day was the release of Consumer Expenditure Index (PCE) data for June. The baseline indicator grew by 0.3% mom in line with the consensus, but in annual terms increased by the highest since February 2.8%, exceeding the average forecasts. Personal expenditures and incomes increased by 0.3% mom (the former fell short of market expectations by 0.1%, the latter matched them). The statistics confirmed the concerns about the stability of inflation, which the previous day was expressed by the head of the Fed Jerome Powell, which reduces the chances of the regulator's transition to easing the MPC in the foreseeable future.

The trade agenda remained in focus ahead of new import tariffs coming into effect. During the day it became known that the U.S. granted Mexico a 90-day postponement to continue negotiations.

- eBay (EBAY: +18.3%) reported second-quarter earnings and revenue above consensus, and its total merchandise turnover (GMV) also exceeded expectations. In addition, the issuer's management gave a strong outlook for the third quarter.

- Carvana (CVNA: +17%) set a sales record in April-June and beat consensus for revenue and EBITDA. The online used car seller forecasts continued sales growth in the current quarter.

- Roblox (RBLX: +10.3%) exceeded average expectations in the reporting period in terms of bookings, number of daily active users (+41% YoY, to 111.8 million) and average revenue per user.

- MasterCard (MA: +1.3%) exceeded average market guidance on revenue and earnings. Management noted strong growth in total transaction volume, indicating continued consumer activity.

- International Paper (IP: -12.9%)reported solid demand and supply growth, but its quarterly earnings came in below consensus. The company noted cost increases and a planned suspension of production, which negatively impacted margins.

This article was AI-translated and verified by a human editor