Morning in New York: Trump escalates trade conflict

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

The foreign trade agenda remains at the forefront of investors' minds. On the eve of the US President Donald Trump announced that from August 1, all goods from Brazil will be subject to a duty of 50%. This was the American leader's reaction to the unfair, in his view, prosecution of the former president of the Latin American state Jair Bolsonaro.  

The same tariff is imposed from this date on copper imports under the influence of a "rigorous assessment of national security threats". This metal is critical for the production of semiconductors and equipment for data centers; it is widely used in defense and many other industries. Amid the White House statements, copper prices on the Commodities Exchange Center (CEC) climbed another 2.6% after soaring 13% a day earlier. The market is beginning to put into quotations the risk of shortage of this raw material. It is predicted that by August a ton of copper in the U.S. will rise in price from the current $10 thousand to about $15 thousand.  

Brazil announced mirror measures against the U.S. under the new law on the "principle of reciprocity", which threatens to escalate the tariff war and change supply chains in the mining and agricultural sectors. The implementation of the announced plans could add to inflationary pressures. So far, the markets are generally ignoring this news, expecting the rhetoric to soften closer to the deadline. The media continue to focus on the prospects of deals with the US' larger partners - the EU and India.  

This Thursday, the weekly data on the number of applications for unemployment benefits will be published (consensus: 238 thousand, previous value: 233 thousand). We forecast stable dynamics of the indicator, which will confirm the stability of the labor market;

There will be an auction of $22 billion in 30-year Treasury bonds, which could affect the dynamics of debt securities yields. 

Delta Air Lines (DAL) and Conagra Brands (CAG) will report for the second quarter before trading begins.  

US index futures are showing moderately negative dynamics. The momentum from NVIDIA capitalization reaching the $4 trillion mark, which was supported by the positive report of Taiwan Semiconductor released today, remains in the quotations. However, increased uncertainty related to the White House foreign trade policy, as well as expectations of macro statistics publication may lead to a spike in volatility. At the same time, we assess the balance of risks as neutral. We focus on S&P 500 fluctuations in the range of 6230-6300 points (from -0.5% to +0.6% to the previous session's closing level);

- Taiwan Semiconductor (TSMC) second-quarter revenue exceeded consensus, rising 39% YoY amid robust global demand for chips for AI products. The strong results reflect the continued expansion of the advanced semiconductor market focused on AI infrastructure. 

- According to the Financial Times, Amazon (AMZN) is considering a multi-billion dollar investment in AI company Anthropic to deepen its strategic partnership. 

- WK Kellogg (KLG) quotes are up more than 55% on the premarket after reports of a pending $3 billion takeover by Ferrero, fueling arbitrage interest. 

- Costco Wholesale (COST) shares are adding 1% on the release of comparable sales data for June, again beating expectations and confirming stability in the retailer's club business segment. 

- Ford (F) is recalling more than 850,000 vehicles in the U.S. due to the risk of a low-pressure fuel pump failure that could cause the engine to stall.  

Trades on July 9 on American stock exchanges ended in plus. S&P 500 added 0.61%, Nasdaq 100 grew by 0.72%, Dow Jones rose by 0.49%, and Russell 2000 - by 1.07%. The main driver for the benchmarks was the dynamics of "Magnificent Seven" quotations. In particular, Nvidia's (NVDA: +1.8%) capitalization crossed $4 trillion following news of its planned release of a China-adapted AI chip in September, providing positive momentum for the entire semiconductor industry.  Overall volatility was low. Eight of the 11 sectors comprising the S&P 500 closed in positive territory. Utility companies (XLU: +0.94%) led the gains, while consumer staples (XLP: -0.65%) were the outsiders.  

The minutes of the June FOMC meeting did not bring any surprises. All of its participants considered keeping the rate reasonable, but some allowed the possibility of its reduction in July in case of favorable dynamics of statistical data. A number of representatives of the regulator's management pointed to persistently high inflation and elevated price expectations, so they consider it inexpedient to revise monetary conditions in 2025. Overall, these comments were seen by the market as a cautious shift towards a softer path. Together with the successful auction of ten-year treasuries, this supported the demand for risk.  

At the same time, President Trump continues to push for a 300bp cut in the key rate. The business press reported that Kevin Hassett and Scott Bessent have become the priority candidates for the post of Fed Head, while Kevin Warsh's chances are decreasing, as the White House fears that he will not become a consistent supporter of significant easing of the MPC. 

The final consensus estimate of wholesale inventories for May showed a 0.3% m/m decline. Consumer credit rose by only $5.1 billion against average forecasts of $11.3 billion, signaling a modest cooling in household demand. Mortgage applications, according to the MBA, climbed by the highest 9.4% since early 2023.  

- Quotes of UnitedHealth Group (UNH: -1.7%) reacted negatively to media reports that the U.S. Department of Justice is questioning physicians and former employees of the company as part of a Medicare billing investigation. The FBI and the DHS Office of Inspector General are also conducting these activities, which increases regulatory risks. 

- Active buying in shares of ProKidney (PROK: +16.4%) was driven by the release of unexpectedly positive and clinically meaningful Phase II REGEN-007 results. The drug rilparencel demonstrated statistically significant improvement in patients with chronic kidney disease and diabetes, which strengthened investors' confidence in the program's potential;

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