Morning in New York: Trump increases uncertainty

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

The head of the White House announced the firing of Lisa Cook, a member of the Board of Governors of the Federal Reserve System, after accusing her of irregularities in the processing of mortgage documents. Cook denied these accusations and said that until the court decision on this issue will continue to perform her duties. It is believed that the court is highly likely to side with Cook. If the verdict is not in her favor, Trump will get more loyal votes in the leadership of the Federal Reserve and will be able to more actively influence its decisions. In this case, volatility in the markets will increase. The main consequence of the realization of this scenario will be an increase in the steepness of the yield curve of treasuries, as the near end of the curve will lay down a softer monetary policy, and the far end will reflect the premium for the structural risks of losing the independence of the regulator.

The US president threatened to impose a 200% duty on goods from China in case of restrictions on exports of rare-earth magnets critical to the US auto industry, electronics and green energy. Trump said details of a possible deal with Beijing could include Boeing deliveries, which remain Washington's leverage as the "trade truce" between the countries is only in effect until November.

An additional source of tension was the U.S. President's threat to raise tariffs and impose new restrictions on technology exports to countries that have "discriminatory" policies against U.S. IT companies, primarily Apple (AAPL) and Alphabet (GOOGL). At the same time, the president noted that China is "completely exempt" from such restrictions. These statements provoke aggravation of relations between the US and Europe, as well as India and other countries, and increase risks for the technology sector.

On the macroeconomic calendar, the data on durable goods orders for July (consensus: -3.9%, June: -9.4%) are of interest. The indicator excluding transportation is forecasted at +0.2%. The Conference Board Consumer Confidence Index for August (consensus: 96.5 points, July: 97.2) will be important for assessing the state of demand.

Ke Holdings (BEKE), Bank of Montreal (BMO) and EHang (EH) will report quarterly results before the opening of trading. After the end of the main session Okta (OKTA), MongoDB (MDB), PVH (PVH), Box (BOX) will report.

Futures on American indices demonstrate negative dynamics. We assess the balance of risks for the upcoming session as neutral with an average level of volatility. We focus on the S&P 500 movements in the range of 6390-6480 points (from -0.7% to +0.7% to the closing level of the previous session).

- Interactive Brokers (IBKR) shares rose in the postmarket on news of its inclusion in the S&P 500, where the company will replace Walgreens Boots Alliance (WBA) after the closing of its acquisition by Sycamore Partners.

-Serina Therapeutics (SER) has received support from the FDA to conduct a registration study of SER-252 against Parkinson's disease. In the fourth quarter, the company plans to submit an application for clinical trials in the US, while at the same time starting patient enrollment in Australia.

-Korean Air placed the largest order in its history for 103 Boeing (BA) airplanes and entered into an engine service agreement with GE Aerospace (GE). This coincided with the South Korean president's visit to Washington and discussions on expanding trade cooperation with the United States.

- Shares of Heico (HEI) reacted positively to the release of its quarterly report. Its EPS and revenue totaled $1.26 billion and $1.15 billion, respectively, compared to the consensus of $1.12 billion and $1.11 billion. Higher revenues from its aviation support business and recent acquisitions contributed to the improvement.

August 25 trading on the U.S. stock exchanges ended in the negative. The S&P 500 fell by 0.43%, the Nasdaq 100 declined by 0.31%, the Dow Jones lost 0.77%, the Russell 2000 - 0.96%. The Magnificent Seven stocks showed mixed performance, with Tesla (TSLA) and Nvidia (NVDA) trading in positive territory. Most sectors of the broad market corrected downward. Energy (XLE: +0.26%) and telecoms (XLC: +0.16%) were the top gainers. The outsiders were the healthcare industry (XLV: -1.43%) and consumer staples (XLP: -1.71%).

New home sales for July totaled 652k after 656k in June, slightly above consensus. The FRB Dallas manufacturing activity index for August unexpectedly went into negative territory, which was worse than expected, indicating continued pressure on the industrial sector in the region.

FRB New York President John Williams noted that the era of low neutral interest rates is not over yet: their long-term level is constrained by demographic and structural factors, and estimates remain close to the pre-pandemic level of about 0.5%. However, the speaker emphasized the high uncertainty of such forecasts.

- Vital Energy (VTLE: +14.5%) met with strong growth on the announcement of the purchase by Crescent Energy (CRGY) in a share swap for about $3.1 bln. The deal is expected to close by the end of the year.

- CSX (CSX: -5.1%) came under pressure on the news that Berkshire Hathaway (BRK.B) has no plans to acquire its equity securities. Warren Buffett said that he is also not considering the purchase of Union Pacific or other representatives of the railroad transportation sector, which caused the negative dynamics of their shares.

- The suspension by a number of European and Asian postal services of some commercial shipments to the United States triggered a decline in Etsy (ETSY: -8.4%) quotations ahead of the end of the small parcel (de minimis) exemption on August 29.

- Elon Musk's AI startup xAI has sued Apple (AAPL: -0.26%) and OpenAI for antitrust violations. The lawsuit alleges that Apple is intentionally under-rating competitors' apps, including chatbot Grok, while promoting OpenAI's ChatGPT through integration into its products.

- Donald Trump announced the launch of a "major investigation" into furniture imports for 50 days in an effort to bring manufacturing back to the US. This caused shares of Williams-Sonoma (WSM: -2.68%), Restoration Hardware (RH: -5.3%) and Arhaus (ARHS: -3.30%) to fall.

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