Morning in New York: US tariff pressure and Fed meeting minutes in focus

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

Uncertainty surrounding the White House's foreign trade policy remains a key driver for the market ahead of the corporate reporting season. This Wednesday, July 9, the 90-day pause was supposed to end, after which reciprocal duties would have kicked in. However, Washington extended it until August 1, giving investors a short-term respite. The focus is on the White House's future strategy. President Trump still makes an aggressive bet on import tariffs, believing that thanks to this measure, additional jobs will appear in the country and economic growth will accelerate. Skeptics, however, have raised concerns about a new spike in inflation and declining consumer confidence. The new approach of the Presidential Administration, which in recent days has been sending letters to trading partners specifying the size of import duties from 25% to 70% and higher, only adds uncertainty and complicates the negotiation process with the EU, Japan, South Korea and other key importers of the United States. Investors are pricing in a scenario of a partial easing of initial conditions by the US side, but the market will be hostage to this political rhetoric until August;

No significant macroeconomic statistics are scheduled for release today. The focus of attention will be the publication of the minutes of the Fed meeting held on June 17-18. Most likely, the document will reflect the split within the Federal Open Market Committee (FOMC). Some of its members see the risk of inflation acceleration under the influence of import tariffs, while others are in favor of softening the economic growth forecast. However, both of these positions signal that interest rates will remain at current levels, at least until fresh inflation data becomes available;

This Wednesday is the auction of $39 billion in ten-year Treasury securities, which could impact UST yields across the curve. 

Futures on US indices show about zero dynamics. We assess the balance of risks for the upcoming session as neutral with reduced volatility. We focus on the S&P 500 movements in the range of 6190-6260 points (from -0.5% to +0.6% to the closing level of the previous session);

- Merck (MRK) is close to buying London-based Verona Pharma (VRNA) for about $10 billion, which implies a premium of about 23% to the latest price on the Nasdaq. The deal, which allows Merck to diversify revenue away from Keytruda, whose exclusive rights expire in 2028, could be the largest for the pharma giant since 2023.  

- AES Corp. (AES) is considering a sale after reports of interest from Brookfield Asset Management and BlackRock. Its shares rose more than 10% on the news in the postmarket. The potential deal would be one of the largest in the renewable energy sector. 

- Aehr Test Systems (AEHR) shares sagged more than 20% after the company reported quarterly revenue of $14.1 million against a consensus of $14.8 million.The company also warned of order delays amid trade uncertainty. Management noted market share expansion and product portfolio growth;

July 8 trading on American stock exchanges ended in a multidirectional manner in the absence of pronounced drivers. S&P 500 lost symbolic 0.07%, Nasdaq 100 added exactly the same amount. The Dow Jones declined 0.37%, and the Russell 2000 rose 0.66%. Volatility was low. The broad market was supported by the energy sector (XLE: +2.69%), while the utilities sector was an outsider (XLU: -1.06%).  

The session took place amid continued uncertainty around the foreign trade agenda. President Trump confirmed the introduction of a 50% duty on imported copper and announced a 200% tariff on pharmaceuticals with a delay of a year and a half. Additionally, plans were announced to impose import duties on semiconductors and other goods from BRICS countries, which, according to the head of the White House, are "trying to destroy the dollar". 

The NFIB Small Business Optimism Index declined slightly in June, confirming entrepreneurs' concerns about the tax burden and high labor costs.  

The bond market remained under pressure: the placement of $58 bln of three-year tri-jeris was held with reduced demand. Yields rose by 0.4 bps after the auction, reflecting investors' cautious mood ahead of the upcoming auctions of 10- and 30-year issues;

- Amazon.com (AMZN: -1.8%) was negatively impacted by a weak start to Prime Day. According to data compiled by Bloomberg, sales during the first hours of the sale were down nearly 14% year-over-year. However, direct comparison with last year's figures is difficult, as this time the promotion will last longer. 

- SOFI (SOFI: +3.7%) shares rose after reports of increased client access to alternative investments, including new private markets closed-end funds. 

- News of the $1 billion valuation of small electric vehicle startup Also supported shares of Rivian (RIVN: +3%), which spun off the business in March, retaining a minority stake. 

- First Solar (FSLR: -6.5%) was among the leaders of the fall. The pressure on its quotations was exerted by Trump's decree to cancel subsidies for energy companies with foreign control.

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