May 20th, 2025
Market Performance:
- Stocks are trading modestly lower on Tuesday with no major economic data today.
- European markets were trading higher as well as Asian markets. China has decided to lower two of its key lending rates by 0.1%.
- Bond yields edged higher in early trading. The 10-year treasury yield opening was roughly 4.52% and the 2-year yield floated around the 4% mark.
Economic Takeaways:
U.S. trade policy is reigniting recession concerns which may contribute to lackluster trading in the markets.
The US and China have fortunately agreed to slash tariffs temporarily in a surprise breakthrough. So why are investors appearing cautious? Some retailers including Walmart, Shein, and Target, are announcing price increases due to tariffs.
The trade wars have led to:
- Uncertainty and Volatility: Trade tensions can create uncertainty about future trade policies, impacting investment and hiring decisions.
- Global Supply Chain Disruptions: Tariffs and trade disputes can disrupt global supply chains, potentially increasing costs for businesses and consumers. Walmart made this clear recently when it announced it would increase prices due to tariffs.
- Retaliatory Measures: When one country imposes tariffs, it often leads to retaliatory tariffs from other countries, creating a cycle of escalating trade barriers that negatively impact businesses and consumers.
- Impact on Investor Confidence and Markets: Trade disputes can shake investor confidence and lead to market volatility.
- Impact on Economic Growth: Trade tensions can slow global economic growth by reducing trade volumes, hindering investment, and increasing inflation.
Budget Negotiations Continue on Capitol Hill
House Speaker Michael Johnson is aiming for the 1,116-page reconciliation bill to be passed before the weekend. “The next key date to watch is Wednesday at 1 a.m. when the House Rules Committee will make final changes and set the parameters for consideration by the full house,” said Michael Townsend, managing director of legislative and regulatory affairs at Schwab.
“I’m leaning toward the House passing the bill by the end of the week, but it could also collapse,” Townsend said, which means the House would reconvene in June to try again. Once it passes, the Senate has to take it up, meaning there will likely be more changes.
The bill would make all 2017 tax cuts permanent and other things.
Merger Updates Could Pick the Markets Up
It was last week that Dick’s Sporting Goods (DKS) announced that it would be buying Foot Locker (FL) for $2.4 billion. Then Charter Communications (CHTR) said it would be buying privately held Cox Communications for $34.5 billion. To top it off, Regeneron Pharmaceuticals (REGN) revealed it would be buying 23andMe for $256 million.
Any news on these mergers could be welcomed by investors. Goldman CEO David Solomon expects M&A to rebound. “People need to transact, need to raise capital, need liquidity for their investments,” Solomon told Bloomberg Television a few weeks ago.
All Eyes on United Health (UNH) as Insiders Load Up
UnitedHealth is one of the biggest stocks in the health sector, but shares have fallen 40% this year. The company is facing unprecedented selling pressure amidst a CEO resignation, a DOJ investigation, and negative public sentiment.
So why would there be a chance of a comeback?
Investing legend Peter Lynch once noted, insiders can sell stock for any reason, but they but it for only one: they think the price is going to go up. Insiders of UnitedHealth have just bought almost $1.6 million shares. Does this mean they believe the health insurer is on its way back to previous levels?
Top Gainers:
D-Wave Quantum, Inc. (QBTS)
Regencell Biosciences (RGC)
Agilysys, Inc. (AGYS)
Amer Sports, Inc. (AS)
Pony AI, Inc. (PONY)
ZoomInfo Technologies (ZI)
Moderna, Inc. (MRNA)
Top Losers:
Fair Isaac Corp. (FICO)
Eagle Materials, Inc. (ZTO)
Ubiquiti, Inc. (UI)
Viking Holdings, Ltd. (VIK)
Dutch Bros, Inc. (BROS)
Royalty Pharma, plc (RPRX)
UBS Group AG (UBS)
Oklo, Inc. (OKLO)
Notables:
- Bitcoin has been hovering just under the $105,000 mark. The Senate is moving forward on its first-ever crypto bill that would regulate stablecoins, a type of digital asset that’s pegged to the dollar. A key procedural vote will come later this week.
- Five of the “Magnificent Seven” stocks fell early, but investors were flocking to the dip spurring a rally.
- Home Depot announced better than expected sales for Q1 but earnings were a little lower than expected. The company has maintained full-year guidance and does not plan to raise prices because of tariffs.
- Super Micro Computer (SMCI) and Palantir (PLTR) ear were up about 1% in early trading after both fell yesterday following strong performances last week. A Mizuho analyst raised SMCI’s price target on the stock.
- Reddit (RDDT) was up a little less than 1% in pre-market trading after shares fell more than 4.6% yesterday on a downgrade from Wells Fargo. The analyst sees a threat to Reddit from Google’s AI search, Investor’s Business Daily
- Tesla (TSLA) saw a slight comeback this morning after a setback yesterday. Shares have significantly rebounded in recent weeks but are still down for the year.
- Nvidia (NVDA) fell 0.6% early Tuesday. The tech giant said the effective U.S. ban on sales of its H20 chips to China that forced it to take a $5.5 billion charge last month could ultimately cost it a staggering $15 billion in sales.
- D-Wave Quantum (QBTS) exploded almost 20% before the open as the quantum computing firm announced the general availability of its new computer.
- Amer Sports (AS) was up a whopping 10% in pre-market trading after the sporting goods and apparel maker beat analysts’ earnings estimates.
- First-quarter earnings season is almost over with about 93% of companies in the S&P 500 having reported earnings.
Look Ahead:
Toll Brothers (TOL) and Palo Alto Networks (PANW) report later today.
Target (TGT), TJX (TJX), and Lowe’s (LOW) will report their earnings tomorrow.
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