Breakfast | S&P rises for six consecutive days, Super Micro Computer's plunge drags down AI stocks

Market Overview

The U.S. Secretary of Commerce discussed the progress of certain tariff negotiations, claiming that some have been agreed upon and await approval, boosting hopes for a trade agreement and lifting U.S. stocks, with major indices reaching new daily highs. The S&P has risen for six consecutive days, marking its longest streak in three years.

Trump signed an executive order related to tariffs on automakers, with Tesla rising over 2%, while General Motors, which withdrew its performance guidance for the year, initially fell 4% but later narrowed most of its losses.

Meta reported six consecutive days of gains before its earnings report; Super Micro Computer, with disappointing preliminary guidance, saw its shares plunge 20% after hours, while Snap, which failed to provide guidance, dropped over 10% after hours. The China concept index fell 0.3%, with XPeng down over 6% and Nio down over 1%.

U.S. economic data was disappointing, with Treasury yields hitting a three-week low. The dollar index rebounded; the pound fell from a three-year high; the offshore yuan rose over 300 points at one point, breaking 7.26, reaching a new high in over three weeks.

The progress in tariff negotiations pressured gold, which fell over 1% during the session; the global trade war harmed demand prospects, leading to two consecutive declines in crude oil, which closed at a new low in over two weeks, dropping 3% at one point during the session.

In the Asian session, A-shares showed a mixed trend, with small-cap stocks significantly rising, the Hong Kong Hang Seng Index closing up 0.6%, automotive stocks gaining, and government bond futures strengthening across the board.

Macroeconomic Information

1. Lawmaker reads 100 reports on Trump's corruption to commemorate 100 days of Trump's presidency

Donald Trump's second presidential term has reached 100 days. To commemorate this moment, Massachusetts Senator Elizabeth Warren plans to read into the Congressional record what she calls 100 instances of Trump using the presidency to benefit himself and his allies.

"One hundred days, one hundred acts of corruption," Warren will say in her Senate speech on Tuesday night. HuffPost obtained a copy of her planned remarks.

"When he was campaigning, Trump repeatedly promised he would lower costs on 'day one,'" her speech reads. "But Trump and his administration have not delivered on that promise; instead, they have paved the way for the president, his senior officials, and his billionaire friends to profit from government corruption."

"So, count with me," Warren plans to say before listing what she calls 100 things Trump has done to benefit himself and punish those he perceives as political enemies.

The White House spokesperson did not immediately respond to a request for comment.

Trump adjusts auto tariffs, but Chinese components are excluded

U.S. President Trump issued an executive order on Tuesday that combines tariff deductions with exemptions for other components and materials to mitigate the impact of auto tariffs, following pressure from automakers on the government. However, a White House official stated that the tariff exemptions do not apply to Chinese components, which will continue to face at least a 145% tariff imposed by Trump, in addition to any previously imposed tariffs.

Trump stated that he does not want to punish automakers who cannot find suppliers for auto parts.

Trump administration considers modifying AI chip export rules, eliminating tiered systemThree informed sources said that the Trump administration is working to revise a regulation from the Biden era that restricts global access to artificial intelligence (AI) chips, including possibly eliminating the classification of countries into several tiers to help determine how much advanced semiconductor access a country can have. The sources indicated that the plan is still under discussion and warned that adjustments may occur. However, if enacted, the removal of tiers could make the Trump administration's use of U.S. chips a more powerful tool in trade negotiations.

Trump stated that tariff negotiations with India are progressing smoothly, and he believes the two countries will reach an agreement.

U.S. Secretary of Commerce Gina Raimondo stated in an interview with CNBC that the Trump administration has reached a trade agreement and is awaiting approval from the country before it is announced.

U.S. Treasury Secretary Janet Yellen declined to confirm that the Trump administration has reached a tariff agreement with a trading partner country, stating that no trade agreement can be considered complete until President Trump announces it.

Yellen mentioned that the Trump administration aims to provide full reimbursement for factory and equipment purchases for companies seeking to relocate to the U.S., retroactive to January 20. She also stated that the U.S. needs precision manufacturing rather than textiles, saying, "Our goal is to bring high-quality industrial jobs back to America."

In the face of Trump's tariffs, dozens of global companies retract or lower their forecasts.

The impact of President Trump's trade war is further reverberating in the business community, with delivery giant United Parcel Service (UPS) announcing it will lay off 20,000 employees to cut costs. General Motors has retracted its outlook and postponed its investor conference call to Thursday, awaiting potential changes in trade policy. Reuters analysis shows that about 40 companies globally have retracted or lowered their forecasts in the first two weeks of the first-quarter earnings season.

Sources say China has exempted U.S. ethane imports from tariffs.

Two informed sources indicated that China has exempted the 125% tariff imposed on U.S. ethane imports earlier this month. This move will relieve pressure on Chinese companies importing U.S. ethane for petrochemical production and provide a sales outlet for natural gas liquids (a byproduct of U.S. shale gas production).

U.S. merchandise trade deficit reached a record high in March as companies rushed to import before tariffs took effect.

The U.S. merchandise trade deficit widened to a record level in March as companies heavily imported before President Trump's full tariffs took effect, suggesting that trade has significantly dragged on first-quarter economic growth. Although some imported goods ultimately ended up in wholesalers' warehouses, economists say this does not alleviate the expected impact of the worsening trade deficit on gross domestic product (GDP). The U.S. government is set to release the preliminary GDP estimate for the first quarter on Wednesday, coinciding with Trump's first 100 days in office.

U.S. consumer confidence fell to its lowest point in nearly five years in April.

Due to increasing concerns over tariffs affecting economic prospects, U.S. consumer confidence fell to its lowest level in nearly five years in April. The Conference Board reported that the consumer confidence index dropped 7.9 points to 86.0, the lowest level since May 2020, and below economists' forecast of 87.5China's April Official Manufacturing PMI Expected to Drop to 49.8, Tariffs Pressure Both Supply and Demand for Enterprises

China will release the official and Caixin manufacturing Purchasing Managers' Index (PMI) for April on Wednesday. With the implementation of extremely high tariffs by the United States, the "export rush" effect has faded, and the impact is being transmitted to the production side, leading to concerns about poor industrial activity in China for April. A Reuters poll of 30 analysts shows a median estimate indicating that China's official PMI for April is expected to fall to 49.8, the lowest in three months, slipping back into contraction territory after two months of expansion. Additionally, a median estimate from 17 institutions suggests that the Caixin April manufacturing PMI for China is also expected to drop to 49.8, marking a seven-month low, after remaining in the expansion range for six consecutive months.

Company Information

Apple Earnings Preview: Beware of Chinese Tariffs

Apple is set to announce its fiscal year 2023 second-quarter (Q2) earnings on May 1. Analysts expect the company to achieve revenues of $94.23 billion and earnings per share of $1.62. This earnings report is highly anticipated. Apple is one of the technology companies most affected by U.S. President Donald Trump's tariffs on China and serves as a bellwether for the broader tech industry.

About 80% of iPhones are manufactured in China, and Trump imposed tariffs on China during the quarter that will be reported. Despite the extremely high 145% tariffs on China implemented in the second quarter, China had already faced a 20% "fentanyl tariff" in the first quarter (which corresponds to Apple's fiscal Q2). Therefore, Apple's upcoming earnings report may be impacted by some tariffs.

It goes without saying that any impact of tariffs on Apple is negative rather than positive. Apple imports millions of iPhones from China each year, and most of the company's non-iPhone hardware products are also manufactured in China. The company's services segment has not been directly affected by tariffs, but it accounted for only 21% of total revenue last quarter. Thus, most of Apple's business is vulnerable to tariff impacts.

Of course, Apple has taken measures to protect itself from tariff impacts, primarily by stockpiling inventory. In the last week of March, Apple shipped five planes of products to the U.S. in hopes of preemptively addressing tariff impacts. This may have helped Apple avoid the most extreme Trump tariffs in the second quarter, but it remains unclear how long the company's product inventory can last. Apple sells approximately 231 million iPhones each year.

Microsoft Earnings Preview: A Critical Moment for AI Capital Expenditure

Microsoft's third-quarter earnings report is expected to be significant, with analysts predicting a year-on-year increase of 9.58% in earnings per share and a 10.64% increase in revenue. However, concerns about the company's $80 billion investment in AI/data center construction not matching returns persist, leading to strong sell ratings. Analysts have lowered revenue expectations, indicating skepticism about Microsoft's spending and capacity forecasts. The cancellation of data center leases suggests overbuilding, while competition from cost-effective AI alternatives further poses risks to Azure's pricing and profit marginsAfter-hours plunge of 20%, Super Micro Computer's performance far below expectations, dragging down NVIDIA and Dell

On Tuesday after the U.S. stock market closed, server manufacturer Super Micro Computer announced preliminary results for the third fiscal quarter, with data falling short of analyst expectations, leading to a sharp decline in its stock price after hours.

Key financial data: The preliminary adjusted EPS for the third fiscal quarter is between $0.29 and $0.31, significantly lower than the analyst expectation of $0.53. Revenue is projected to be between $4.5 billion and $4.6 billion, compared to the expected $5.35 billion.

According to the company's statement, Super Micro Computer has lowered its previously provided performance guidance for the quarter ending March 31. The new revenue range indicates an 18% year-over-year growth, far below the 200% growth level from the same period last year.

Super Micro Computer stated in the announcement that during the third fiscal quarter, some customer platform decisions were delayed, causing some sales to be pushed into the fourth fiscal quarter. Additionally, the company is facing increased inventory of outdated products and expedited costs. These two factors led to a preliminary gross margin contraction of 220 basis points compared to the previous quarter.

Analysts pointed out that this early release of a performance warning is another blow to Super Micro Computer in recent years. Over the past year, the company has been troubled by delays in financial reporting and negative reports from short-selling firms.

Super Micro Computer's stock price plunged 20% in after-hours trading on Tuesday. Due to its poor performance, competitor Dell's stock price fell nearly 5% in after-hours trading, HP dropped about 2%, and NVIDIA saw a decline of up to 2.9% after hours