Daily News Round Up
Tuesday, 20 May 2025
- Macroeconomic Resilience and Rate Divergence: Despite Moody’s downgrade of U.S. sovereign debt and lingering trade risks, the U.S. economy continues to demonstrate resilience with robust labor market data and improving soft indicators. Simultaneously, central banks in Australia and China implemented rate cuts to stimulate growth, creating a divergence in monetary policy and boosting Asian equities ((Seeking Alpha), (CNBC)). This divergence may pressure the Fed to maintain a dovish stance, potentially supporting equity valuations.
- Tariff Concerns and Supply Chain Adjustments are Reshaping Corporate Strategy: Renewed focus on U.S. trade policy and the potential for increased tariffs is prompting companies to reassess supply chains, adjust pricing strategies, and invest in domestic production.Several companies, including General Motors, are slowing exports to China, while others like Birkenstock and Pandora are preparing to spread tariff costs globally ((Reuters), (FMP)). This adds complexity to corporate earnings forecasts and could lead to sector-specific impacts, particularly in consumer discretionary and industrials.
- Tech Sector Valuations Remain High Despite Downgrade: Despite a recent downgrade of the U.S. credit rating, the “Magnificent 7” technology stocks remain significantly valued above the broader market, trading at a 43% premium to the S&P 500’s P/E ratio ((FMP)). While showing strong earnings growth in Q1, a narrowing earnings gap relative to the overall market suggests potential for valuation compression, especially if rising Treasury yields continue ( (Market Watch)).
- Stablecoin Regulation Gains Momentum: The Senate’s advancement of the GENIUS Act marks a significant step towards establishing a regulatory framework for stablecoins in the US. This increased regulatory scrutiny, requiring minimum capital requirements and AML protocols, could bolster investor confidence in stablecoins and facilitate their broader adoption in DeFi applications ((FMP)). While still nascent, this development has implications for the broader cryptocurrency market and potential for its integration into mainstream finance.
- AI Investment and Competition Intensify: Major players like NVIDIA and Dell are aggressively pushing the boundaries of AI infrastructure and software, with NVIDIA incurring a substantial write-down due to export restrictions and Dell launching enhanced AI-optimized hardware ((FMP), (FMP)). This investment signals continued strong demand for AI solutions, but also highlights geopolitical risks and strategic competition, particularly in relation to China and access to key technologies.
What happened yesterday?
Macro
Cryptocurrency Regulation: The Senate voted 66-32 on Monday to advance the GENIUS Act, establishing a tri-agency committee comprised of the Treasury, Federal Reserve, and FDIC to vet domestic and foreign stablecoin issuers. The bill aims to define rules for stablecoin issuers like Circle’s USDC and Tether’s USDT, mandating minimum capital requirements and stringent anti-money-laundering protocols. The GENIUS Act is the first major U.S. legislation addressing stablecoins, intending to bolster confidence in their use for on-chain settlements and DeFi applications. Market participants can track stablecoin peg stability and trading volumes using FMP’s Cryptocurrency Daily API. FMP’s Crypto News API aggregates headlines on stablecoin legislation. (FMP)
Economic Growth: US economic data remains resilient, with no imminent recession signals; recent uptick in manufacturing and robust labor market support near-term optimism. Soft data is improving, financial conditions are easing, and EPS growth is likely to meet expectations, supporting a bullish short- to medium-term stock outlook. (Seeking Alpha)
Inflation: Gold prices declined in early Asian trading on Tuesday, falling 0.6% to $3,211.65/oz for spot gold and 0.6% to $3,213.67/oz for June gold futures (as of 01:40 ET / 05:40 GMT). The declines followed interest rate cuts by the People’s Bank of China and the Reserve Bank of Australia, intended to stimulate sluggish economic growth, which boosted Asian equities and dampened demand for safe-haven assets. While gold briefly rallied after Moody’s downgraded the U.S. sovereign credit outlook, the impact faded as the U.S. dollar and Wall Street showed resilience. Concerns over slowing global growth and lingering trade risks, along with a potential shift towards monetary easing worldwide, still support the long-term bullish case for gold. (FMP)
Inflation: If the U.S.’s loss of its final perfect credit rating boosts yields on Treasury debt, it likely would boost the cost of borrowing for both companies and consumers. (Barrons)
Interest Rates: The move takes the Reserve Bank of Australia’s policy rate to its lowest level since May 2023. Australia’s inflation has been on a downtrend. (CNBC)
Interest Rates: Asian currencies mostly weakened against the dollar in early Asian trade amid signs that the Fed isn’t in a hurry to lower rates. (WSJ)
Interest Rates: Investors should still watch rising bond yields, which could eat into appetites for high-growth tech stocks. (Market Watch)
Interest Rates: An increase in yields for long-term Treasury notes tends to coincide with concerns among investors about the long-term effects of the growing national debt, which sits at $36.2 trillion as of May 15, according to the Treasury Department. In Moody’s announcement to cut the U.S.’ credit rating last week, the agency said its downgrade “reflects the increase over more than a decade in government debt,” while the U.S.’ interest payment ratios are “significantly higher than similarly rated sovereigns. (Forbes)
International relations: Asian markets generally rose on Tuesday, with mainland China’s CSI 300 gaining 0.3% and the Shanghai Composite up 0.2%. Hong Kong’s Hang Seng jumped 1%. Australia’s ASX 200 increased by 0.5%, nearing three-month highs, following a 25 bp rate cut by the Reserve Bank, which projected 2.1% GDP growth for 2025 and softer inflation. Japan’s Nikkei 225 rose 0.5% and the TOPIX gained 0.3%. South Korea’s KOSPI advanced 0.2%. India’s Nifty 50 Futures declined 0.1%. The People’s Bank of China signaled readiness for further monetary support, while a Commerce Ministry warning regarding U.S. chip export curbs to Huawei’s Ascend processors limited gains. Wall Street futures softened following a Moody’s U.S. credit downgrade. (FMP)
International relations: Global oil benchmarks traded with June Brent futures at $65.55 per barrel and West Texas Intermediate (WTI) near $62.20. Brent futures overnight range was $65.30-$65.80, while WTI’s was $61.95-$62.30. Iran reaffirmed its uranium enrichment program is “absolutely non-negotiable,” suggesting no short-term surge in Iranian oil exports and underpinning prices. President Trump announced “immediate” ceasefire negotiations between Russia and Ukraine, introducing demand uncertainty. The Economics Calendar API flags key dates for envoy statements and planned talks. Upcoming US weekly stock reports from the EIA and API are considered critical. (FMP)
International relations: President Donald Trump’s trade tariffs, announced in April, have sparked sharp reactions across global markets. While many interpret the move as protectionist, Cathie Wood, founder of ARK Investment Management, believes the policy shift may instead pave the way for more open and freer international trade. (Invezz)
International relations: The MSCI Emerging Market Index had advanced by 10.0% in US dollar terms compared to the S&P, which was up by just 1.8%. In our view, this indicates that much of the bad news from tariffs was already priced into EM assets while US stocks needed to make a bigger adjustment. (Seeking Alpha)
Market Sentiment: I am upgrading my recommendation from hold to buy for major U.S. assets due to favorable volatility, flow, and company indicators. A 50% drop in the VIX and a low put/call ratio indicate a positive market outlook and investor optimism. (Seeking Alpha)
Policy: The S&P 500 closed up 0.1%, while the Dow Jones Industrial Average added 137 points (0.1%), and the Nasdaq Composite gained 0.02% on Monday following a Moody’s downgrade of the U.S. sovereign rating to Aa1. Concerns persist regarding a $36 trillion debt load and a potential $3-$5 trillion impact from the Trump tax bill over ten years. Treasury Secretary Janet Yellen dismissed the downgrade as a “lagging indicator.” Energy and utilities outperformed, while financials underperformed due to rising Treasury yields. Walmart (WMT) shares declined. Alcoa is scheduled to report Q2 earnings on Thursday, marking the unofficial start of the Q2 earnings season. Upcoming catalysts include a vote on the U.S. House’s tax legislation, Fed speeches later this week, and Alcoa’s earnings report. (FMP)
Policy: Japanese Prime Minister Shigeru Ishiba stated Japan’s fiscal position is “extremely poor, worse than Greece’s,” ruling out tax cuts funded by debt. The Bank of Japan has raised short-term rates to 0.5% and is tapering bond-buying, potentially increasing yields and debt-servicing costs. Japan’s gross government debt currently exceeds 260% of GDP, the highest ratio globally, although the country remains a net creditor. Ishiba resisted calls for consumption-tax cuts ahead of an upper-house vote in July, citing rising social-welfare costs. (FMP)
Policy: Moody’s downgraded U.S. credit to Aa1, with Treasury Secretary Scott Bessent attributing the decision to a $36.2 trillion debt load and recurring deficits. Republicans aim to pass a $3–5 trillion tax package before May 26. Q2 earnings reports from Home Depot and Target will follow Walmart’s warning about tariff-driven price hikes. S&P Global’s flash U.S. PMI for May will be released, following an April reading of 50.6. China’s factory output rose 6.1% year-over-year (YoY), while retail sales slowed to 5.1%. JPMorgan’s investor day will feature CEO Jamie Dimon addressing the tariff outlook. (FMP)
Policy: Morgan Stanley strategist Michael Wilson views the recent selloff following Moody’s downgrade of the U.S. credit rating to Aa1 as a rate-driven event, noting Moody’s began downgrades in 2011 and is the last major agency to do so. Wilson warns that stocks’ correlation with 10-year Treasury yields could turn negative if yields exceed 4.50%. He highlights that the effective U.S.–China tariff rate decreased from 145% to 30%, a factor he deems a catalyst for a rally. He recommends “buying the dip” when yields pressure stocks, focusing on cyclical strength and observing Industrial sector’s potential leadership based on earnings revisions, while anticipating consumer sectors may lag. (FMP)
Policy: Fed officials say debt downgrade complicates inflation outlook, Nvidia CEO discusses China chip ban, JPMorgan’s investor day, and more news to start your day. (Barrons)
Policy: The market began the week trying to digest Friday’s post-close downgrade of US credit by Moody’s, which cut the government’s rating from Aaa to Aa1. Bessent warned that holdout countries could face a return to April 2’s “Liberation Day” sky-high rates, while Hassett dangled a more optimistic line: 15 countries are “close” to a deal. (Seeking Alpha)
Policy: Moody’s decision to lower the rating on U.S. government debt seems unlikely to shake up the corporate bond market too much. (Market Watch)
Policy: Investors sold U.S. government bonds and the dollar on Monday amid concerns about the U.S. fiscal picture. Stocks edged higher. (WSJ)
Policy: CNBC’s Jim Cramer told investors on Monday to tame their fear, even when spooked by announcements like the Moody’s downgrade of U.S. debt. “You are being given an early warning to invest more—not more aggressively—but more of what you can save,” he said. (CNBC)
Policy: Moody’s downgraded the U.S. credit rating one notch to Aa1 from AAA (Investors Business Daily)
Policy: The Q1 earnings season is now largely behind, revealing companies’ reactions to Trump’s tariff policies. A clear signal of economic weakness has surged – consumer confidence has plummeted. (Seeking Alpha)
Policy: Moody’s downgrade of U.S. credit on Friday helped put into focus the U.S. government’s ballooning budget deficit and President Donald Trump’s hopes to add trillions more to the national debt. (Market Watch)
Policy: The JPMorgan CEO warned of complacency in the markets at the bank’s investor day. (WSJ)
Policy: Yields in the Treasury market are rising, threatening to make it more expensive for consumers and the U.S. to manage debt. (Market Watch)
Policy: Treasury Secretary Scott Bessent downplayed the U.S. credit downgrade as a “lagging indicator” of economic and fiscal conditions, after Moody’s took the U.S. off its top tier. (Fox Business)
Policy: Washington’s borrowing spree just got a lot more expensive. Bond markets are signaling distress with 30-year borrowing rates spiking to 5%. (Forbes)
Policy: The regulator will consider changes that could make it easier for investors to put money into hedge funds and private-equity funds. (WSJ)
Policy: Bond yields rose and the dollar weakened as Trump administration tries to play down significance of setback (The Guardian)
Policy: Moody’s spooked investors after it slashed the nation’s credit rating down from the highest score. (New York Post)
Policy: The once linear, largely predictable movement of money through corporate ecosystems is being reimagined against today’s increasingly dynamic and uncertain macro backdrop. Even category giants aren’t immune, as evidenced by Walmart Chief Financial Officer John David Rainey’s commentary during the company’s latest earnings call. (PYMNTS)
Trade: General Motors (GM) will cease exporting U.S.-made vehicles to China, impacting its Durant Guild division, which accounted for less than 0.1% of GM’s Chinese sales. This decision follows a period where goods shipped from the U.S. to China faced import duties exceeding 100%, though new levies were suspended for 90 days. The move occurs during sensitive U.S.-China trade negotiations. Ford Motor Co. (F) paused exports to China in April. GM states the restructuring is due to significant changes in economic conditions and aims to optimize GM China’s operations, reinforcing a pivot toward localization and market-specific manufacturing. The halt is not expected to significantly impact GM’s short-term financials. (FMP)
Trade: First-quarter earnings season is winding down this week. Most market watchers would agree that one issue has loomed large over this round of results. (Investopedia)
Industry
Automotive: Waymo, Alphabet’s self-driving arm, received approval from California regulators to expand its uncrewed robotaxi service, following 23 stakeholder endorsements and zero protests. The expansion, requested in March, will be implemented “methodically over time.” Waymo currently operates over 1,500 vehicles in San Francisco, Los Angeles, Phoenix, and Austin, providing over 250,000 rides weekly. Tesla plans to launch a paid robotaxi service in Austin next month and California later this year. Alphabet holds a AA corporate rating and dedicates approximately 15% of its revenue to Research and Development. (FMP)
Automotive: Honda Motor Co. announced on Tuesday a reduction in its EV investment plans, now allocating 7 trillion yen (approximately $48.4 billion) toward electrification and software through 2030, down from a previous target of 10 trillion yen. The company will launch 13 new hybrid models globally starting in 2027, focusing on hybrid technology as a transition to full electrification. This shift follows slower-than-expected EV adoption and rising costs, mirroring similar adjustments by other automakers. Honda maintains strong financial fundamentals and expects this strategic change to balance innovation with profitability. (FMP)
Consumer Goods: Shanghai-based Bc Babycare says it expects its supply chain diversification and the U.S. market potential to more than offset the impact of ongoing U.S.-China trade tensions. Baby gear is particularly sensitive to tariffs since the majority of those sold in the U.S. are made in China, said U.S.-based Newell Brands, which owns stroller company Graco. (CNBC)
Consumer Goods: Amer Sports earnings are due Tuesday, with Trump tariffs in focus for the sporting goods maker. Amer Sports stock is at the edge of a buy zone. (Investors Business Daily)
Energy: Continental Resources has filed suit against Hess Corp, alleging inflated service fees through related-party deals with Hess Midstream Partners, which Hess owns 38%. Continental claims this self-dealing cost it $34-$69 million in net revenue from its non-operating interests in approximately 483 Williston Basin wells operated by Hess Bakken Investments. Hess Midstream Partners reported an 8% rise in gas processing volumes and a 9% increase in water gathering in Q1. The lawsuit alleges above-market rates were charged for gas processing, oil terminaling, and water gathering, impacting hydrocarbon netbacks for Continental and other minority stakeholders. (FMP)
Insurance: Chesnara is in exclusive talks to acquire HSBC’s UK life insurance arm in a deal potentially valued at $500–700 million. Chesnara currently manages approximately £14 billion in assets and roughly one million policies. The acquisition could increase Chesnara’s premium base by up to 20%. Chesnara has averaged an 8% annual increase in underwriting profits over the past five years. If approved by regulators by Q4, Chesnara could see EPS increase by 5–10% by 2026, with an announcement potentially coming as early as June. (FMP)
Retail: Global retailers including sandal maker Birkenstock and jeweller Pandora are looking at spreading the cost of U.S. tariffs by raising prices across markets to avoid big hikes in the United States that could hurt sales. (Reuters)
Retail: How are discount retailers doing in the Trump tariff era? We’ll learn more this week, when the parent companies of TJ Maxx, Marshalls and Ross Dress for Less report their latest earnings. (Investopedia)
Semiconductors: Foxconn is investing ₹127.74 billion (US$1.5 billion) to acquire 12.77 billion shares in its Tamil Nadu unit, Yuzhan Technology India. This follows Apple’s export of approximately 600 tons of iPhones, valued at US$2 billion, to the U.S. in March. Apple maintains a US$50 billion cash balance and holds a AAA corporate rating. Foxconn’s commitment aims to expand component output and final assembly capacity in India, reducing lead times and addressing Sino-U.S. trade frictions. (FMP)
Semiconductors: Dell Technologies has expanded its AI Factory platform in partnership with NVIDIA, introducing new hardware and software solutions. Key updates include PowerEdge XE9785 & XE9785L servers supporting up to 256 Blackwell Ultra GPUs, claiming a 4x speedup over previous generations; the Dell Pro Max Plus laptop powered by Qualcomm’s AI 100 PC Inference Card with 32 cores; and the PowerCool Enclosed Heat Exchanger, reducing cooling costs by up to 60% and enabling 80 kW capacity per rack. Software innovations include Project Lightning, a parallel file system delivering twice the throughput, and enhancements to Data Lakehouse and ObjectScale. Dell is collaborating with Google, Meta, Cohere, Glean, and Mistral, and supports LLMs like Llama 4, offering solutions for both cloud and on-premise setups. (FMP)
Corporate
Apple Inc / Alphabet Inc / Amazon.com Inc / Meta Platforms Inc / Microsoft Corp / Nvidia Corp / Tesla Inc: The “Magnificent 7” Big Tech stocks, currently trading at their lowest relative valuations in over six years, have a forward P/E ratio of 28, a 43% premium over the broader S&P 500’s 20, placing it in the 30th percentile over the past decade. Q1 earnings showed 28% year-over-year EPS growth, excluding Nvidia, compared to the broader index’s 9% growth, representing a 16% earnings beat—the largest since Q2 2021. Goldman Sachs forecasts an earnings gap of 32 percentage points in 2024 narrowing to just 2 points by 2026. Mid-cap stocks are currently at discounted valuations and historically have demonstrated faster earnings growth and better risk-adjusted returns. (FMP)
Bath & Body Works: Bath & Body Works reported Q1 earnings of $0.49 per share, exceeding the consensus estimate of $0.42, on revenue of $1.40 billion, slightly below the $1.42 billion forecast. The stock closed at $33.76, down 16% over the past three months and 35% year-over-year. The company has seen two positive EPS revisions and nine downward adjustments recently. Investors can access profitability and leverage ratios via FMP’s Ratios TTM API, and the Q2 report date will be available through the Earnings Calendar API. (FMP)
Nike Inc: Nike has laid off an undisclosed number of employees in its technology division, shifting responsibilities to third-party vendors to reduce costs and sharpen its digital strategy, a move announced last week following a leadership shake-up. The company faces soft consumer demand and a steeper-than-expected fourth-quarter revenue forecast. Nike holds an AA- corporate rating and has over $7 billion in cash and equivalents. Investors should monitor vendor partnerships, margin trends, and leadership commentary during Nike’s next earnings call. (FMP)
NVIDIA Corp: NVIDIA CEO Jensen Huang stated that U.S. export restrictions on AI chips have resulted in a $5.5 billion write-off of unsellable inventory and a loss of $15 billion in revenue, primarily due to the inability to sell chips like the H20 in China. The company estimates a loss of roughly $3 billion in potential tax contributions. Huang warned that these restrictions may unintentionally boost China’s AI development and potentially lead to a globally diffused independent tech ecosystem, sidelining U.S. influence. He advocates for accelerating global adoption of American platforms rather than limiting access, arguing that no company has ever previously written off such a large amount of inventory. (FMP)
Ryanair: Ryanair ADR reported a fourth-quarter EPS of -$0.62, slightly below the consensus of -$0.60, but revenue of $2.59 billion exceeded forecasts of $2.36 billion. The stock closed at $50.00, increasing 9.8% over three months and 7.1% over the past year. Analysts have seen one positive EPS revision in the last 90 days, suggesting cautious optimism regarding margin recovery. Ryanair maintains an investment-grade profile, allowing favorable financing for fleet expansion and fuel hedges. (FMP)
Strategy Inc. (NASDAQ:MSTR) / Coinbase (NASDAQ:COIN): Bitcoin was trading at $103,200, down 1.4% by 09:50 ET, after reaching a session high near $107,000, its strongest level since January 2025. This triggered over $600 million in crypto derivatives liquidations. On Sunday, Bitcoin gained over $2,500 in under an hour. In May, Bitcoin has gained over 11%, supported by easing U.S.-China trade tensions and subdued U.S. inflation prints. Strategy Inc. (NASDAQ:MSTR) acquired 13,390 BTC for $1.34 billion and subsequently purchased another 7,390 BTC for $764.9 million at an average price of $103,498 per token. Coinbase (NASDAQ:COIN) joined the S&P 500 index. Bitcoin’s all-time high remains $109,228. (FMP)
Toyota Motor / Toyota Industries: Toyota Motor, alongside a special-purpose vehicle backed by Chairman Akio Toyoda, plans a tender offer to take Toyota Industries private for approximately ¥6 trillion (US$41 billion), exceeding Toyota Industries’ ¥5.4 trillion market capitalization as of May 19. The offer is expected to launch in late May or June, pending approval. Toyota Industries’ shares (TYO:6201) jumped 9% to ¥18,000, reaching a record high, while Toyota Motor’s shares (TYO:7203) rose 2% to ¥2,717. The acquisition will be financed through loans from banks like Mitsubishi UFJ Financial Group (MUFG). Toyota Industries holds an A+ corporate rating and had over ¥1 trillion in cash and equivalents at the end of its latest quarter. (FMP)
Trip.com ADR: Trip.com ADR (NASDAQ: TCOM) reported a first-quarter EPS of ¥5.96, exceeding the analyst consensus of ¥5.54. Revenue reached ¥13.85 billion, surpassing the forecasted ¥13.83 billion. The stock closed at ¥67.10, showing a 1.50% gain over the past three months and a 20.19% increase over the last 12 months. In the last 90 days, there were 2 negative EPS revisions and no positive revisions. (FMP)
Vanguard Group: A federal judge in Philadelphia rejected Vanguard Group’s proposed $40 million class-action settlement, deeming it to offer “no value” to investors. The rejection, issued by Judge John Murphy in a 25-page ruling, stems from the settlement duplicating benefits already provided under a $135 million agreement with the U.S. Securities and Exchange Commission (SEC) earlier this year. The SEC settlement resulted in $106.4 million in investor relief, including a $13.5 million civil penalty. The proposed class-action settlement would have deducted over $13 million in legal fees, reducing investor compensation. The dispute originated from Vanguard’s December 2020 decision to lower the investment threshold for institutional share classes of its target-date funds from $100 million to $5 million, causing a mass migration of investors and unanticipated capital gains taxes. (FMP)
Wells Fargo: The credit downgrades follows its decision to remove the AAA rating from te United States. (Barrons)
