ISM Data Raises Stagflation Concerns; Trump Proposes Tariff Increases and Fed Chair Nomination
Trump to Announce Tariffs on Pharmaceuticals and Chips
Overview
President Trump announced on Tuesday that the U.S. government will impose tariffs on imports in the semiconductor and pharmaceutical sectors within the next week. This move aims to reshape global trade and encourage domestic manufacturing.
Key Points
- Initial small tariffs on pharmaceuticals will rise to 150% within 1-1.5 years, eventually reaching 250%.
- Tariffs on semiconductors and chips will also be announced soon.
- Due to India's continued purchase of Russian oil, tariffs on Indian goods entering the U.S. will be significantly increased within 24 hours.
Fed Chair Candidates Narrowed
Update on Fed Leadership
Trump stated that he has narrowed down candidates for the next Federal Reserve Chair to four individuals, excluding current Treasury Secretary Scott Bessenet. This comes after the resignation of Fed Governor Adriana Kugler, allowing Trump to potentially place a preferred candidate in the Fed.
Economic Indicators
ISM Services PMI
The ISM reported that the U.S. services PMI for July was 50.1, below expectations of 51.5, indicating stagnation in the sector and a reduction in employment.
Consumer Loan Delinquencies
The New York Fed reported that severe delinquencies in consumer loans reached their highest level since early 2020, with student loan delinquencies at 12.9%.
Stock Market Reactions
Market Performance
Despite weak ISM data, the stock market saw declines across major indices:
- Dow Jones: -0.14%
- S&P 500: -0.49%
- Nasdaq: -0.65%
Notable Stock Movements
- AMD reported record Q2 revenue but faced uncertainty regarding exports to China.
- Intel's stock rose as Trump pressured TSMC to invest in Intel.
- Pfizer's Q2 revenue exceeded expectations, prompting an upward revision of its annual profit guidance.
Earnings Reports
Lucid Group and Hims & Hers Health
- Lucid's Q2 results fell short of expectations, leading to a production guidance cut.
- Hims & Hers Health saw a revenue increase but did not meet market expectations, resulting in a stock drop.
Lemonade's Strong Performance
Lemonade's Q2 earnings surpassed expectations, leading to a significant stock increase.
Upcoming Financial Events
Key Reports and Decisions
On Wednesday, the U.S. will release the global supply chain pressure index for July and EIA crude oil inventory data. The Reserve Bank of India will also announce its interest rate decision. Major companies like Uber, Novo Nordisk, and Disney are set to report earnings soon.
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