Markets Mixed as Investors Await Clarity on Tariffs and Retail Earnings
Markets Mixed as Investors Await Clarity on Tariffs and Retail Earnings
By:JJ Kinahan
Walmart warns of price hikes as tariff pressures mount
- The effects of tariffs on consumers are coming into focus.
- Markets are eying clarity on trade policy as volatility nears the historical average and boosts investor optimism.
- Next week’s retail earnings reports will offer insight into consumer behavior amid inflation and uncertainty.
US markets ended mixed yesterday. The S&P 500 rose by 0.4%, while the Nasdaq Composite slipped 0.2%. Small-cap stocks performed well, gaining 0.6%. The Dow Jones Industrial Average, which had faced pressure earlier in the week because of weakness in UnitedHealth Group, rebounded with a 0.7% gain.
One of the most notable developments came from Walmart, which announced it would begin raising prices because of tariffs. Despite sourcing more than two-thirds of its products within the US, Walmart acknowledged that increased costs from tariffs are forcing price hikes. This raises concern that other companies may soon follow suit, setting off a broader trend of consumer price increases.
But there was good news, too.
US and Switzerland reach deal
Last weekend brought some encouraging news on the trade front. US-China negotiations in Switzerland resulted in a reduction of previously announced tariff rates. While this is a positive step, the remaining tariffs are still significantly higher than at the start of the year. This remains true not only in trade with China but also with Canada and Mexico.
In 2024, the US imported nearly $1 trillion in goods from Canada and Mexico combined. Although the USMCA exempts certain goods from tariffs, the average American is still expected to pay roughly $750 more annually on products from these countries. When China is included, Yale’s Budget Lab estimates the total added cost to consumers could range from $1,200 to $3,800 per year.
Markets appear to be weighing two potential narratives. One optimistic view is that tariff uncertainty is finally clearing up, allowing investors to adjust accordingly. This week’s market rally might reflect that sentiment. A more cautious interpretation is that the rally is overextended and may face correction. Upcoming earnings reports may offer insight.
Upcoming earnings reports
Next week, major retailers, including Home Depot (HD), Lowe’s (LOW), Target (TGT), TJ Maxx (TJX) and Ralph Lauren (RL), will report quarterly results. Analysts will be watching closely to gauge consumer behavior, especially amid high interest rates and shifting spending patterns.
In corporate news, Applied Materials (AMAT) fell 5% after offering mixed guidance that cited tariff-related uncertainty. Charter Communications (CHTR) announced a $34.5 billion acquisition of privately held Cox Communications, possibly signaling shifts in consumer preferences as streaming choices multiply.
For now, traders are eying the 6,000 level on the S&P 500 and watching volatility. The VIX, near 17.3, is close to its historical average, suggesting potential stability ahead.
JJ Kinahan is CEO of tastytrade from IG—which includes tastylive, tastyfx and tastycrypto. Kinahan traded for 21 years at the Chicago Board Options Exchange. He serves on the CBOE Advisory Board and the SIFMA Options Committee. @thejjkinahan
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