April 17th Market Overview

Happy Thursday.

Markets are closed tomorrow for Good Friday.

The bond market is consistently disapproving of Trump’s actions. Each time he goes after the Fed Chairman Powell, yields spike. The bond market is the largest market, it’s considered the smartest, and it reflects economic reality. More on this for Sunday’s write up.

"I will once again be listening to the bond market in the months ahead, as I did my first 35 years in the business." — Stanley Druckenmiller

"The bond market is a reflection of what the aggregate investor thinks about inflation, growth, and central banks." -Ray Dalio

"The bond market is the truth-teller." -Jeffrey Gundlach


Let's dig in...

Executive Summary

• Weekly jobless claims came in better than expected (215,000 vs. 225,000 forecast), suggesting continued labor market resilience despite tariff concerns.
  

• President Trump intensified his criticism of Fed Chair Powell, stating his “termination cannot come fast enough” after Powell warned that tariffs could move the Fed away from its goals.
  

• UnitedHealth Group $UNH delivered disappointing earnings and slashed its full-year guidance by over 10%, triggering a sector-wide sell-off in healthcare insurers.
  

• The European Central Bank cut rates by 25 basis points to 2.25%, citing deteriorating growth outlook amid rising trade tensions.
  
  

Market Overview

Key Market Drivers

1. White House-Fed Tensions Escalate: President Trump stated Powell's "termination cannot come fast enough" after the Fed Chair warned about tariff-driven inflation. Trump asserted he could remove Powell "real fast," raising significant concerns about central bank independence.
   

2. Trade Policy Developments: Treasury Secretary Bessent confirmed active negotiations with 15 key trading partners. Japan talks progressed well, while Trump expressed confidence about an EU deal. China indicated openness to discussions if the U.S. "acts more rationally."
   

3. Corporate Tariff Impacts Emerging: Alcoa $AA reported $20 million in tariff costs last quarter, projecting $90 million this quarter. Ford $F warned of summer price increases without tariff relief, while Taiwan Semiconductor $TSM maintained its outlook despite tensions.
   

4. Divergent Central Bank Actions: The European Central Bank cut rates by 25 basis points to 2.25%, citing deteriorating growth from trade tensions, while the Fed maintained its cautious stance.
   

Stock Spotlight

UnitedHealth Group $UNH ( ▼ 22.38% ) reported Q1 earnings below estimates ($7.20 vs $7.29) and cut full-year EPS guidance from $29.50-$30.00 to $26.00-$26.50. Medicare business challenges triggered steep declines across healthcare insurers.

Eli Lilly $LLY ( ▲ 14.3% ) oral GLP-1 drug met Phase 3 endpoints for Type 2 diabetes, effectively lowering A1C levels and reducing weight. This strengthens Lilly's position in the competitive weight management market.

Nvidia $NVDA ( ▼ 2.87% ) faced continued pressure after disclosing a $5.5B charge from U.S. export restrictions on its H20 processors to China. CEO Jensen Huang, currently in Beijing, acknowledged the "significant impact" while working to adapt within regulations.

Taiwan Semiconductor $TSM ( ▲ 0.05% ) reported Q1 profit up 60% and revenue up 42% year-over-year. The company maintained its $40B capex outlook and expects AI-related revenue to double this year, noting demand still exceeds supply.

Hertz Global Holdings $HTZ ( ▲ 44.31% ) jumped after Bill Ackman's Pershing Square built a 19.8% position through shares and swaps, becoming the company's second-largest shareholder.

Big Name Updates

Alphabet $GOOGL ( ▼ 1.42% ) declined after a federal judge ruled Google illegally monopolized online advertising technology in publisher ad server and ad exchange markets.

Microsoft $MSFT ( ▼ 1.03% ) was downgraded by KeyBanc to Sector Weight from Overweight, citing concerns about AI demand timing and monetization relative to significant capital expenditures.

Apple $AAPL ( ▲ 1.4% ) bucked the "Magnificent Seven" downward trend, standing as the only member poised for gains in Thursday's session.

Blackstone $BX ( ▲ 0.78% ) President Jonathan Gray warned that tariff-induced volatility could hamper private equity exits. The uncertainty has paused already-slow deal activity despite limited direct exposure.

Charles Schwab $SCHW ( ▲ 0.59% ) reported quarterly profit up 40%, with trading revenue rising 11% as customers repositioned portfolios amid market volatility.

Other Notable Company News

Global Payments $GPN ( ▼ 17.43% ) is acquiring WorldPay for $22.7B while selling its Issuer Solutions business to Fidelity National $FIS for $13B+.

Advanced Micro Devices $AMD ( ▼ 0.9% ) faces potential $1.5-$1.8B revenue impact from export restrictions, about 10% of expected 2025 datacenter revenue, according to JPMorgan.

Netflix $NFLX ( ▲ 1.19% ) reports earnings after close, with Piper Sandler initiating at Overweight, citing a "defensible subscriber base" and advertising potential.

Palantir $PLTR ( ▲ 1.15% ) is reportedly teaming with SpaceX and Anduril to lead a bid for Trump's "Golden Dome" missile defense system.

Hermès will pass all new U.S. tariffs to customers starting May 1, on top of regular 6-7% annual price adjustments.

Redfin $RDFN ( ▼ 1.57% ) reported U.S. homes selling at the slowest pace in six years due to overpriced listings amid sluggish demand.

BHP Group $BHP ( ▲ 1.89% ) CEO warned a tariff war could slow the global economy and fragment world trade beyond direct impacts.

Sector Watch

Bond Market

Treasury yields climbed today, with the benchmark 10-year yield rising to 4.33%, snapping three consecutive days of declines. The move higher came as traders reassessed inflation risks following Powell’s comments about tariff impacts. The bond market closed early at 2:00 PM ET ahead of the Good Friday holiday.

Policy Watch

• The White House-Fed conflict intensified with President Trump explicitly calling for Powell’s “termination” and asserting he could remove the Fed Chair despite the institution’s technical independence.
  

• Treasury Secretary Bessent confirmed active trade negotiations with approximately 15 key trading partners, including the EU, Japan, South Korea, and India, with Trump expressing optimism about eventual deals.
  

• The European Central Bank cut rates by 25 basis points to 2.25%, its seventh cut in eight meetings, highlighting divergent central bank responses to shared global pressures.
  

• The WSJ reported biotech companies are pushing back trials after FDA missed deadlines or failed to respond, with agency job cuts reportedly slowing drug development.
  
  

What to Watch Out For

1. Market Holiday Impact: Markets are closed tomorrow for Good Friday.

   • Why it matters: Three-day weekends often see positioning shifts on the preceding day. Watch for potential volatility when markets reopen Monday, especially with options expiration occurring today.
     

2. Fed Independence Concerns: Monitor developments in the Trump-Powell relationship and market reaction.

   • Why it matters: Escalating conflict threatens central bank independence, potentially impacting interest rate expectations and increasing market volatility.
     

3. Trade Negotiation Progress: Watch for concrete developments in U.S. talks with key trading partners during the 90-day tariff pause.

   • Why it matters: Successful agreements could reduce market uncertainty, while setbacks could trigger renewed selling pressure in affected sectors.
     

4. Netflix Earnings Impact: Examine reaction to Netflix results in Monday’s trading.

   • Why it matters: As the first major tech company reporting this season, Netflix’s results may signal broader trends for tech earnings and streaming media.
     

5. Healthcare Sector Fallout: Monitor whether UnitedHealth’s issues are company-specific or indicative of broader industry challenges.

   • Why it matters: Further deterioration could signal deeper problems in healthcare business models, while stabilization might present buying opportunities in the sector.

P.S. 

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Have a good weekend everyone 🙂

- John