Trump announces more tariffs, reportedly to ask chipmakers to manufacture more in US

New tariffs on a range of imported goods, including drugs, trucks, and furniture, were announced, along with an executive order enabling the sale of a social media platform's US arm for approximately $14 billion. The market anticipates key inflation data, with forecasts suggesting a slight acceleration in overall personal consumption expenditures but a slowdown in core PCE. Small-cap stocks, represented by the Russell 2000, are showing signs of a breakout after a four-year sideways bear market, though investor confidence and ETF inflows have yet to fully materialize.

Key economic indicators to watch include Federal Reserve commentary, personal consumption expenditures (PCE) data, and consumer sentiment from the University of Michigan. The potential for a government shutdown is also a concern, with economists predicting a limited impact on GDP but potential disruptions to data publications crucial for the Fed's decision-making. Discussions are ongoing regarding the use of AI models to enhance advertising businesses and the strategic implications of significant compute commitments by AI companies.

The market is navigating uncertainty around interest rate paths, potential government shutdowns, and ongoing tariff developments. While some sectors like pharmaceuticals and furniture may face headwinds from new tariffs, others, such as domestic truck manufacturers and chipmakers, could see benefits. The broader market sentiment is cautiously optimistic, with analysts suggesting potential for further gains before a leveling off, contingent on technicals, dollar strength, interest rates, and earnings.

New Tariffs on Imported Goods [00:45]

• A fresh round of tariffs has been announced on a broad range of imported goods.
• These include 100% duties on branded drugs and 25% levies on heavy-duty trucks, effective next week.
• Additional tariffs of 50% on imported kitchen cabinets and bathroom vanities, and 30% on upholstered furniture will take effect from October 1st.
• These duties have led to declines in pharmaceutical stocks across Asia and less pronounced dips in Europe, though some UK pharmaceutical shares have risen.

The president was pretty busy on Truth Social last night. He unveiled a fresh round of punishing tariffs on a broad range of imported goods, including 100% duties on branded drugs and 25% levies on heavy-duty trucks set to come into force next week.

Chip Manufacturing and Supply Chain Reliance [01:41]

• There are plans to require chip makers to manufacture as many chips domestically as their customers import.
• This initiative aims to curb reliance on foreign supply chains.
• Tariffs will be levied on firms that do not maintain a 1:1 ratio of domestic to imported chip manufacturing over time.
• This plan is linked to previous statements about tech companies investing more in the US to avoid semiconductor tariffs.
• This could pose challenges for companies importing chips but potentially benefit those increasing US production.

The Trump administration would levy tariffs on firms that do not maintain a 1:1 ratio over time.

Federal Reserve Commentary and Inflation Data [02:30]

• Commentary from Fed officials is expected, following previous statements from Richmond Fed President Tom Barkin and Michelle Bowman.
• Bowman indicated that the fragile job market justifies further interest rate cuts.
• The Fed's preferred inflation gauge, Personal Consumption Expenditures (PCE), is scheduled for release.
• Forecasts predict total PCE for August to accelerate to 0.3%, while core PCE is expected to slow to 0.2% month-over-month.
• The final reading of consumer sentiment from the University of Michigan is also anticipated to remain steady at 55.4, signaling a continued downbeat consumer attitude.

Michelle Bowman saying that the fragile job market justifies more interest rate cuts.

Social Media Platform Sale Approval [03:30]

• An executive order has been signed, allowing the sale of a Chinese-owned social media platform's US operations to US and global investors.
• The new US company is valued at approximately $14 billion, which is lower than some analyst estimates.
• Potential owners of the new group are thought to include figures associated with Oracle, Dell, and Murdoch.

The president signed an executive order last night declaring that his plan to sell Chinese owned Tik Tok's US operations to US and global investors has got the green light from both Washington and Beijing.

Defense Stock Watch and Geopolitical Tensions [04:02]

• Defense stocks, particularly in Europe, are areas to watch due to heightened geopolitical tensions.
• European diplomats have warned of NATO's readiness to respond with full force to further airspace violations, including shooting down Russian planes.
• This follows an incident involving three MiG 31 fighter jets flying over Estonia, which Russia denies.

European diplomats warned the Kremlin this week that NATO is ready to respond to further violations of its airspace with full force, including by shooting down Russian planes.

AI Partnerships and Advertising Business [04:28]

• Discussions have occurred between a major tech company and Google concerning the potential use of its Gemini models to improve its ad business.
• This comes as the two companies are direct competitors in the online advertising market.
• The tech company has already been exploring partnerships with other AI firms to enhance its AI features.

Meta has had discussions with Google about the possibility of using its Gemini models to improve its ad business.

Market Outlook and Potential for Rally [04:51]

• After three days of declines, the market faces potential headwinds from a government shutdown threat, tariff turmoil, and uncertainty over Fed rate cuts.
• Despite recent softness, the overall backdrop is considered good, with potential for further gains in the stock market, possibly another 5% to 10% rally before leveling off.
• Predicting the stock market in the short run is acknowledged as difficult, but underlying market trends are seen as still upward.
• September's end is marked by typical softening, and October is generally not a bad month unless September has seen dramatic declines.

I think the backdrop is good. I I I think we've got some more juice in this rally.

Small Cap Stocks and the Russell 2000 [06:47]

• Small-cap stocks have been in the news, with the Russell 2000 hitting a new intraday high.
• Historically, small caps benefit from low interest rates, which reduce borrowing costs for smaller businesses.
• However, fading hopes of larger rate cuts have led to a pullback in stocks over the past three days.
• The Russell 2000 tracks about 2,000 smaller US stocks with minimum market cap and stock price requirements.
• Profitability is optional for companies included in the Russell 2000, differentiating it from the S&P 600.
• Industrials and financials are the largest sectors in the Russell 2000, unlike the S&P 500 where tech leads.
• The Russell 2000 is described as more domestic, interest rate sensitive, and tied to credit conditions compared to the S&P 500.

Small caps are finally having their moment, but investors still don't believe it.

Russell 2000: Technicals and Historical Performance [09:15]

• The Russell 2000 bottomed in 2009 after the global financial crisis and trended upwards through most of the 2010s.
• It experienced sideways action and a significant shakeout during the early pandemic, followed by a rally to new highs in late 2021.
• This marked the beginning of a new 4-year sideways bear market from which it is now starting to climb.
• A prior attempt to break out failed in late 2024, and the focus is now on whether the previous ceiling will become support.

This here is the big picture price action view going all the way back to 2007 in the wake of the global financial crisis.

Small Cap ETF Flows and Investor Sentiment [10:03]

• Annual ETF flows for small-cap ETFs have been negative so far this year, with $10 billion in outflows.
• The only other year with negative flows was 2011, which was also a poor year for performance.
• Despite a positive 8% return this year for the Russell 2000, investors have not yet fully embraced the rally.
• A lack of new money inflows following the price breakout could lead to a dip back into the old trading range, indicating a potential false breakout.

What really stands out is that 2025 is negative so far. We've already had 10 billion dollars of outflows.

Catalysts for Small Cap Growth [10:42]

• Key catalysts for small caps to move higher include technical improvements, such as a further rally and the previous price ceiling becoming support.
• Cooperation in the form of a weaker dollar and lower interest rates from short to long term is also crucial.
• The Fed cutting rates should lower borrowing costs and loosen financial conditions, benefiting the economy.
• An increase in ETF flows, indicating investors committing actual money to small caps, would provide further fuel.
• Strong earnings and guidance from small banks, industrials, and healthcare services during the upcoming earning season are also important.

Then, we'd want to see cooperation in the form of a weaker dollar and lower interest rates from short to long-term.

Trending Tickers: Intel and Tariffs Impact [12:13]

• Intel is experiencing significant trading volumes amid reports that the US may require half of its chips to be made domestically.
• This development is sending Intel's stock higher, with the company also seeking new partnerships globally.
• The broad effect of new tariff announcements is being observed across markets.
• Companies and governments are seeking clarity on how these new tariffs affect previously agreed-upon deals.

Intel, which is seeing significant trading volumes this morning on reports that the US may require half of its chips to be made in America.

Wayfair and Truck Makers Impacted by Tariffs [12:44]

• Wayfair, a home furniture and accessories seller, is down in pre-market trading, marking a setback after a significant rise over the past six months.
• Truck makers are showing a clear contrast between American and foreign stocks.
• US truck makers saw their stocks jump higher in pre-market, while European truck makers are in the red.
• Companies like Daimler, with US operations, are expected to be hit hardest.

Wayfair, the home furniture and accessories seller, well, it's down in pre-market.

Pharmaceutical Sector and Boeing Deals [13:25]

• Eli Lilly is trading higher following the announcement of a new 100% tariff on some branded imported drugs.
• Boeing is at the center of US diplomacy again, with reports of a deal being negotiated with China.
• Turkish Airlines has agreed to expand its fleet with 225 new Boeing aircraft.
• This news follows the Turkish leader's visit to Washington, and Boeing's stock is currently flat but worth watching.

Eli Liy. It's in the green this morning as Trump announced a new 100% tariff on some branded imported drugs.

Oracle and TikTok Deal Significance [14:04]

• Oracle is in the headlines as the TikTok deal has been signed off.
• Oracle is set to act as TikTok's security provider, managing user data and monitoring algorithms and code.
• This arrangement is part of a new joint venture intended to protect national security.
• Oracle has given up some value after a recent strong rally.

Oracle is set to act as Tik Tok's security provider, storing Tik Tok user data and monitoring the algorithm and code in a new joint venture that is meant to protect national security according to the US government.

OpenAI's Commitments and AI Market Landscape [14:30]

• OpenAI is at the center of significant deal-making and has made substantial compute commitments, valued at half a trillion dollars.
• The company is described as operating on a "fake it till you make it" basis, with an expected $12 billion in revenue this year but significant losses.
• The likelihood of them fulfilling these commitments is considered low, though not impossible, as ChatGPT has a head start.
• Competitors like Google, Meta, Anthropic (backed by Amazon), and XAI are also well-funded enterprises.
• OpenAI now needs to raise the $500 billion in funding to support these commitments, which is a significant challenge.

This is one of the most uh impressive cases of fake it till you make it from Silicon Valley.

Differentiating Real AI Companies from Marginal Players [16:34]

• Real companies that will perform well in the AI space include hyperscalers like Microsoft, Amazon, Google, and Nvidia, which will supply the necessary chips.
• Marginal players are those entirely reliant on OpenAI, such as Corereweave and Oracle.
• The commitments received by these marginal players from OpenAI are seen as the same "funny money" that may or may not materialize.
• It is important to distinguish between companies genuinely building out AI infrastructure and those benefiting from the excitement and expansion of the AI trade.

We have to separate an AI right now the real companies that will do well under a wide range of scenarios. These are the big hyperscalers.

AI's Impact on Clean Energy Demand [17:25]

• Despite political roadblocks and dismissals of climate change, demand for clean power in the US is expected to grow.
• Artificial intelligence will further accelerate the shift to cheap, low-carbon energy due to an AI-driven surge in power use.
• Renewable energy is already more economical than coal or gas in the US.
• A major Australian miner has finalized the acquisition of a Spanish renewable technology company and signed preliminary agreements for wind turbines, solar panels, and battery storage.
• Previous renewable energy projects have faced delays, shrinking, or cancellations due to policy changes.

President Donald Trump's dismissal of climate change and attacks on renewable energy won't significantly damp demand for clean power in the US where artificial intelligence will further accelerate the swift the shift to cheap lowcarbon energy.

Economic Outlook: Housing and Interest Rates [18:50]

• Transactional volume in the housing market has been low for years, with mortgage rates being the most important factor.
• The key question is whether the Fed cutting short-term rates will also lead to a decline in the 10-year yield.
• Normally, these rates move together, but if investors believe the Fed is making a mistake by cutting rates in a way that could let inflation rise, they might demand higher yields for longer-term investments.
• This could cause the 10-year rate to not decline in line with Fed cuts or even move in the opposite direction.

The key thing or the key question is if the Fed cuts rates, which is the short-term rate, the Fed funds rate, is that going to lead the 10-year rate to also the yield on the 10-year rate to also decline?

Government Shutdown Impact on Economy and Fed Data [20:24]

• The impact of a possible government shutdown on GDP is expected to be limited, with government workers typically receiving back pay.
• However, a shutdown could lead to a situation where the Fed is "flying blind" due to a cessation of new data publications.
• Crucial reports like the October 3rd employment report and the October 15th CPI report might not be released.
• This lack of top-tier data could influence the Fed's decision-making at its next meeting, potentially leading to a rate cut if there's no reason to deviate from prior indications.

We think that most likely the impact on GDP will be pretty limited.

Global Market Performance and Tariff Clarity [21:30]

• Asian shares have slid, with pharmaceutical stocks being hit hard, partly due to receding bets on sharp Fed rate cuts after stronger-than-expected economic data.
• In Europe, despite some pharmaceutical names falling, the market is largely in the green, with travel stocks performing well.
• Many European companies and governments are seeking clarity on how President Trump's overnight tariff announcements will affect their existing deals.
• This uncertainty is a reason why European stocks are not showing significant declines.

A lot of European uh companies and governments are looking for clarity after President Trump's announcement on tariffs uh overnight on Truth Social.

Wall Street Opening and PCE Data Focus [22:25]

• US stock futures are showing minimal movement, with the Dow slightly up and the S&P and NASDAQ down slightly.
• Traders will be closely watching the PCE inflation data, which is expected to be released.
• The market has experienced three straight days of losses, influenced by jitters over the sustainability of the AI boom and speculation on rate cuts.
• A significant week is anticipated with upcoming data releases and potential market movements.

Traders will be looking out for that the PCE inflation data they'll be looking at that closely as we will be here on Yahoo Finance.

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