An Airing of Grievances

Chips drop... The technical picture is better... The U.S. and China might talk trade sooner than later... Powell spooks the market… A look at earnings season... 'Double' guidance... A mixed picture...

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Chipmakers were back in the spotlight today...

New restrictions on U.S. tech imports to China made headlines. And shares of leading chipmakers Nvidia (NVDA) and Advanced Micro Devices (AMD) were among the day's biggest losers, down roughly 7% each. The behavior helped drag down the tech-heavy Nasdaq Composite Index, which finished roughly 3% lower.

The benchmark S&P 500 Index lost 2.2%.

In a Securities and Exchange Commission ("SEC") filing published late yesterday, Nvidia said a new licensing requirement to export high-end chips will cost the company $5.5 billion in previously expected revenue.

AMD said in a similar filing today that it could face an $800 million hit.

So, that's the bad news.

On the other hand, this coverage didn't mention that the Trump administration is reportedly weighing exceptions and trade policy around semiconductors in general.

It also comes after Nvidia just announced a few days ago plans to build "AI supercomputers entirely in the U.S... for the first time" at factories in Texas and Arizona. Production is slated to start within 15 months.

That sounds good.

The technical picture...

On a related note, we've been tracking what Ten Stock Trader editor Greg Diamond has described as "the end of a very long correction," with the semiconductor sector being an important one to watch for signs of a possible turnaround first.

Perhaps counterintuitively, on today's drop of Nvidia and others, Greg saw indications of potentially just that. Greg wrote to subscribers before today's open about overnight trading action...

Nvidia (NVDA) and ASML (ASML) led semiconductor stocks lower. And while the percentage moves look big, the technical charts are shaping up for a buying opportunity.

Greg noted that Nvidia shares – while lower – were "not even close to the major April 7 low. This is likely setting up for a higher low, even if there's more downside over the next week or two." Similarly, Greg wrote later today about another leading semiconductor stock...

With the "bad news" around semiconductors today, we aren't seeing a flush out like one might expect. Here's a daily chart of Taiwan Semiconductor Manufacturing (TSM) to illustrate this point...

TSM bounced off the lower level of "support" within this consolidation pattern. (See the dashed lines above.)

If you remove the "noise" of the news/headlines and focus on the price action and setups, you'll see that this looks very ripe for a breakout.

I (Corey McLaughlin) can't give away the details and instructions, but Greg sent a new bullish recommendation on semiconductors this morning designed to take advantage of this technical setup. Ten Stock Trader subscribers can find the details and all of Greg's latest updates here.

Amid the latest bout of market volatility, Greg has booked trading gains of around 42% in two days, 36% in one day, and 7% in a longer-term position.

Meanwhile, about China...

Some small but potentially important moves have happened in the past 24 hours that could be the first steps to some form of trade détente between the U.S. and China, as Stansberry Research analyst Brian Tycangco pointed out this morning.

One, China has appointed Li Chenggang as its new lead trade negotiator with the U.S. He replaces Wang Shouwen, a veteran who had previously negotiated with the U.S. during Trump's first term. It's hard to say for certain exactly why China made this shake-up, but the timing is likely not a coincidence and figures to inject new energy into any talks. As Reuters reported...

Wang was regarded as a tough negotiator and had clashed with U.S. officials in previous meetings, said a source in Beijing's foreign business community.

"He's a bulldog, very intense," said the source, declining to be named...

The abrupt change took place in the middle of President Xi Jinping's tour of Southeast Asia to consolidate economic and trading ties with close neighbours amid the standoff with the U.S.

Second, when asked about the prospect of future talks with the U.S. at a briefing, Chinese foreign ministry spokesperson Lin Jian didn't say no... but did lay out some preferred ground rules. As quoted in the Associated Press, Lin said...

If the U.S. truly wants to resolve the issue through dialogue and negotiation, it should stop using maximum pressure and stop threats and blackmail. For any dialogue to happen, it must be based on equality, respect, and mutual benefit.

Whatever you might think of that stance, it's a signal that China at least wants to talk.

Perhaps this is an airing of grievances – for instance... 100%-plus tariff rates – before getting to business. But, still, there's plenty of ground to cover before getting to that point. Yesterday, the White House press secretary Karoline Leavitt read this statement from Trump...

The ball is in China's court. China needs to make a deal with us. We don't have to make a deal with them. There's no difference between China and any other country except they are much larger. China wants what we have. Every country wants what we have: the American consumer. Or to put it another way, they need our money.

She immediately followed up by saying, "The president has made it quite clear that he's open to a deal with China, but China needs to make a deal with the United States of America."

The global energy market, at least, appeared to take a bullish view on all this news because of what a thawing of tensions between the world's two largest economies could mean.

Oil prices are up about 2% in the past 24 hours, and energy outperformed the other S&P 500 sectors by far today, rising roughly 1%.

And then there's the Fed...

The indexes hit intraday lows as Federal Reserve Chair Jerome Powell delivered remarks at the Economic Club of Chicago this afternoon. He essentially repeated what he'd said at an event a few weeks ago... but the markets reacted as if hearing the news for the first time.

"Tariffs are highly likely to generate at least a temporary rise in inflation," Powell said, but he added that "the inflationary effects could also be more persistent," depending on their size and scope.

But Powell also said growth could slow, too, and that the Fed's "dual mandate" goals (of stable prices and maximum employment) could end up "in tension." Tariffs are "likely to move us further away from our goals," he said, "probably for the balance of this year."

If that's the case, Powell said the central bank would have to consider which one to primarily address. (The Fed clearly doesn't believe in simply doing nothing.) Of inflation, he said a goal would be to make sure any short-term tariff-related price increases don't turn into a longer-term trend.

That sounds to me like a reason to expect higher interest rates for longer.

For now, Powell indicated the Fed will continue to "wait for greater clarity" before making any policy moves, but it did not sound like the central bank is in a hurry to lower rates.

The 'good' from earnings season...

We're now in the thick of earnings season.

Since Friday, we've gotten several updates from major banks – marking the official start of companies reporting their quarterly financial results. And while there's a lot of chaos in the markets right now, the banks aren't seeing major red flags for folks and the economy just yet...

Let's start with JPMorgan Chase (JPM), which reported earnings on Friday. The company topped Wall Street's expectations, and the stock jumped 4% that day as a result.

Taking a look under the hood, in the first quarter, JPMorgan saw spending on customers' credit and debit cards rise 7% from the same period last year.

This week, Bank of America (BAC) said more of the same – with combined credit- and debit-card spending rising 4% in the first quarter. As CEO Brian Moynihan said in a prepared statement...

Consumers have shown resilience, continuing to spend and maintaining healthy credit quality.

These are two of the largest credit- and debit-card issuers out there, so they've got a good handle on how the American consumer is doing. And right now, they're not seeing major concerns from consumers just yet.

This morning's retail sales report from the Commerce Department, covering March, supports this idea as well. U.S. sales rose 1.4% for the month, above Wall Street expectations for 1.2% growth and well above the 0.2% increase in February.

Of course, there's more to the story...

A lot of this spending is being done by using debt. As our Dr. David "Doc" Eifrig wrote today in his free Health & Wealth Bulletin...

Americans' total credit-card debt is now around $1.1 trillion. And thanks to higher interest rates and higher prices of everyday goods, folks are having a tough time keeping up with their credit-card payments.

Doc also noted that an increasing percentage of folks (around 11%, the highest rate in 12 years) are only making the minimum payments on their cards... And the percentage of credit-card debt that is 90-plus days past due is as high as it was in early 2009 during the great financial crisis.

Companies' 'double' guidance...

CEOs have plenty of concerns with the current climate, too.

In his regular shareholder letter, JPMorgan CEO Jamie Dimon highlighted "considerable turbulence" for the economy in the form of sticky inflation, tariff uncertainty, and other geopolitical tensions.

Moynihan from Bank of America put it a different way, saying the company faces a "changing economy." And Goldman Sachs (GS) CEO David Solomon said today is a "markedly different operating environment" versus just a few weeks ago.

Meantime, bookings from chipmaking-equipment maker ASML (ASML) came in 20% below Wall Street's expectations for the first quarter. In his quarterly statement, CEO Christophe Fouquet said the tariff headlines were an issue the company is closely watching – and the increased uncertainty could bring some downside risks in the coming months.

We wouldn't exactly take those comments as confidence in the direction of the economy at the moment.

Also, while we noted earlier this week that Walmart (WMT) and Delta Air Lines (DAL) have pulled forward guidance because of the uncertainty, United Airlines (UAL) took it a step further.

As the company put it in an SEC filing, the broader economic outlook this year is "impossible to predict this year with any degree of confidence." So United decided to offer a pair of financial projections based on different possible paths the economy takes from here. From its SEC filing...

The Company's guidance is based on consensus market macroeconomic expectations. However, a single consensus no longer exists, and therefore the Company's expectation has become bimodal – either the U.S. economy will remain weaker but stable, or the U.S. may enter into a recession. The Company is therefore providing two separate guidance benchmarks based on these two different macroeconomic views.

United left its earnings forecast from January of $11.50 to $13.50 per share intact. But in the case of a recession, it says earnings per share would come in between $7 and $9. That's a pretty wide gap... And the mere fact that United took this approach shows you the kind of uncertainties all kinds of companies are dealing with today.

We haven't seen this sort of uncertainty about companies' earnings guidance since the early days of the pandemic.

The bottom line...

According to FactSet, analysts still expect S&P 500 earnings to grow 7.3% year over year in the first quarter. While it's lower than the 11% growth the S&P 500 saw in the fourth quarter, it's above the 3.5% growth from the first quarter of 2024. And it would mark seven straight quarters of year-over-year earnings growth.

For now, earnings results show no signs of a significant slowdown. But companies are prepping for continued volatility and uncertainty.

The market is working through the jitters...

While tech stocks notably fell and energy stocks were up, all of the major U.S. indexes ended the day lower. In addition to the Nasdaq and S&P 500, the Dow Jones Industrial Average and the small-cap Russell 2000 Index were off about 1.7% and 1%, respectively.

The CBOE Volatility Index ("VIX") crossed back above 30 today. And gold made another new all-time high, rising more than 3% to above $3,300.

However, another indicator of overall market fear – the high-yield credit spread – has fallen about 50 basis points since its April 7 high. In other words, investors are willing to accept less yield from riskier bonds in relation to safer ones... because they're less concerned about a crash.

And longer-term bond yields were lower (slightly) for a third straight day, meaning bond prices rose. That's distinctly not what was happening during the first half of last week.

This mixed picture of the markets tells us that investors aren't sure what will happen next. Be prepared for a variety of outcomes – including for volatility to stick around until further notice.

New 52-week highs (as of 4/15/25): Agnico Eagle Mines (AEM), Alamos Gold (AGI), Alpha Architect 1-3 Month Box Fund (BOXX), Franco-Nevada (FNV), VanEck Gold Miners Fund (GDX), VanEck Junior Gold Miners Fund (GDXJ), Kinross Gold (KGC), Pan American Silver (PAAS), Sprott Physical Gold Trust (PHYS), Royal Gold (RGLD), Sandstorm Gold (SAND), Sprott (SII), Skeena Resources (SKE), and Wheaton Precious Metals (WPM).

In today's mailbag, feedback on yesterday's Digest... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"I noticed on Jeff Havenstein's table of stocks performance following large 2 day down moves. Most of the green finishes occurred after the Fed manipulated the market with things like [quantitative easing and zero interest-rate policy]. Will they kick the can down the road again?" – Subscriber Ron M.

"Hi, Corey. I am an attorney, and I can tell you with absolute certainty that the lawsuit filed by the small businesses will end up before the Supreme Court... I wouldn't venture a guess as to how this one might come out... Not being a constitutional lawyer, I don't know that the courts have discretion to act in this case if Congress fails to do so. It will be interesting..." – Subscriber Sherwin R.

"To me it was appropriate emergency... [We've had] China's toxic products rammed down our throats... Everything from appliances that either don't work or maybe last two years [to] toxic flooring, toxic clothing, toxic products for EVERYTHING!" – Subscriber Kathy S.

All the best,

Corey McLaughlin with Nick Koziol
Baltimore, Maryland
April 16, 2025