The Trump Stops Here; Heavy (Metal) Levies; SoFi Far, So Good
President takes a hard line on newest tariff deadline; metals targeted and drugs could be next; also, check out this Sarge stock's move.
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Pres. Trump has hardened his stance on trade across several fronts. Markets wobbled a bit as there was a real-time algorithmic response to these announcements, but overall financial markets hung in there much better than one might have expected. Is it that the president has proven time and again that he is adjustable and his stance on trade, despite the rhetoric, is negotiable? Quite possibly.
More than likely, in my opinion, the support seen for risk assets of late probably has more to do with the clarity now provided for American business in regard to future tax rates and deregulation. Just those two items alone go a long way as far as forward looking business planning is concerned. Will tariffs work themselves out? Maybe. Maybe not.
Obviously high tariffs are a negative for multinational corporations that either produce abroad or bring in materials from abroad in terms of margin. The bright side of that is the $100 billion in revenue that tariffs have provided to the U.S. Treasury so far this year. Treasury Sec. Scott Bessent mentioned that number at Tuesday's cabinet meeting.
That's actually quite impressive given that tariff increases only began broadly in early April and a week later, a 90-day pause in the reciprocal portion of those tariffs was announced. Bessent sees tariff revenue for 2025 in its entirety for 2025 rising as high as $300 billion. Remember, the Congressional Budget Office, in a separate estimate, projected tariff-driven revenue of $2.8 trillion over ten years.
For some absurd reason, the CBO did not use this projected $2.8 trillion as an offset against their projected $3.3 trillion budget deficit connected to the "big, beautiful" bill now passed into law, which kind of makes any real economist wonder what they heck they are doing over there. What's going on here is simple. If tariffs don't blow up consumer-level inflation, which the jury is still out on, and they do drive revenue for a perpetually fiscally imbalanced nation, then at least for now, that's a positive.
No More Extensions
On Monday, Pres. Trump sent letters to the leadership of 14 trade partners including Japan, South Korea and Malaysia, who are all key U.S. suppliers. The president is expected to send a letter to the European Union this week. These letters impose tariffs of between 25% and 40% on goods imported into the U.S. from these nations. The president said, "The deals are mostly my deal to them. We're picking a number that's low and fair."
These increased tariffs will be implemented on Aug. 1. The president added that there would be no more extensions beyond that date. Obviously, for nations that have not made a deal with this administration, in the eyes of this administration, a deal will be made for them. So far, only the U.K. and Vietnam have come to definitive trade deals and China has agreed to a framework of sorts that has its own expiration date, which is Aug. 12. So, there will be more China trade headlines coming our way before long.
Copper, Then Drugs?
The White House also announced 50% tariffs on copper imports on Tuesday under Section 232. Section 232 is drawn from the Trade Expansion Act of 1962. That Act allows U.S. presidents to restrict imports of certain goods, if they are deemed threats to national security. Copper soared to record prices in response to the news, though I did not see a date set for implementation.
This president has already applied similar sector tariffs of 25% to the imports of autos, steel and aluminum. Still under consideration are sector tariffs that could be placed on the imports of lumber, pharmaceuticals and semiconductors. The tariffs that had been placed on steel and aluminum are "just" 25%, so there is no standard here. Future sector tariffs could be anything, even potentially much higher.
As far as imported pharmaceuticals are concerned, there will be a grace period for companies to prepare and adjust their supply lines, so there is no date set and there may not be for some time. That said, it is felt that tariffs of up to 200% could eventually be placed upon those imports.
Oil on the Move
Anyone else notice that WTI Crude has been rising in dollar terms since the last week in June, despite that the U.S. Dollar Index itself has been on the rise for most of that time? Despite the fact that OPEC+ agreed over the weekend to increase output aggressively in August? On Tuesday, the Energy Information Administration lowered its forecast for daily U.S. crude oil production to 13.3 million barrels per day. That number ran above 13.4 million for the second quarter of 2025. In the report, the EIA implied that falling oil prices have led to a slowdown in domestic drilling activity.
I have not been in oil of late. I normally maintain a minimal level of exposure in either Exxon Mobil XOM or Chevron CVX, sometimes both. That said, I sat out this prolonged era of sideways to downward movement for those stocks.
I thought it worthy of note that shares of Chevron are positioned to potentially break out of a modest Rising Wedge pattern. Rising Wedges are normally patterns of bearish reversal. If they do break out to the upside, the move could be meaningful. I may initiate a small, long position in CVX this morning. If it fails at the line, I'll be out of the position before I'm down 8% (my rule). If it runs to the upside, I'll shoot for the March high of $169. This is a trade idea, not an investment.
Marketplace
Speaking of Energy XLE, that sector SPDR ETF ran 2.69% on Tuesday, leading just four of the 11 SPDR sector funds that closed out the day in the green. The Utilities XLU and the Samples XLP, both defensive in nature, led the losers on Tuesday, which is actually a market positive in my eyes.
The major indexes just kind of hung around on Tuesday, picking lint out of their navels. The S&P 500 lost 0.07%. Even less impressive was the 0.03% gain posted by the Nasdaq Composite. Small cap stocks outperformed with the S&P 600 up 0.78% and the Russell 2000 up 0.66%. The Philly Semiconductors, at +1.8% led the mid-majors with Intel INTC, GlobalFoundries GFS and ON Semiconductor posting gains of 7.23%, 6.96% and 5.5% respectively.
Minty Fresh
Given the strength in smaller cap stocks, in terms of breadth, Tuesday looks pretty decent in the rear-view mirror. Winners beat losers by a rough 5-to-3 margin at both the NYSE and the Nasdaq. Advancing volume took a commanding 70.2% share of composite Nasdaq-listed trade and a 62.9% share of composite NYSE-listed activity. Aggregate trade increased on Tuesday by 9.6% on a day-over-day basis across those securities listed at the NYE and by 1.1% for those listed at the Nasdaq. Is that meaningful? It means that those traders and investors that had taken some time off last week into Monday actually showed up for work on Tuesday.
Trading Notes
- As implied in my column on Tuesday morning, shares of SoFi Technologies SOFI punched through our $20 target price during the regular session. A token sale was made. A new target price will be set for the lion's share of the position in the near-term future.
- Don't lose focus this afternoon. At 1:00 p.m., the U.S. Treasury Department will raffle off $39 billion worth of new Ten-Year Notes. An hour later, the Federal Reserve will release its minutes from the meeting that culminated on June 18.
Economics
(All Times Eastern)
07:00 - MBA 30 Year Mortgage Rate (Weekly): Last 6.79%.
07:00 - MBA Mortgage Applications (Weekly): Last 2.7% w/w.
10:00 - Wholesale Inventories (May-rev): Flashed -0.3% m/m.
10:30 - Oil Inventories (Weekly): Last +3.845M.
10:30 - Gasoline Stocks (Weekly): Last +4.188M.
1:00 p.m. - Ten-Year Note Auction: $39B.
The Fed
(All Times Eastern)
2:00 - FOMC Minutes.
Today's Earnings Highlights
(Consensus EPS Expectations)
After the Close:
AZZ (1.46)
At the time of publication, Guilfoyle was long ON, SOFI equity.
