Trump's draconian tariffs, markets fall (0:30). Declines in retail and tech (2:50). Tesla stock price, Q1 deliveries, Musk murmurs (6:20). Retail bright spots and low lights (9:30). AI spending, guidance coming (13:20). Macro data points (15:25).Show Notes:Tesla: A Nuanced Bull/Bear ConversationNasdaq ends down 6%, S&P logs worst day since 2020 as Trump tariffs flare trade-war fearsThe full list of U.S. tariff rates and the countries targetedEpisode transcripts: seekingalpha.com/wsbSign up for our daily newsletter here and for full access to analyst ratings, stock quant scores, dividend grades, subscribe to Seeking Alpha Premium at seekingalpha.com/subscriptions.
Chapter 1: What are the effects of Trump's tariffs on the markets?
Brian Stewart, welcome back to Wall Street Breakfast. We're in some times, aren't we, friend?
Indeed, yeah. Busy times.
Yeah, busy times, busy times, especially as the director of news. So tariff talk all around. What do you got for us? What would you share with investors?
Yeah, obviously. So we're recording this on Thursday as the markets fall following the tariff announcement last night. The tariffs were much more draconian than people had predicted. So the market is adjusting accordingly. If you're taking the optimistic view of the process that we're now involved in, Trump is in the process of doing a negotiation tactic.
He's playing chicken with the rest of the world. These are sort of opening gambit to negotiations. And so over the next few weeks, we're going to see these mitigated or exceptions made to the point where they won't be as aggressive as they are now.
The pessimistic view is that Trump isn't interested in coming to any sort of reasonable terms with countries, that there's a more kind of political component to the tariffs more than economic, and that they could conceivably spark a worldwide recession in the near future.
What are the things that investors should be most paying attention to as they navigate these unprecedented times in this market volatility?
Yeah, I think that the news flow over the next foreseeable future is going to be kind of how sticky are these tariffs? Is this the end state that we're just going to put these tariffs in place? Just to give some perspective to listeners who haven't sort of dug into the details yet, it's 10%, kind of a minimum. Every country gets at least 10% tariff. And then through a...
a equation related to the trade deficit that we have with various countries, a tariff rate sets. And so the highest rates on countries like Cambodia is 49%. And so I believe doing this off top my head, but I think China was 34% on top of the 20% that we'd already put in place. So extremely high in sort of normal sort of economic structures, the
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Chapter 2: How are retail and tech sectors reacting to the tariffs?
So just to give some examples, like Five Below, a low price retailer that gets a lot of items from overseas retailers, China, Taiwan, Vietnam, those kinds of places. So it's down 26% as we're speaking. Gap is down 18%. Kohl's is down 24%. Victoria's Secret's down 20%. So companies that have a supply chain that's very, very reliant on those countries are going to see a hard hit.
We're also seeing a lot of tech stocks get hit. One of the standouts is Apple, which is down about 8%, getting back to levels last seen last summer. Also just kind of doing a quick check of the Magnificent Seven. We have Amazon down 7%, Nvidia down six, Meta down six. They're all kind of reaching
september levels one i guess you'd call it a standout in terms of how well it's holding up today is microsoft it's only down one percent today but it's just off a 52-week low down 10 so far this year so it's already kind of priced in some of this action so we're seeing kind of a broad-based focused on consumer and technology stocks as like i said we're just adjusting to the reality and kind of trying to figure out what the reality is going to be going forward
Before we leave the tariff conversation in favor of some stock specific news, anything noteworthy to point out about the tariffs on the uninhabited islands?
I mean, not economically. I think if you want to take that as a signal as to the process by which these tariffs were arrived at. It seems to be there was a spreadsheet somewhere and there was equations used and sort of spit out. And there wasn't sort of a review process to see sort of the reality of the situation on the ground and what this would mean and what this... meant.
And so if you want to look at it as a glimpse as to the Trump administration's process to putting these in place, and if you're an optimist, maybe that points to the idea that this is just an opening gambit, that we were setting a number. We need that number to be justified in some sort of way. So here it is. And then now we're going to talk to the individual countries.
Obviously, you can't talk to an uninhabited island, but those tariffs aren't going to affect consumers anyway. So we'll kind of see how things shake out. Generally speaking, looking back at past administrations, they've been very responsive to the stock market. That's one of the kind of main signals that...
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Chapter 3: What are the implications of Tesla's Q1 delivery numbers?
presidential administrations have used to determine popularity in the absence of, you know, when elections are far away, if you want to sort of judge popular opinion, stock market is one of the indexes that they use. So traditionally, historically, a move like today would have the White House discussing internally next moves. I'm not sure how responsive the Trump administration is.
We just don't know. The administration's new. It hasn't changed policy much in response to previous stock market dips so far this year. So it remains to be seen exactly what the next steps are.
So speaking of not knowing what the next steps are and having a lot of drama around the numbers and volatility are the Tesla Q1 delivery numbers that we saw yesterday. We did a special Bull Bear Investing Experts podcast episode around Tesla stock and There was some questioning of why the stock was moving up. Was it because of that political report? Is Elon Musk leaving Doge? He says no.
Hard to know exactly which sources to read when. But what would you say out of those numbers and what would you say for Tesla followers?
So just to review the action yesterday. So Tesla was down early in the day based on the delivery numbers. As you pointed out, there was a bounce back later and the stock was higher, ended higher before being down today, kind of after the tariff announcement. I think part of that was there was already an expectation in the market that the Q1 deliveries were going to be bad.
They were worse than expected. And so you saw a dip, but a lot of that had already been priced into the stock. And so I don't know that deliveries were ever going to have a lingering impact on the stock price. I think that was always going to be sort of the jumping off point for whatever was coming next. I do think that Politico story did provide a catalyst on the upside.
I'm using Dan Ives now as sort of a bull sentiments index. He's been pounding the table that... Musk's activity in Doge have been very problematic for Tesla's brands and that he needs to step away from Doge and come back to the company and take the steps necessary. He calls it a moment of truth for Musk. So if you kind of take that as sort of the bull's view of the stock, that's a necessary step.
You can see why the stock would rally on the idea that he was stepping back from Doge and moving back to sort of full-time Doge. management of Tesla. Later, after that report came out, both the White House and Musk denied that it was true. It's not clear how much of that is saving face, how much of that is truly Musk's intent.
The bottom line is it's not clear right now what Musk's plans are going forward, how much time he plans to spend at Doge, how much time he plans at Tesla. That uncertainty itself is a problem for Tesla. So a lot of the future of Tesla depends. And I'm talking about the near-term future.
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Chapter 4: Which retail companies are thriving amidst market volatility?
So when companies have too much inventory, it'll take it off its hand and sell it at discounted prices. That's its business plan. So because it has this flexible supply chain, it's not as plugged in to... it can move around in response to these tariffs. It's also benefiting from the general move to lower price options.
So it's been one of the standout winners in the retail space today and in the near term. You also see companies like Costco and Walmart. Costco's up slightly today and Walmart's down slightly, but down much less than the market in general. Also Walmart's up about 5%. over the previous five days anyway.
Walmart took a dip back in February after it issued soft guidance, but in recent days it's reportedly been pushing its Chinese suppliers to lower costs. So I think there's a bet that companies like Costco and Walmart in a situation where all retailers are gonna be hurt by these tariffs because their supply chains are going to be affected by much more expensive
that companies like Costco and Walmart are large enough that they can negotiate better prices. So even though the entire industry is going to be a general loser relative to their competitors, Walmart and Costco can get better deals and so therefore can still offer lower prices.
And what would you say about the stocks that have been down this week? Restoration Hardware is a big one, but many of the tech names, as you mentioned, are also significantly down. How would you contextualize that for investors?
So RH, Restoration Hardware, is down about 39% today. I mean, that's partially tariff-related, but it had negative earnings as well. It missed expectations and gave soft guidance. It's described the current housing market as the worst housing market in almost 50 years. It's a luxury furniture maker, retailer, luxury furniture retailer. And it's just in the perfect storm.
Everything's going wrong for macro speaking for RH. And so you can see it losing a large chunk of its value today. In terms of the other tech companies, there's Besides the supply chain issues that are being affected by the tariff, there's also the fear that the AI build-out is not going to be as aggressive as originally hoped. I think there's just a general moving away.
There was already a general moving away from tech into more defensive. People were hedging their bets a little bit on tech. And so I think this has only exacerbated this. As we discussed during the sell-off that happened earlier this year, if you're bullish long-term, bullish generally, the best case scenario is that it falls quickly and finds a bottom quickly and then starts to recover.
So in a certain sense, if you want to take sort of a reversely positive look at a day when The NASDAQ at its lowest point was down more than 5%. You can say we washed out all the concerns and now we can have a better base to build on. So if you're a tech bull, this is a great chance to get tech companies at a reduced price.
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