The Week Ahead

It would be tough to match last week’s craziness, and while still pricing in historically high volatility traders are looking for this week to be slightly less chaotic. We’ll see over the next few days if they are correct. This weekend did have chaos in the form of tariff exemption confusion. Despite the late Sunday backpedaling, futures followed through on the electronics/smartphones exemptions news to open slightly higher Sunday evening. Some headlines:

• Trump Exempts Some Electronics, Including Smartphones, From Tariffs on China (WSJ Video)

  • President Trump’s tariff exemptions on some electronics are the latest twist in U.S. trade policy and could benefit companies such as Apple, Microsoft, Dell, Samsung and others that manufacture some products abroad.

  • Trump stressed in a social-media post Sunday that "NOBODY is getting 'off the hook'" on tariffs and that levies on tech products are simply moving to a different bucket.

• Shifting Signals on Tech Tariffs Fuel Fresh Trade Uncertainty. (WSJ)

  • A string of mixed signals from the Trump administration over the weekend regarding tariffs on smartphones, laptops and other electronics fueled fresh uncertainty over U.S. trade policy, setting up another chaotic week on Wall Street and in Washington.

  • Commerce Secretary Howard Lutnick on Sunday warned that many tech products will still face separate levies in a month or two as part of a trade investigation into semiconductors under Section 232 trade law.

• Tim Cook’s ‘Long Arc of Time’ Prepared Apple for the Trade War (WSJ)

  • Tim Cook and his adherence to the “long arc of time” won—again. The iPhone is exempt from the White House’s latest escalation of the trade war with China, the Trump administration quietly announced late Friday.

• China Halts Critical Exports as Trade War Intensifies (NYT)

  • Beijing has suspended exports of certain rare earth minerals and magnets that are crucial for the world’s car, semiconductor and aerospace industries.

• Trade Wars Are Easy to Lose (Foreign Affairs)

  • If the administration’s logic is correct, then China, Canada, and any other country that retaliates against U.S. tariffs is indeed playing a losing hand. But this logic is wrong: it is China that has escalation dominance in this trade war. The United States gets vital goods from China that cannot be replaced any time soon or made at home at anything less than prohibitive cost. Reducing such dependence on China may be a reason for action, but fighting the current war before doing so is a recipe for almost certain defeat, at enormous cost.

• Markets Investors are growing concerned about a U.S. asset exodus as Treasurys and the dollar decline (CNBC)

  • “The market is re-assessing the structural attractiveness of the dollar as the world’s global reserve currency and is undergoing a process of rapid de-dollarization. Nowhere is this more evident than the continued and combined collapse in the currency and US bond market as this week comes to a close,” Deutsche Bank strategist George Saravelos said in a note to clients Friday.

If you’re confused on the first couple of headlines above you are not alone. As of Saturday it looked like a fairly clean reversal on tariffs affecting much of big tech. But the waters were muddied once again on Sunday.

We wrote in this space last Sunday that “we enter the week with implied volatility at panic levels”. We got that and more early in the week where not only did equities make a new low but treasuries went wild enough to cause a pivot in DC. This week’s pricing is still looking for extreme volatility but a bit outside of panic mode for now. Additionally, markets are closed on Good Friday into the 3 day Easter Weekend. Here are the expected moves for the week based on Friday’s option closing prices (last week’s SPX options were pricing a 6% move):

This Week’s Expected Moves:

• SPX/SPY: 4% (5150-5575)

  • QQQ: 4.5%

  • IWM: 4.7%

  • TLT: 2.8%

  • USO: 5%

A 4% expected move for a four day week is still extremely high with overnight gaps of a multiple percentage points and intraday swings of the same expected. But for now it’s a bit different than the panic mode of last week. What could change that would be more worries in the dollar or treasuries.

This week’s economic calendar sees important Retail Sales numbers as well as a more from Fed Chair Powell:

Economic Calendar: 

• Monday: 

  • All Day - Fed Walker, Harker, and Bostic Speeches

• Wednesday: 

  • 8:30am -Retail Sales

  • 2:30pm - Fed Chair Powell Speech

• Thursday:

  • 8:30am - Housing Starts

  • 8:30am - Initial Jobless Claims

  • 9:15am - ECB Press Conference

• Friday: Markets Closed

We are right back in it on earnings season, some of the big names reporting this week include more big banks like Goldman, Citi and BAC, a semiconductor update from Taiwan Semi, and in an odd twist Netflix reporting after hours Thursday into a 3 day weekend:

Earnings (with expected moves):

• Monday

  • Premarket: GS 6.5%

• Tuesday

  • Premarket: C 6.5%, BAC 6.2%, PNC 6%, JNJ 3.9%

  • After hours: UAL 11.2%, IBKR 7.5%

• Wednesday

  • Premarket: ASML 7.9%, ABT 5.1%

• Thursday

  • Premarket: TSM 7.4%, UNH 4.8%, AXP 6.7%

  • After Hours: NFLX 8%

Again, the thing that matters the most this week is still tariff headlines. One thing that has changed however is we may have transitioned from a period of time where those headlines affected the market overall, to one where it’s more sector and even company specific. Quite the time to be trading stocks like Apple, for instance.

We’ll have continuing coverage all week. Remember to send in questions for the shows and we’ll try to get to them on air!

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