Wall Street cuts Q2 outlook 05/05/2025

HOT stories for today

US market wrap:

• On Friday, the S&P 500 notched its ninth consecutive gain, marking its strongest rally since 2004. Robust performance in the tech sector and upbeat first-quarter earnings supported the market, as consumer spending remained resilient despite lingering fears of future inflation. Hopes were lifted by trade discussions, with the U.S. and China quietly slashing tariffs by 25% and showing a willingness to reengage in negotiations. Solid earnings from software technology companies helped sustain the S&P 500’s upward momentum.
• Stocks bounced back from their post-Liberation Day dip, bolstered by encouraging signals from both the White House and international sources suggesting trade talks could soon commence with Europe, Canada, and China. Looking ahead, the Federal Open Market Committee is convening this week to determine interest rate policy on Wednesday. Although markets currently estimate only a 1% chance of a rate cut, the final decision remains uncertain. In a historic shift, Warren Buffett is expected to formally recommend Greg Abel as his successor to lead Berkshire Hathaway.

Wall Street cuts Q2 outlook
 

• Wall Street analysts have significantly lowered second-quarter earnings forecasts for S&P 500 companies, cutting estimates by 2.4% from March 31 to April 30, 2025—exceeding the 20-year average reduction of 1.9%, according to FactSet. This downward revision reflects mounting concerns over inflation, new tariffs, and broader economic uncertainty.  The U.S. economy contracted in Q1 for the first time in three years, primarily due to increased imports ahead of anticipated tariffs, which widened the trade deficit. Despite this, key indicators such as personal income, consumer spending, and employment remain robust.
• President Trump's recent imposition of expansive tariffs has exacerbated market anxiety. While companies like Amazon report strong demand and minimal price impacts thus far, analysts express concerns about long-term implications, especially for businesses reliant on Chinese imports, including e-commerce and toy manufacturers like Mattel and Hasbro.  Looking ahead, upcoming earnings reports from major firms such as Disney, Uber, and Rivian will provide further insight into consumer spending trends and sector-specific effects of ongoing trade tensions.
   

Stocks on the move:

• Block (XYZ) — Shares of the payments company plunged 20.4% after posting underwhelming first-quarter revenue and offering a subdued outlook amid broader economic uncertainty. Block reported sales of $5.77 billion, falling short of the $6.20 billion estimate from LSEG analysts.
• Roku (ROKU) — The streaming service provider's stock declined 8.5% following its Q1 earnings release. Roku recorded revenue of $1.02 billion, slightly ahead of FactSet's $1.01 billion forecast, but its adjusted EBITDA of $56 million missed the projected $57 million.
• Take-Two Interactive (TTWO) — The video game developer saw its shares drop roughly 6.7% after delaying the launch of the next Grand Theft Auto title to May 26, 2026. The release had previously been expected this fall.
• Nvidia (NVDA) — Shares of the chipmaker rose 2.5% following a report from The Information that Nvidia is developing customized semiconductors for China in response to U.S. export restrictions.
• Duolingo (DUOL) — The language learning platform’s stock surged more than 21% after the company issued an upbeat revenue outlook that exceeded market expectations.
   

Today’s action
 

• Markets in Japan, South Korea, Hong Kong, and mainland China were closed Monday due to public holidays. Australian equities declined after Prime Minister Anthony Albanese secured reelection, while broader Asia trading remained muted due to the regional closures. 
• In the U.S., stock index futures edged lower Sunday night following a strong performance last week, where the S&P 500 marked its longest winning streak in 20 years. Futures linked to the S&P 500 slipped about 0.4%, while Dow Jones Industrial Average and Nasdaq-100 futures each dipped 0.3%. Investors now turn their focus to the Federal Reserve's upcoming two-day policy meeting beginning Tuesday. According to the CME Group’s FedWatch Tool, markets are pricing in only a 3.2% chance of a rate cut. However, traders will closely monitor any guidance from the Fed or Chair Jerome Powell regarding economic conditions and the ongoing impact of global trade tensions. On the corporate earnings front, On Semiconductor (ON), Tyson Foods (TSN), and Loews Corp. (L) are scheduled to release quarterly results before Monday’s opening bell.

Watchlist: ON, TSN, L, PLTR, CMI, BNTX, NVDA, AMZN, TSLA
 

Bitcoin

• The leading cryptocurrency retreated slightly over the weekend, slipping back to its breakout level around $95,000. Bulls will need to defend this key support to maintain upward momentum. Crypto economist Timothy Peterson suggested on X that Bitcoin could climb to a new record high of $135,000 within the next 100 days, contingent on market conditions. He noted that a drop in the CBOE Volatility Index (VIX) below 18 could ignite a "risk-on" sentiment favorable to Bitcoin.
• In the short term, crypto markets are expected to remain turbulent as investors await the Federal Reserve’s rate decision on May 7. While CME Group’s FedWatch Tool signals a slim chance of a rate cut, the outcome may spark significant market movement.
  Watchlist: Bitcoin: 74 000-100 000, Ethereum:1500-2800, Solana: 80-180
   

Forex
 

• The Japanese Yen (JPY) strengthened for a second consecutive session on Monday, supported by renewed safe-haven demand as geopolitical tensions and uncertainty over U.S. trade policy overshadow recent signs of easing between the U.S. and China. The USD/JPY pair retreated toward the 144.00 level during Asian trading, weighed down by modest U.S. Dollar (USD) weakness. However, gains in the Yen may be limited by the Bank of Japan’s recent dovish policy stance, as attention now turns to this week’s Federal Reserve meeting.
• Meanwhile, the Euro (EUR) rebounded modestly against the Dollar, with EUR/USD climbing back toward the mid-1.1300s. The move comes as fresh USD selling emerges, helping the pair recover from last week’s three-week low near 1.1265. Still, the recent break below the 100-period SMA on the 4-hour chart suggests bulls should tread cautiously, with bears potentially waiting for a drop below 1.1265 to re-enter.
  Watchlist: EUR/USD: 1.0700-1.1600, USD/JPY: 140-144

Basic Materials
 

• Gold (XAUUSD) regained upward momentum on Monday, trading above $3,250 during the Asian session as renewed geopolitical tensions boosted safe-haven demand. Ongoing conflicts in Ukraine and the Middle East, along with uncertainty surrounding former U.S. President Donald Trump’s proposed tariffs, continue to weigh on market sentiment. A weaker U.S. Dollar, which remains subdued below recent highs, further supports gold prices. Traders now await this week’s two-day Federal Reserve meeting for policy direction.
• WTI Crude, on the other hand, dropped nearly 4% to around $55.75 as OPEC+ announced plans to accelerate production increases. The group will boost output by an additional 411,000 barrels per day in June, following a surprise hike in May. According to Reuters, this could add up to 2.2 million barrels per day by November, adding pressure to prices already facing headwinds from sluggish global demand. Tensions also persist, with Iran warning of retaliation if attacked by the U.S. or Israel.
  Watchlist: GOLD 2600-3500, US Oil: 55.60-70.00
   

Key Economic Events Today:

EST time
09:45 am: USD Final Services PMI
10:00 am: USD ISM Services PMI

 

Earnings

BMO (Before the US Market opens)
CMI               Cummins Inc.
BNTX            BionTech SE
TSN              Tyson Foods
L                    Loews Corp.
ON                ON Semicon. Corp.
AMC (After the US Market closes): PLTR, VRTX, WMB, F
 

The TEFS Analyst team wishes you a successful day!