Equities dip on Trump`s tariffs and tech losses

General market commentary

US equities retreated for a third consecutive session, with the Nasdaq leading declines despite stronger-than-expected economic data. The final second-quarter GDP reading showed annualised growth of 3.8% against forecasts of 3.3%, supported by resilient consumer spending, while jobless claims also surprised to the downside at 218,000. Nonetheless, investors locked in gains following the recent rally and remained cautious ahead of the potential US government shutdown. The S&P 500 has shed around 1.5% in recent days but remains higher by nearly 12% year-to-date, while Treasury yields have continued to climb, with the 10-year yield edging up to 4.17%. Market sentiment was further tested by mixed signals from the Federal Reserve, as policymakers balance inflation concerns against evidence of labour market softness.

On Thursday, the Dow Jones Industrial Average fell 0.38%, the S&P 500 declined 0.50%, and the Nasdaq Composite also slipped 0.50%. Most S&P sectors ended lower, though energy shares gained 0.9% and technology edged up 0.03%, helped by an 8.9% jump in Intel after reports of potential collaboration with TSMC. Decliners included CarMax, which dropped 20.1% after reporting weaker profits, and Accenture, down 2.7% despite better-than-expected revenues. Valuations remain elevated following recent record highs, and investors are closely watching upcoming corporate earnings and next week’s US jobs report for further direction. Trading breadth was weak, with declining issues outnumbering advancers by more than 3-to-1 on both the NYSE and Nasdaq, while trading volumes exceeded recent averages.

Latest market and economic update

Most Asian equities declined on Friday, led by sharp losses in pharmaceutical shares after President Trump announced 100% tariffs on branded drug imports, while technology shares also retreated on AI bubble concerns. South Korea’s KOSPI fell 2.1%, Hong Kong’s Hang Seng shed 0.8%, and Chinese equities slipped. Japan outperformed slightly as soft inflation bolstered BOJ hold bets.

U.S. equity index futures were flat overnight as markets digested President Trump’s new tariffs and awaited key inflation data. S&P 500 Futures held at 6,659.75, Nasdaq 100 Futures at 24,623.0, and Dow Futures at 46,263.0. Futures steadied after Wall Street’s third consecutive session of losses, pressured by profit-taking, rising Treasury yields, and government shutdown concerns.

European equities fell sharply on Thursday, with the STOXX 50 down 0.6% to 5,435 and the STOXX 600 down 0.7% to 550. Credit-sensitive shares such as Ferrari, Adidas, Stellantis, and Saint-Gobain dropped over 2% on concerns over higher global interest rates, while biotech firms Siemens Healthineers, Sartorius Stedim, and Philips fell more than 3%.

The dollar held firm on Friday, supported by stronger-than-expected U.S. economic data, which reduced expectations for further Fed easing this year. The dollar index remained near a three-week high at 98.47, while the euro slid 0.6% to $1.1665. Markets now price an 87.7% chance of a 25bp Fed cut in October amid focus on the PCE inflation report.

Oil prices rose in Asian trade, holding near seven-week highs, supported by Russian supply risks and a larger-than-expected drawdown in U.S. crude inventories. Brent gained 0.3% to $69.63 and WTI 0.4% to $65.25, set for a weekly rise above 4%. Gains were tempered by Trump’s new tariffs and uncertainty over future Fed rate cuts.

President Trump announced new tariffs from 1 October, including 100% on branded pharmaceuticals, 25% on heavy trucks, 50% on kitchen and bathroom fittings, and 30% on upholstered furniture. Pharma firms investing in U.S. plants are exempt. The measures aim to boost domestic production and security, following prior investment pledges.

Equities on the move

The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news:

Meta has held early talks with Google Cloud about using its Gemini and Gemma AI models to enhance ad targeting, though no deal is certain. The move highlights Meta’s challenges in scaling its own AI despite heavy investment. Both companies, which compete in online advertising, are exploring AI partnerships to boost ad performance and social media features.

Intel has approached Taiwan Semiconductor Manufacturing Company for potential investments or partnerships amid its turnaround efforts, following recent funding from Nvidia and SoftBank. Struggling to compete in the AI-driven chip market, Intel is exploring collaborations, including a possible joint venture with TSMC, which could take a 20% stake.

President Trump signed an executive order advancing the sale of TikTok’s U.S. operations to American and global investors, valuing the company at around $14 billion. Oracle, Silver Lake, and MGX will hold stakes, with ByteDance retaining under 20%. The move aims to protect U.S. data and comply with a 2024 law, though questions over the algorithm remain.

Accenture beat fourth-quarter revenue estimates with $17.6 billion, driven by strong demand for digital and AI services. The company announced a six-month, $865 million restructuring, including severance and divestitures, to improve efficiency and upskill staff. New bookings reached $21.3 billion, while full-year 2026 revenue growth is projected at 2–5%.

Costco Wholesale beat fourth-quarter revenue and profit estimates, with $86.16 billion in revenue and $5.87 per share earnings, as consumers sought value amid inflation and a weaker labour market. Strong private-label sales, local sourcing, and limited product categories helped mitigate tariff impacts. Membership fee income rose 14%, though shares fell almost 1% after the bell.

Starbucks will close underperforming North American stores, including its Seattle roastery, in CEO Brian Niccol’s $1 billion restructuring to boost sales. Around 500 company-operated outlets are affected. The company is investing in faster service, technology, and store improvements. Closures are not linked to union status, though Workers United criticised the move.

The European Commission launched an investigation into SAP SE over potential anticompetitive practices. The probe examines whether SAP restricted competition in maintenance and support services for its ERP software, potentially limiting rivals and raising costs. SAP said it will cooperate with the commission, maintaining that its policies comply with competition rules.

Chinese EV maker BYD outsold Tesla in the EU for the second month running, with August sales up 201%, giving a 1.3% market share, while Tesla fell 36.6% to 1.2%. EU car sales rose 5.3%, led by electrified vehicles, which accounted for 62.2% of registrations, with gains for Stellantis, Volkswagen, and Renault.

Barclays warned that the AI-driven market boom could falter if hyperscaler data centre spending slows. While not a bubble yet, valuations are vulnerable, with potential multiple compression of 15–20%. Key risks include power constraints, efficiency gains reducing compute needs, and funding gaps, impacting technology, energy, industrials, and networking sectors.

Bank of America analysts estimate the quantum computing market could reach $4 billion by 2030, up from $300 million in 2024, though growth faces scaling challenges. While applications in finance, such as HSBC’s bond-trading pilot with IBM, show promise, broader practical use remains limited. Public players include D-Wave, Rigetti, IonQ, and Quantum Computing Inc.

Analyst Gene Munster views Apple’s reported investment talks with Intel as offering limited strategic benefit, given Apple’s M-series chips and strong TSMC partnership. He cautions that such a move could complicate Apple’s supply chain, noting investor scepticism reflected in the muted share response, though geopolitical and domestic investment factors may still play a role.

Analysts at Yardeni Research and Barclays highlight Nvidia’s AI growth is closely tied to investments in clients like OpenAI and CoreWeave, creating potential risks if funding slows. Yet surging AI demand supports its central role in the ecosystem. Barclays raised its price target to $240, forecasting EPS growth from $3 in 2025 to $6.93 by 2027.

MoffettNathanson reaffirmed a Buy on Alphabet, raising its target to $295, citing AI leadership, reduced regulatory risks, and multiple growth drivers. Analyst Michael Nathanson highlighted strengths in search, Google Cloud, YouTube monetisation, and Waymo. Trading below peers, Alphabet is seen as a leading contender for the world’s most valuable company.

Bernstein upgraded Freeport-McMoRan to Outperform, saying investors overreacted to a mudslide halting Grasberg mine operations, which represent 3% of global copper supply. Output is expected 35% lower in 2026, returning to normal in 2027. Antofagasta was cut to Market Perform after shares exceeded target prices amid the copper rally.

Scotiabank upgraded CrowdStrike to Sector Outperform, raising its price target to $600, citing recovery from last year’s service outage and strong market positioning. Analysts expect annual recurring revenue growth of 25–30% in fiscal 2027, driven by contract renewals, expanded customer spending, and new AI security tools, with margins and cash flow targets reaffirmed.

Redburn initiated Oracle coverage with a Sell rating and $175 target, citing overestimated cloud revenue value. Analysts argued Oracle’s single-tenant deployments resemble financing rather than cloud services, with limited upside as OpenAI captures most gains. Fixed costs, capital intensity, and R&D requirements further constrain profitability, challenging market expectations.

Seaport Research Partners upgraded Intel to Neutral from Sell, citing near-term support from potential investments and stop-gap solutions for its fabrication plants. Analyst Jay Goldberg warned that long-term challenges remain, including margin pressure, unclear AI strategy, and structural issues, with share gains likely driven by short-term headlines rather than fundamentals.

Bernstein reiterated an Outperform rating on Novo Nordisk, highlighting its GLP-1 diabetes and obesity portfolio, including oral semaglutide. New SOUL trial and real-world data confirm cardiovascular benefits and competitive obesity efficacy. Oral semaglutide, launching in the U.S. early 2026, is forecast to achieve $6.4 billion in 2030 sales, well above consensus.

Bank of America reiterated a Buy on Siemens Energy, raising its target to €150 and citing three drivers: higher mid-term targets, resumed dividends/buybacks, and progress ending Wind cash burn. Analysts forecast strong sales, profit growth, and margins, with free cash flow breakeven in Wind by FY27 supporting an attractive FCF yield.

MoffettNathanson upgraded Chewy to Buy, raising its price target from $33 to $48, citing a recovery in U.S. pet household formation. Analysts expect around 800,000 net customer additions annually through 2025–2027, driven by the Chewy+ rollout. Despite near-term margin dilution, growth and EBITDA are projected to exceed consensus by 2026.

Upcoming data and events

Today’s economic data releases include the Core PCE Price Index, a key inflation measure watched by the Federal Reserve, and consumer sentiment readings from the University of Michigan.

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