Wall Street CEOs see Some Tariff Impact Filtering Into Customer Behavior

Economic

Stocks

Summary:

Jamie Dimon, CEO of JPMorgan Chase, on Tuesday maintained a cautious stance on the U.S. economy, saying "significant risks persist," while recognizing its resilience.

Some top executives at Wall Street banks have been showing concern about higher inflation and potential deterioration of the U.S. economy as tariffs take effect, noting there has been more cautious behavior from corporate clients.

"We have seen pauses in capex and hiring amongst our client base," Citigroup's Jane Fraser told analysts on Tuesday. "All of that said, the strength of the U.S. economy driven by the American entrepreneur and a healthy consumer has certainly been exceeding expectations of late."

The bank expects consumer spending to cool in the second half if a spike in prices occurs.

Wells Fargo CEO Charles Scharf said he has met with some commercial banking clients and described how they are navigating the new environment.

"Many have found ways to avoid passing the 10% tariffs on to their customers," Scharf said. "At the same time, they are preparing for the downside and are not growing inventories or hiring aggressively and developing contingency plans if the downside scenario occurs", he told analysts.

Scharf also expressed concern about financial assets. "We should recognize there is risk to the downside as the markets seem to have priced in successful outcomes."

All six of the biggest U.S. banks - JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley - beat analysts' profit expectations in the latest quarter, helped by the financial health of consumers and businesses, as well as busy trading desks.

Still, while CEOs touted the resilience of the world's largest economy, some described cautionary measures companies are taking due to uncertainty around tariffs.

U.S. stocks plummeted after President Donald Trump unveiled tariff rates on April 2. They have since recovered, with both the S&P 500 and the Nasdaq Composite hitting all-time highs on June 27 and new records since then.

Still, U.S. companies have navigated an uncertain environment. Trump has paused some tariffs while trade partners negotiate a deal, adding more unpredictability to business.

Following "Liberation Day," global brokerages saw a greater chance of a recession this year, with JPMorgan calculating a 60% probability. Major firms later trimmed their gloomy outlook. JPMorgan sees the recession probability now at 40%.

Many executives said their main concern is how consumers will react if goods prices surge because of tariffs.

Rising prices pulled inflation higher in June. On Tuesday, economists viewed the latest Consumer Price Index as evidence that Trump's rising import taxes were passing through to consumers. It increased 0.3% last month, the most in five months, in line with expectations.

Yields on the 30-year Treasury hit a six-week high after the inflation data on Tuesday. The S&P 500 stock index ended lower.

Jamie Dimon, CEO of JPMorgan Chase, on Tuesday maintained a cautious stance on the U.S. economy, saying "significant risks persist," while recognizing its resilience.

Goldman Sachs CEO David Solomon highlighted the amount of uncertainty going ahead. "Geopolitical concerns have intensified in many regions, but notably in the Middle East, a number of trade agreements have yet to materialize, and that the ultimate impact on growth from higher tariffs is yet unknown," he told analysts on Wednesday.

Overall, top executives said they expect the dealmaking pipeline to pick up in the second half of the year, as business owners get more comfortable with the new tariff environment. Most banks reaped gains from an M&A rebound in the second quarter already.

"Corporations are looking past tariffs to lead their companies through strategic movements and growth," Morgan Stanley's Chief Financial Officer Sharon Yeshaya said.

Source: Reuters

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Manuel

Cryptocurrency

Political

The House approved on July 16 a motion to reconsider the crypto‑related proposals package combining the GENIUS Act, the CLARITY Act, and the Anti‑CBDC Surveillance Act in a 215-211 vote.

Alex Thorn, head of research at Galaxy Digital, said on X that analysts expect a vote on the GENIUS Act today.

Because the House agreed to a Senate‑passed resolution text that bundles the three measures procedurally, but does not itself constitute enrolled statutory language. As a result, the package does not go directly to the President.

The approval positions House and Senate leaders to move the underlying bills individually, fold them into another legislative vehicle, or draft a consolidated conference substitute that can clear both chambers in identical statutory form for presidential action.

Since this was a procedural bundle rather than a single formal bill, the next step requires converting the package into enactable legislation.

Committees or leadership can discharge, mark up, or attach the component measures to moving vehicles.

Crypto Package Setback on July 15

House leaders advanced GENIUS for floor action one day after members rejected a rule that would have packaged the same three digital asset measures with the annual defense appropriation.

President Donald Trump urged Republicans on Truth Social on July 15 to support that combined rule, writing that passage would keep the United States “lightyears ahead” of China and Europe on digital asset policy.

Libertarian‑leaning and House Freedom Caucus members objected to the bundling and pressed for stand‑alone debate time.

Representative Chip Roy told reporter Laura Weiss he wants “a hard ban” on a US central bank digital currency and ranked the CLARITY Act as equally important, saying opponents “need to be dealing with this all at once.”

Source: Cryptoslate

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Manuel

China–U.S. Trade War

Economic

President Donald Trump said on Wednesday the U.S. will probably "live by the letter" on tariffs with Japan and may have another trade deal coming up with India, following his announcement of an accord with Indonesia on Tuesday.

"We have some pretty good deals to announce," Trump told reporters at the start of a meeting with Bahrain's Crown Prince Salman bin Hamad Al Khalifa at the White House. He said he would also discuss trade issues with the Bahraini leader.

"The big one really is going to be on the 150 countries that we're really not negotiating with, and they're smaller — we don't do much business with."

On July 7, Trump announced 25% tariffs on imports from Japan and South Korea, effective August 1. He also announced separate rates for a number of other countries. On Tuesday, he said letters would be going out soon to dozens of smaller countries notifying them their goods would face a tariff rate of over 10%.

He said those smaller countries would receive a "notice of payment" with a uniform tariff rates for the whole group.

The deal with Indonesia is among the handful struck so far by the Trump administration ahead of an August 1 deadline when duties on most U.S. imports are due to rise again. The European Union and Canada, meanwhile, are readying countermeasures if their talks with the U.S. fail to produce a deal.

Trump has said he does not expect to reach a broader deal with Japan.

Trump's trade moves have upended decades of negotiated reductions in global trade barriers. They have unsettled international financial markets and stoked worries about a new wave of inflation.

Kevin Hassett, Trump's top economic adviser, told Fox News that "a whole bunch" of additional trade deals would be announced very soon, but gave no details.

He said Trump's strict August 1 deadline had spurred a flurry of new activity, including talks with countries that had not previously been in touch.

Trump on Wednesday repeated his prediction of a deal with India, which faces a 26% tariff rate, but gave no details. An Indian trade delegation arrived in Washington on Monday for fresh talks, with more officials expected to arrive Wednesday.

European Union trade chief Maros Sefcovic also headed to Washington on Wednesday for tariff talks, an EU spokesperson told Reuters. He plans to meet U.S. Commerce Secretary Howard Lutnick and Trade Representative Jamieson Greer.

Trump has threatened a 30% tariff on imports from the EU from August 1, a level Europe says is unacceptable and would end normal trade between two of the world's largest markets.

Greer, Trump's top trade negotiator, told business executives in Detroit, that he was focused on shrinking the $1.2 trillion U.S. trade deficit and stemming the loss of U.S. advanced manufacturing capacity.

Trump's tariff policies called for a universal tariff rate of 10% on all countries, with higher rates for the most "problematic" ones, including China, which has the highest tariff rate of 55%, Greer said, adding the president was willing to negotiate if countries want to invest.

Source: Reuters

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Manuel

Political

Economic

American companies in China are reporting record-low new investment plans for this year and declining confidence in profits, while uncertainty in U.S.-China relations and President Donald Trump’s tariffs have become their top concerns, according to a business survey released Wednesday.

The companies are also challenged by China's slowing economy, where weak domestic demand and overcapacity in local industries are eroding profitability for the Americans.

“Businesses in China are less profitable now than they were years ago, but risks, including reputational risk, regulatory risk, and political risk, are increasing,” said Sean Stein, the president of the U.S.-China Business Council, a Washington-based group that represents American companies doing business in China, including major multinationals.

The survey, conducted between March and May and drawing from 130 member companies, came after the two countries clashed over tariffs and non-tariff measures, including export controls on critical products such as rare-earth magnets and advanced computer chips. Following high-level talks in Geneva and London, U.S. and Chinese officials agreed to pull back from sky-high tariffs and restrictions on exports, but uncertainty persists as the two sides are yet to hammer out a more permanent trade deal.

Kyle Sullivan, vice president of business advisory services at the USCBC, said more than half of the companies in the survey indicated they do not have new investment plans in China “at all” this year.

"That’s a record high,” Sullivan said, noting that it is “”a new development that we have not observed in previous surveys.”

Around 40% of companies reported negative effects from U.S. export control measures, with many experiencing lost sales, severed customer relationships, and reputational damage from being unreliable suppliers, according to the survey. Citing national security, the U.S. government has banned exports to China of high-tech products, such as the most advanced chips, which could help boost China's military capabilities.

Stein argued that export controls must be very carefully targeted, because businesses from Europe or Japan, or local businesses in China would immediately fill the void left by American companies.

Silicon Valley chipmaker Nvidia won approval from the Trump administration to resume sales to China of its advanced H20 chips used to develop artificial intelligence, its CEO Jensen Huang announced on Monday, though the company's most powerful chips remain under U.S. export control rules.

While 82% of U.S. companies reported profits in 2024, fewer than half are optimistic about the future in China, reflecting concerns over tariffs, deflation, and policy uncertainty, according to the survey.

Also, a record high number of American businesses plan to relocate their business operations outside of China, Sullivan said, as 27% of the members indicated so, up from 19% the year before.

In a departure from past surveys, concerns over China's regulatory environment, including risks of intellectual property misuse and lack of market access, didn’t make it to the top five concerns this year. That's likely a first, and not for a good reason, Stein said.

“It is not because things got dramatically better on the Chinese side, but the new challenges, often coming from the U.S., are now posing as much of a challenge,” Stein said.

Almost all the American companies said they cannot remain globally competitive without their Chinese operations.

A survey from the European Union Chamber of Commerce in China in May found that European companies were cutting costs and scaling back investment plans in China as its economy slows and fierce competition drives down prices.

Source: AP

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Adam

Bond

The market premium for the US Treasury yield edged lower in June, based on analysis using a “fair value” estimate. But with inflation showing signs of heating up due to tariffs, economic conditions don’t look particularly conducive for an ongoing decline in the market premium for the near term.

The current average monthly fair-value estimate for June via several models is 3.77%, which remains moderately below the actual 10-year yield. In yesterday’s trading, the benchmark rate was 4.50% (July 15), a middling level vs. recent history. Relative to the current average fair value estimate, that equates with a market premium of 73 basis points, a middling premium year to date. The fair value estimate is calculated as the mean based on three models run by Capital Spectator.

Based on monthly data, the market premium in June continued to hold in the 50-100 basis point range, which has prevailed so far in 2025. Investors will be keenly watching how tariffs affect the 10-year yield in the weeks and months ahead. Given an expectation that tariffs will remain elevated, it’s reasonable to speculate that the recent range for the market premium will rise as the crowd demands higher compensation for holding US debt. Another factor that looks set to keep the market premium relative high: estimates that the US federal budget deficit will deepen in the years ahead.

US consumer inflation for June rose more than expected at the headline level. The Consumer Price Index (CPI) increased 2.7% vs. the year-ago level, the fastest pace since February. Core CPI, which strips out the volatile food and energy inputs, ticked up to a 2.9% annual rate.

“Today’s report showed that tariffs are beginning to bite,” said Omair Sharif, head of Inflation Insights, “apparel prices rose, household furnishing prices jumped … and recreation commodities increased.”

“Inflation has started a slow climb as signs of tariff-induced inflation are now evident within durable and nondurable imports,” advised Joe Brusuelas, chief economist at RSM US “That prompts an important question: Will service and housing inflation, which is easing but still elevated, cool further to offset what will be a more pronounced increase in durable and nondurable goods? Our sense is that the Federal Reserve will continue to display patience as the direction of inflation evolves,” he added.

Fed funds futures are currently predicting a near-certain probability that the central bank will leave its target rate unchanged at a 4.25%-4.50% range for the upcoming July 30 FOMC meeting, based on CME data. The estimate for the September meeting, which recently had been leaning toward a moderate probability for a rate cut, is now closer to a coin-flip forecast, according to the future market.

source : investing

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Adam

Forex

Large U.S. multinationals should soon start showing the positive effects of the dollar's tumble in recent months, reversing the situation in the past few years when the greenback's strength hurt companies with significant foreign revenue.

The Dollar Index, which measures the buck's strength against six major currencies, is down about 10% for the year, due to rapidly changing U.S. trade policy and worries about U.S. growth and government debt.

About half of that drop happened since April 2, when U.S. President Donald Trump announced outsized import tariffs against trading partners that started a panic about investing in U.S. assets.

For the April-June period, the index, which is heavily weighted toward the euro, averaged 99.74, down 6.5% from the first quarter average, the largest such decline over consecutive quarters in more than 30 years. The effects of the dollar's slide are expected to start showing up in second-quarter earnings season just getting underway.

While that dollar's fall reflects investor worries about the U.S. economy's strength, it can help some companies. A weaker U.S. currency makes it cheaper for multinational companies to convert foreign profits into dollars, while also boosting the competitiveness of exporters' products.

"It's an absolutely huge move," Greg Boutle, head of U.S. equity & derivative strategy at BNP Paribas, said. "It is going to flatter earnings a little bit this quarter and also feed its way to guidance."

The dollar's impact on overall earnings is usually small, but can grow more meaningful when the currency experiences a large swing.

Every 10% drop in the dollar translates into a profit surprise of about 2%, at the S&P 500 level, according to estimates from research and strategy firm Macro Hive.

That would be welcomed by investors increasingly worried about the earnings impact of evolving trade and tariff policies. The second-quarter profit reporting season started this week.

"Whatever the beat, miss or forward guidance was going to be without the FX effect will obviously be a little bit better with it," Boutle said.

The dollar's weakness this year, after a 7% rise in 2024, which hurt corporate results last year, took many market watchers by surprise.

"Certainly a lot of companies came into the year assuming a headwind .... That's flipped. That's a positive for earnings," Patrick Kaser, portfolio manager at Brandywine Global, said.

While earnings growth is expected to decelerate from the first quarter, the weaker dollar could help to offset possible tariff effects.

Analysts are forecasting second-quarter earnings growth of 5.8% year-over-year compared with 13.7% in the first quarter, LSEG data show.

Even in the first quarter, the dollar was a drag on year-over-year S&P 500 earnings growth of about 1%, but now could lift earnings growth by about 0.5% in the second quarter, according to David Lefkowitz, head of U.S. equities at UBS Global Wealth Management.

"If the dollar stays at these levels, the boost on a year-over-year basis will get progressively larger," Lefkowitz said, estimating the dollar could generate a lift to year-over-year S&P 500 earnings growth by about 1% and 1.5% for the third and fourth quarter respectively.

FOREIGN EXPOSURE

S&P 500 companies generate about 41% of their revenue from outside the United States, according to FactSet.

Companies with major exposure to the Asia-Pacific region are particularly in focus with the euro having appreciated 12% against the buck while the yen is up about 6%.

However, not all index constituents are equally affected by the dollar's swings.

The information technology sector tops the list with the most international revenue exposure, at about 55%, followed by the materials and communication services sectors, at 52% and 49%, respectively, according to FactSet.

For instance, on Tuesday, BMO Capital Markets analyst Brian Pitz lifted his second-quarter revenue growth estimate for Netflix to 17.2% from 16.4%, largely boosted by a weaker dollar. Netflix will report results on Thursday.

Investors are divided on the impact of a weaker dollar on stock prices. Some, like UBS's Lefkowitz, believe any benefits are already priced in by Wall Street and will not significantly move markets during earnings reports, but others still anticipate a positive boost.

"A lot of buy-side investors are obviously very acutely aware of this already, but nevertheless, we do think it's not in sell-side consensus numbers," BNP's Boutle said.

"So we just think it creates a mechanical tailwind for earnings."

Still, analysts cautioned against counting on a big lift to stock prices from earnings beats driven by the weaker dollar.

Many companies, including chipmakers, which stand to benefit from a weaker dollar, are also the ones most vulnerable to a hit from tariffs, Macro Hive research analyst Viresh Kanabar said.

Investors may also be preoccupied with the potential impacts companies could see from the recent passage of the sweeping tax-cut and spending bill.

"In an environment where nothing else was going on, the move in the dollar would matter," Brandywine's Kaser said. "With all these other things going on, I don't think the currency effect is going to be as big as in an environment that maybe is quieter from a macroeconomic and geopolitical side of things."

Source: Reuters

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Thomas

Economic

Central Bank

Two-year U.S. Treasury yields tumbled in volatile trading on Wednesday but came off their lowest levels after President Donald Trump said he was not planning to fire Federal Reserve Chair Jerome Powell, refuting media reports that he planned to do so soon.

Two-year yields (US2YT=RR), which track interest rate expectations, fell to a roughly one-week low of 3.86% after CBS and Bloomberg reported that Trump had indicated to a group of House Republicans that he would fire Powell.

The yield was last 5.1 basis points lower at 3.906% (US2YT=RR).

The reports pushed rate cut bets starting in September to 66%, from 54% just before. After Trump said the reports were not true, that probability stood at 60%.

"I don't rule out anything, but I think it's highly unlikely unless (Powell) has to leave for fraud," Trump said, a reference to recent White House and Republican lawmaker criticism of cost overruns in the $2.5 billion renovation of the Fed's historic headquarters in Washington.

Investors sold off the long end of the Treasury curve, pushing 30-year yields to an eight-week high of 5.08%, before they eased back to 5.041% (US30YT=RR).

The benchmark 10-year yieldalso rose but was last down 1.2 bps on the day at 4.477%.

The yield curve steepened to its most since April, with the spread between two- and 10-year yields widening to as much as 61.8 bps. That reflects the sell-off at the long end amid fiscal worries and concerns about inflation going out of control if the Fed under a new chair cuts rates aggressively.

"This story keeps churning so understandably markets are nervous that it could happen sooner rather than later re Trump firing Powell," said Kenneth Broux, head of corporate research and rates, at Societe Generale in London.

"Bond and FX markets do not like the uncertainty. We've had stronger U.S. CPI goods ex-autos just yesterday, so to think that lower rates are the way forward as tariffs seep through consumer prices is not going to reassure."