Morning Brief: The IMF waves the “no recession here” flag, tariffs be damned

Good morning, everyone — and welcome to the last Friday of what’s shaping up to be the worst quarter for stocks since 2023. Top of mind remains Trump’s erratic trade war, with his latest executive order slapping a 25% tariff on all cars imported to the U.S.

Although there are still a lot of unknowns, UBS analyst Joseph Spak told me there will be pain — except for carmakers that build 100% of their vehicles in the U.S., like Tesla and Rivian.

The auto tariff is a fresh reminder that Trump might not be bluffing after all. And Wall Street is starting to wake up to the fact that he doesn’t seem to care as much about the market blowback as they once thought.

Today, all eyes are on inflation numbers, which might be enough to ease some of the anxiety heading into next week’s so-called “Liberation Day.”

Five things to know before opening bell

• Yesterday’s jobless claims might have signaled the labor market’s resilience, but the real test for the economy in these nerve-wracking times could come later today with the latest inflation numbers. The personal consumption expenditures index will offer a look at February’s price growth — excluding food and energy. Economists expect a monthly rise of 0.3%, matching January’s pace, and a 2.7% annual increase — just a hair above last month.
• It might be used to mint the practically worthless penny, but copper is the hottest commodity these days. As buyers stockpile the red metal ahead of potential tariffs, copper hit an all-time high in New York while prices dipped in London — a split that echoes recent moves in gold. Bank of America’s head of metals research, Michael Widmer, warned before the tariffs that “you need to see more investment in supply, and if that doesn’t happen, then I think we will see an increasingly supply-constrained demand.”
• Speaking of gold, analysts think $3,000 an ounce might just be the start. Goldman Sachs raised its already bullish year-end forecast from $3,100 to $3,300, expecting the metal to keep benefiting as investors flee more volatile corners of the market.
• Investors will also be looking for more signals from the Fed today, following recent comments from Chair Jerome Powell and other central bank officials. Atlanta Fed President Raphael Bostic is scheduled to speak later today at a time when cutting rates quickly seems less and less on the table.

• So what exactly are Powell and the rest of the Fed saying these days? You probably won’t be surprised to hear that one word keeps coming up: uncertainty. Powell used “uncertain” at least 22 times in his remarks last week. A few days later, New York Fed President John Williams said it a modest dozen times — though his speech was, quite literally, titled Certain Uncertainty. If you’re not sure what to make of this economy, at least you’re in good company.

The IMF waves the “no recession here” flag, tariffs be damned

No market forecast these days feels complete without a clear caveat about the still-uncertain impact of President Donald Trump’s trade policy.

But while the International Monetary Fund is clearly keeping a close eye on tariff threats and looming deadlines, its latest forecast isn’t quite as gloomy as some investors might have expected.

A bust might not be inevitable

When the Conference Board releases its consumer expectations index, a score below 80 is seen as a potential warning sign of recession. Earlier this week, the index dropped to a 12-year low of 65.2.

Adding to the pessimism are forecasts like that of Euro Pacific Capital CEO Peter Schiff, who’s long warned of a recession this year. He’s particularly wary of a crisis of confidence in the U.S. dollar — and the economic fallout that would follow.

But not everyone agrees, and there’s even a bit of encouraging news for investors, if they know where to look. That brings us to the IMF’s Julie Kozack, who offered a dose of cautious optimism about the longer-term stability of the U.S. economy.

She acknowledged there could be a “significant adverse effect” from Trump’s tariffs if they remain in place for an extended period. Still, she emphasized the fund’s belief that the economy remains “remarkably strong” despite lingering uncertainties on multiple fronts.

Kozack’s comments come with the admission that “there have been many developments” since the IMF raised its annual U.S. growth forecast by half a percentage point in January.

“Large policy shifts have been announced, and the incoming data is signaling a slowdown in economic activity from the very strong pace of 2024 … [but] recession is not part of our baseline,” she said.

Digging into the latest data

Investors may have more than just the IMF’s tone to help them sleep this weekend. While it remains to be seen whether today’s PCE index offers a surprise to the upside, some of Thursday’s numbers pointed to stability — if not outright strength.

An upward revision to Q4 GDP and solid jobless claims helped moderate some of the day’s losses on Wall Street, though all three major indexes still finished in the red.

“The labor market is far stronger and more resilient than folks appreciate,” said Harris Financial Group’s Jamie Cox in a new note to investors.

So — is a recession coming?

That’s the question on many investors’ minds, but we may not get a clear answer anytime soon. As Cox put it: “Hard to see recession in these data, but the real test will be the initial read on Q1 2025 GDP, when the trade shocks feed into the numbers — that may not look so rosy.”

Up like a rocket, down like a rock — Semiconductor stocks continue to bleed

After helping buoy the broader stock market in recent years, tech stocks — especially in the AI and semiconductor space — have been anything but stable lately.

Volatility across the sector has become the new normal, and yesterday’s losses extended that trend, with ripple effects likely to continue today.

Investors are also looking ahead to Tuesday, when the Trump administration is expected to unveil new trade measures — dubbed “Liberation Day” — that could include fresh tariffs.

What’s moving the market

Semiconductor stocks slumped Thursday, driven by a mix of macro pressure and company-specific news. Alongside familiar issues like shifting demand and lingering supply-chain concerns, here are a few standout moves:

• Kyndryl (KD) plunged after allegations surfaced that the data center firm manipulated financial data
• Advanced Micro Devices (AMD) slipped more than 3% following an analyst downgrade
  
• Semtech Corp (SMTC) dropped roughly 4.5% amid continued operating losses

But as usual, much of the conversation in the chip sector centers around Nvidia — the AI powerhouse that’s recently been showing signs of strain.

Nvidia’s next big test?

Uncertainty around Tuesday’s trade announcement is weighing heavily on sentiment. While it’s still unclear whether Taiwanese imports will be directly affected, Nvidia (NVDA) has already taken a hit. The stock fell more than 5% on Wednesday and lost another 2% Thursday, closing at $111.43.

That marks a nearly 27% drop from its recent peak, prompting some investors to eye the stock as a potential buying opportunity. And with a jaw-dropping 21,000% return over the past decade, the “Magnificent 7” member still commands major attention from analysts and traders alike.

Still, even a tech titan can’t coast forever. Whether tariffs — or broader macro headwinds — will chip away at Nvidia’s edge remains to be seen.

Winners and losers emerge as Trump’s auto tariffs come into focus

At first glance, it might seem like domestic automakers would gain from President Donald Trump’s newly announced 25% tariff on imported vehicles. But that’s not how markets reacted Thursday, following the late-day announcement.

Who’s feeling the impact?

The “Big Three” U.S. automakers — Ford (F), General Motors (GM), and Chrysler parent Stellantis (STLA) — all closed lower. GM took the biggest hit, falling around 7% by the end of the session.

Foreign carmakers also suffered: BMW, Toyota, and Hyundai each logged notable losses.

But the effects won’t stop at the company level. According to industry analysts, the cost burden will likely trickle down to consumers.

“It’s going to be expensive,” said Ivan Drury, Director of Insights at Edmunds.com. Even before the added costs reach dealers, many may start trimming incentives or finding other ways to boost revenue — without changing the sticker price.

“It’s too soon to tell how much,” Drury added, “but it’ll be a couple of thousands of dollars, if not more.”

Who could come out ahead?

If new vehicle prices jump, analysts expect consumers to explore alternatives — and some sectors may benefit.

One early example: car rental stocks. Hertz and Avis Budget both surged Thursday.

“These rental companies actually benefit from the tariffs,” said Dennis Dick, chief strategist at Stock Trader Network. “If car prices go up, some people might say, ‘You know what? I don’t drive that much. I’ll just rent a car.’”

Tesla (TSLA), despite ongoing protests over Elon Musk’s leadership, bucked the trend with a 0.4% gain. Musk, who also heads Trump’s Department of Government Efficiency, acknowledged the company won’t be “unscathed” by trade disputes — but for now, investors seem to view Tesla as relatively insulated from the tariff fallout.

Longer term, the UAW believes these policies could favor American workers. “This is a major step in the right direction for autoworkers and blue-collar communities,” the union’s leader said.