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Market Wrap
Talks Off, Talks On: Markets Ride the China Trade Wave
Conflicting U.S.-China Trade Signals Shift Market Sentiment:
Early in the day, U.S. Treasury Secretary Scott Bessent stated that trade talks with China had not yet begun, contradicting earlier Trump comments. This fueled investor anxiety and contributed to a broad market sell-off. However, later in the day, Bessent confirmed plans to meet with China's lead economic official, signaling that negotiations may soon start. This reversal helped lift S&P 500 futures in after-hours trading, reflecting renewed investor optimism about a potential easing of trade tensions.
President Trump's Remarks on Trade Deals:
President Trump stated that the U.S. doesn't "have to sign" any trade agreements, reinforcing a hardline stance on tariffs. This comment further unsettled markets already wary of escalating trade conflicts.
Record Trade Deficit:
The U.S. trade deficit widened to a record $140.5 billion in March, up from $123.2 billion in February. This surge was primarily due to businesses accelerating imports ahead of anticipated tariff increases, particularly on Chinese goods. The influx of imports significantly impacted GDP, subtracting 4.83 percentage points and contributing to a 0.3% annualized contraction in Q1 2025.
Commencement of FOMC Meeting:
The Federal Open Market Committee (FOMC) began its two-day policy meeting on May 6, 2025. The outcomes of this meeting, including any changes to interest rates or monetary policy, are anticipated to be announced upon its conclusion.
China Implements Economic Stimulus Measures:
In response to escalating tariffs and a slowing economy, China reduced its policy rate and lowered the reserve requirement ratio for banks. These measures aim to inject liquidity into the financial system and support economic growth amid trade tensions.
IMF Urges China to Shift Economic Strategy:
The International Monetary Fund called on China to transition from an export-led growth model to one driven by domestic consumption. This recommendation comes amid global economic pressures and aims to promote sustainable growth.
Eli Lilly & Co. shares dropped 5.6% following a reduction in its full-year profit outlook, attributed to a $1.72 per share charge from its acquisition of Scorpion Therapeutics. Additionally, investor sentiment was impacted by CVS Health's decision to exclude Lilly's obesity drug, Zepbound, from its standard formulary, favoring Novo Nordisk's competing product, Wegovy. This move by CVS, a major pharmacy benefit manager, raised concerns about increased competition in the weight-loss drug market.
Advanced Micro Devices Inc. shares gained in after-hours trading following the release of earnings that met analyst expectations, reflecting confidence in the company's performance.
Vertex Pharmaceuticals Inc. shares dropped 10% due to disappointing quarterly results, with rising costs and challenges in the Russian market impacting profitability.
DoorDash Inc. shares declined 7.4% after reporting weaker-than-expected revenue and announcing a $3.9 billion acquisition of Deliveroo, raising investor concerns about the company's growth strategy.
Electronic Arts Inc. shares increased in after-hours trading despite a 33.7% decrease in quarterly earnings compared to the same period last year, as the results still surpassed analyst forecasts.
Ford Motor Co. shares rose despite suspending its annual outlook, as the company indicated that upcoming auto tariffs would not significantly impact car prices, alleviating investor concerns.
Super Micro Computer Inc. shares fell in after-hours trading after reporting a 68.18% decrease in quarterly earnings compared to the same period last year, raising concerns about the company's growth prospects.
Mattel Inc. shares increased 2.8% following the announcement of plans to shift production out of China and raise U.S. prices, a strategic move in response to new tariffs.
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