Weekly Issue Review: April 21, 2025 – Earnings Season and Trade Tensions

Weekly Issue Review: April 21, 2025 – Earnings Season and Trade Tensions

The week of April 21, 2025, marks a critical period as the Q1 earnings season intensifies and trade-related uncertainties, particularly around port fees and tariffs, dominate market narratives. Below is an analysis of the key issues, supported by insights from international sources.

---

1. Earnings Season Overview

According to FactSet, as of April 17, 2025, 12% of S&P 500 companies have reported Q1 earnings, with 71% surpassing profit expectations and 61% exceeding revenue forecasts. The S&P 500 is projected to see a year-over-year (YoY) earnings growth of 7.2% for Q1, driven significantly by the “Magnificent 7” (M7) tech giants, which are expected to post a robust 14.8% growth. Excluding the M7, the remaining 497 companies are anticipated to grow earnings by a more modest 5.1%. For the full year of 2025, analysts expect M7 growth to slow to 15.9% (down from 36.5% in 2024), while the rest of the S&P 500 is projected to improve to 8.3% from 4.9% last year, signaling broader market participation.

However, downward revisions to Q1 earnings estimates by 4.3 percentage points—larger than the long-term average of 3.3 points—highlight caution, particularly in sectors like Materials, Consumer Discretionary, and Industrials. Key contributors to these downgrades include Ford, Apple, Tesla, and insurance firms impacted by losses from the Los Angeles wildfires.

Key Earnings to Watch This Week

• Monday (4/21): Regional banks like Comerica (CMA), Western Alliance (WAL), and Zions (ZION) report earnings. Investors will focus on comments regarding economic slowdown, loan delinquencies, and exposure to commercial real estate, given these banks’ sensitivity to economic volatility. Regional banks are under scrutiny as the KBW Regional Bank Index has shown strength recently, but recession fears linger.
• Tuesday (4/22): Defense and industrial firms, including GE Aerospace (GE), RTX, Lockheed Martin (LMT), and Northrop Grumman (NOC), report results. Their commentary on tariff impacts and government spending will be critical, especially as defense budgets face scrutiny amid trade policy shifts. Tesla (TSLA) is the highlight, with markets eager for clarity on shrinking auto sales, tariff effects, and CEO Elon Musk’s forward guidance. Investors are skeptical of Musk’s typically optimistic tone and seek concrete plans for production and regulatory hurdles, especially after disappointing Q3 2024 deliveries.
• Wednesday (4/23): Boeing (BA) faces pressure after reporting its largest quarterly loss since 2020, compounded by China’s reported pause on purchases. Investors will scrutinize Boeing’s outlook on Chinese demand and tariff impacts. Other reports from IBM, ServiceNow (NOW), and Lam Research (LRCX) will shed light on tech sector resilience and China-related revenue risks. Defensive stocks like Philip Morris (PM) and NextEra Energy (NEE) will also be watched for tariff-related commentary.
• Thursday (4/24): Alphabet (GOOG), an M7 member, is a focal point due to its exposure to cloud computing, advertising, and other sectors. Its performance could influence broader tech and consumer discretionary stocks. Intel (INTC) will be scrutinized for tariff-related supply chain disruptions, while pharmaceutical firms like Merck (MRK) and Bristol Myers Squibb (BMY) will address potential tariff impacts on drug pricing and supply chains. Procter & Gamble (PG), with significant China revenue, will provide insights into U.S.-China trade tensions.
• Friday (4/25): AutoNation (AN) will offer a window into consumer spending and tariff impacts on the auto retail sector. Pharmaceutical firm AbbVie (ABBV) and oilfield services company Schlumberger (SLB) will also report, with focus on tariff effects and global demand dynamics.

Sector-Specific Insights

• Financials: The Financials sector is expected to report a modest 2.3% YoY earnings growth for Q1 2025, ranking fifth among S&P 500 sectors. Regional banks face challenges from sluggish loan growth, but some may report stabilizing net interest margins.
• Information Technology: Expected to lead with a 30.4% YoY earnings growth, driven by AI and cloud computing demand, though tariff-related supply chain risks loom large for firms like Intel and Lam Research.
• Consumer Discretionary: Projected to grow 27.0%, but Tesla and other firms face headwinds from tariffs and weakening consumer confidence.

---

2. Port Fees and Tariffs

The U.S. government’s recent imposition of port fees on Chinese shipowners, operators, and vessels, effective after a 180-day grace period, has escalated trade tensions. The fees aim to curb Chinese maritime influence but will likely raise costs for U.S. importers, as Chinese firms may reroute cargo to avoid fees. This could lead to higher freight rates for U.S.-bound shipments, while rates on other routes may decline due to oversupply. U.S. exporters may also face higher costs due to supply shortages, potentially reducing trade volumes.

The policy is expected to boost land-based transport through Canada and Mexico, increasing transit times and costs. Combined with a proposed 10% universal tariff, these measures could accelerate global economic slowdown. Reuters notes that global markets are already reacting, with U.S. stock futures falling sharply after China announced retaliatory tariffs on April 4, 2025. The World Trade Organization slashed its 2025 trade growth forecast, warning of a deeper slump.

Amid this, U.S.-China relations are at a critical juncture. Both sides are engaged in a “pride-driven standoff,” with calls for dialogue overshadowed by escalating trade measures. However, some analysts suggest the situation may have reached its nadir, signaling the start of a “negotiation phase.” Markets will closely monitor any signs of de-escalation.

---

3. Day-by-Day Key Issues

• Monday (4/21): Markets will digest weekend comments from President Trump and regional bank earnings. The World Bank/IMF Spring Meetings begin, setting the tone for global economic discussions.
• Tuesday (4/22): The IMF’s downward revision to its global economic outlook will be a focal point, alongside earnings from defense and industrial firms. Fed Vice Chair Jefferson, among others, will speak, potentially clarifying monetary policy amid tariff-driven inflation fears.
• Wednesday (4/23): Tesla’s earnings call will dominate, with focus on tariff impacts and Musk’s guidance. The Federal Reserve’s Beige Book, detailing regional economic conditions, will provide insights into tariff effects and consumer confidence.
• Thursday (4/24): Alphabet’s multi-sector earnings, Intel’s tariff exposure, and pharmaceutical firms’ responses to potential drug tariffs will drive markets. P&G’s China-related commentary will also be key.
• Friday (4/25): Portfolio adjustments ahead of month-end data releases (e.g., PMI, consumer sentiment) will influence trading. AutoNation and Schlumberger earnings will reflect consumer and energy sector trends.

---

4. Key Economic and Policy Events

• Monday: China’s loan prime rate decision and U.S. leading economic indicators will set the stage. The World Bank/IMF Spring Meetings (April 21–26) will focus on global growth and trade risks.
• Tuesday: The IMF’s Global Economic Outlook and Financial Stability Report will quantify tariff impacts. U.S. 2-year Treasury auctions and Fed speeches (Jefferson, Harker, Kashkari) will signal policy direction.
• Wednesday: U.S. and Eurozone PMI data, U.S. new home sales, and the Beige Book will provide economic snapshots. U.S. 5-year Treasury auctions will gauge bond market sentiment.
• Thursday: U.S. durable goods orders and existing home sales will reflect industrial and housing trends. U.S. 7-year Treasury auctions and speeches from Kashkari and IMF’s Georgieva will be watched.
• Friday: U.S. consumer sentiment (final) and Japan’s Tokyo CPI will close the week, alongside earnings from AbbVie and Schlumberger.

---

5. Market Implications

The S&P 500’s Q1 2025 performance has been volatile, with a 4.3% quarterly decline—the worst since Q3 2022—driven by tariff uncertainties and a correction exceeding 10% from mid-February highs. Growth-heavy sectors like Consumer Discretionary (-14%) and Information Technology (-12.8%) have underperformed, while defensive sectors and safe-haven assets like bonds and gold have gained traction.

The Federal Reserve has paused rate cuts, with Chair Powell emphasizing uncertainty from tariffs and inflation risks. Market expectations for 2025 rate cuts have dwindled to 29 basis points, with no significant cuts priced in until June. Rising Treasury yields (10-year at 4.784%) reflect investor caution.

---

Conclusion

This week’s earnings will clarify the extent of tariff-related disruptions across sectors, from tech giants like Alphabet to regional banks and consumer goods firms like P&G. The U.S.-China trade standoff, exacerbated by port fees, threatens global growth, but signs of negotiation could stabilize markets. Investors should monitor Fed speeches, the Beige Book, and IMF reports for policy and economic clues, while preparing for volatility as tariff impacts materialize.

Disclaimer: This analysis is for informational purposes only and does not constitute investment advice.