In recent weeks, international markets have faced significant turbulence, driven by escalating tensions surrounding tariff retaliations between major economies. As countries impose levies on imports in response to previous tariffs, investors are grappling with uncertainty and volatility.
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Stock Storm: Tariff Retaliation Sparks Sharp Declines in International Markets
The term “tariffs” may be music to the ears of U.S. President Donald Trump, but it sends jitters through the investing community. Risk-sensitive assets like stocks and cryptocurrencies plummeted on Monday after Trump declined to exempt Canada and Mexico from a steep 25% tax on all goods imported from those nations.
In the financial arena, the S&P 500 posted its largest drop since December 18, now testing the critical 200-day moving average, which is typically viewed as a support level. A fall below this marker could signal even deeper declines. Bitcoin also dipped below $90,000, quickly negating its earlier 10% hike following Trump’s Sunday announcement about the establishment of a U.S. strategic crypto reserve.
On the other hand, European leaders responding defensively to Trump’s moves appear to be giving a boost to the continent’s equity markets. The regional Stoxx 600 outperformed the S&P 500 during February. Furthermore, with defense-related stocks rising, the Stoxx 600 gained even more ground on Monday.
However, since Trump’s tariff declaration arrived after European markets had closed, a negative reaction could unfold on Tuesday when the tariffs officially take effect. Investors should prepare for potential increased fluctuations in the market.
Trump Tariffs Trigger 10-Year Treasury Yield Slide: What’s Next?
The yield on the 10-year Treasury dipped on Tuesday as President Donald Trump’s tariffs on Canada, Mexico, and China took effect.
The key 10-year Treasury yield decreased by approximately 1 basis point to 4.168%, while the 2-year Treasury yield fell 5 basis points to 3.931% around 6:30 a.m. ET.
One basis point represents 0.01%, and there is an inverse relationship between yields and prices.
Starting Tuesday, Trump’s 25% tariffs on goods from Canada and Mexico became effective. He also enacted an additional 10% duty on Chinese imports, raising the total of new tariffs on China to 20%.
In response, China declared it will implement tariffs of up to 15% on select U.S. goods starting March 10. These new tariffs mainly target U.S. agricultural commodities, with corn facing a 15% duty and soybeans a 10% duty.
Canadian Prime Minister Justin Trudeau confirmed Canada will impose 25% tariffs on $155 billion CAD (approximately $107 billion) worth of U.S. products.
Additionally, market participants are anticipating the release of February’s nonfarm payrolls and unemployment data this coming Friday.
Honeywell Approaches $2.2 Billion Deal for Sundyne, WSJ Reports
According to a report from the Wall Street Journal on Tuesday, Honeywell International is nearing a nearly $2.2 billion agreement to acquire pump manufacturer Sundyne from private equity firm Warburg Pincus.
Last month, industrial giant Honeywell revealed its intention to separate into three independently traded companies, effectively dismantling one of America’s remaining large conglomerates shortly after activist investor Elliott Management purchased a $5 billion stake in the company.
Aramco’s Full-Year Profit Decreases; Dividend Cut Amid Economic Pressures
On Tuesday, Saudi state oil giant Aramco announced a decline in net profit to $106.2 billion in 2024, down from $121.3 billion in 2023.
The company projects total dividends for 2025 will be $85.4 billion, showing a notable decrease from the 2024 total of $124.2 billion.
This reduction follows a cut in its total payout for the fourth quarter. Aramco revealed that its base dividend for the last three months of the year will rise to $21.1 billion, while its performance-linked payout is set at just $200 million. In comparison, the third-quarter base dividend was $20.3 billion, with a performance-linked dividend of $10.8 billion.
The company faced challenges last year due to lower oil prices, as a surge in global crude production coincided with a slowdown in demand. Aramco’s realized oil price—the net amount received per barrel after considering transportation and other costs—decreased to $80.2 per barrel in 2024 from $83.6 in the previous year.
Aramco’s revenue dipped to $436.6 billion in 2024, down from $440.8 billion in 2023.
The company’s total borrowings increased, reaching $319.3 billion in 2024 compared to $290.1 billion in the previous year. However, its net debt saw a reduction from $102.8 billion in 2023 to $78 billion in 2024.
Aramco’s dividend, the largest globally, has been essential in supporting Saudi Arabia’s public finances. The announced reduction will impact the kingdom’s budget deficit, which has been growing due to lower oil prices and increased government spending on ambitious mega-projects tied to Vision 2030, the enormous economic reform initiative led by Saudi Crown Prince Mohammed Bin Salman.
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Target’s February Sales Trigger Concerns Over Consumer Economic Health
Target issued a warning on Tuesday, anticipating a “significant” decrease in first-quarter profits compared to the same period last year due to “persistent consumer uncertainty,” slow sales during February, and worries about tariffs.
Typically, the initial months of the year are slow for retailers as consumers usually curb spending following the holiday season. However, Target’s cautious outlook follows similar concerns raised last month by Walmart and E.l.f. Beauty regarding a less robust start to the year.
This warning is compounded by a sharper than expected decline in consumer spending in January and the largest drop in consumer confidence since 2021 reported in February, highlighting potential weaknesses in consumer behavior and the broader U.S. economy.
While some of Target’s challenges are self-inflicted, as a major retailer serving a wide segment of consumers, its sales performance can provide insights into upcoming spending trends, particularly as others in the industry express similar concerns.
In a statement, Target’s CFO, Jim Lee, remarked that February sales were “soft,” and noted that weakened “consumer confidence” negatively impacted discretionary purchases. He also pointed to “uncharacteristically cold weather” as a factor affecting clothing sales.
Lee added, “We anticipate a moderation in this trend as apparel sales respond to warmer temperatures, and consumers look to Target for upcoming seasonal events like Easter.” He assured that the company would closely monitor these trends, maintaining a cautious stance regarding future expectations.
Despite its outlook, Target’s fiscal fourth-quarter results surpassed Wall Street’s expectations.
Here’s how Target’s performance compared with analyst predictions based on a survey by LSEG:
- Earnings per share: $2.41 vs. $2.26 expected
- Revenue: $30.92 billion vs. $30.82 billion expected
For the fiscal period ending February 1, Target registered a net income of $1.10 billion, or $2.41 per share, down from $1.38 billion, or $2.98 per share, a year prior.
Sales fell to $30.92 billion, reflecting a decrease of about 3% from $31.92 billion last year. The previous year’s results were bolstered by an additional week, affecting year-over-year comparisons.
For the current fiscal year, Target projects earnings per share to range from $8.80 to $9.80, which aligns closely with the midpoint estimate of $9.31, according to LSEG. However, sales growth is expected to be only 1%, significantly trailing the estimate of 2.6% from LSEG.
Target’s guidance for the first quarter may also catch investors off guard. While not providing specific figures, the company indicated “meaningful year-over-year profit pressure” in its first quarter compared to the rest of the year. Analysts had expected profits to rise by 0.9%, according to LSEG.
Ahead of its earnings report, Target raised its comparable sales guidance for the fourth quarter in January after observing steady customer traffic during key holiday periods, though it maintained its profit outlook, suggesting it depended on discount strategies to boost sales.
This approach ultimately affected profit margins. The retailer’s gross margin fell approximately 0.4 percentage points partly due to “higher promotional and clearance markdown rates,” as reported in a press release.
Having historically attracted customers with a diverse array of discretionary products, Target has struggled to appeal to shoppers looking for non-essential items amidst ongoing inflation, rising interest rates, and stiff competition from online retailers and Walmart. This shift in focus has negatively impacted Target, given that discretionary items usually yield higher profits than essentials like groceries and toiletries.
The company noted that it has seen success in driving sales when introducing new, attractive products, including fresh fitness apparel, pet supplies, or seasonal food flavors.
