Wall Street will be focused on earnings reports from the largest US retailers this week to gauge how changing trade conditions are affecting the economy and whether the recent stock market rally is truly on solid ground.
Retail giants Target, Home Depot and Lowe's are among the companies set to report their quarterly results, which come as concerns about a potential recession triggered by President Donald Trump's tariff policies are easing. The latest truce between the US and China, the world's largest economies, is particularly encouraging.
However, Walmart's announcement on Thursday has once again brought tension back to the market. The world's largest retailer warned that the company will be forced to raise prices due to increased tariffs. This signal is pushing investors to take a closer look at the reports of other retailers - how they are adapting to unstable trade policy and how this is affecting their profits and strategy.
The market continues to be under pressure due to the prospect of new tariffs. They could not only increase prices for goods, but also slow down consumer spending - the main driver of the American economy. This sounds especially alarming against the backdrop of Trump's announcement on April 2 about large tariffs timed to coincide with the so-called "Liberation Day".
Financial reports of retail companies can provide a key to understanding the current state of consumer activity, which accounts for more than two-thirds of US GDP. It is the behavior of consumers - to buy or save - that will determine how resilient the economy is in the face of foreign policy turbulence.
The latest sales data confirm that Americans have begun to be cautious: in April, retail growth slowed noticeably. The reason was the disappearance of the "stock before the storm" effect - previously, demand was fueled by concerns about the introduction of tariffs. At the same time, consumer sentiment remains sluggish, which is confirmed by surveys.
New quarterly reports are on the horizon: they are joined by the cult clothing brand Ralph Lauren and the discounter TJX Companies, which owns popular chains such as T.J. Maxx. Their data will allow us to assess how different strata of consumers are feeling - from brand seekers to bargain hunters. Investors are waiting for the full picture of who is losing and who is winning in the current market turbulence.
After a sharp decline caused by Donald Trump's aggressive remarks on April 2, the market has surprised with its resilience. The S&P 500 has not only recovered, it has soared more than 18% from its April lows, completely covering all losses accumulated since the beginning of the year. This recovery could be a litmus test: is the economy really ready to move forward, or is this a temporary effect of political promises?
Amid American optimism, there is alarming news from Asia. In China, retail sales unexpectedly fell, showing how painful the transition from an export-oriented model to domestic consumption can be. This is not just statistics - it is a sign: China is not yet ready to become a full-fledged global consumer, which means global trade remains vulnerable.
With his unconventional style, Donald Trump hinted to Americans that the era of cheap imported goods is coming to an end. "Less dolls and pencils" is not just a figurative expression. It is a signal of a shift: US trade policy is now aimed not only at putting pressure on China, but also at trying to transform domestic consumption. At the same time, China, according to Trump's plan, should start buying more American goods.
The US Secretary of the Treasury harshly criticized foreign partners, saying that they either play by "fair rules" or prepare for increased tariff pressure. At the same time, he made it clear that the White House has limited attention - a maximum of 18 key countries. The rest will have to fight for their place in line, otherwise their interests may be left "in the wind."
The effective tariff on imports to the United States has now reached 13%, a record level since the Great Depression. In fact, this is the equivalent of a hidden tax comparable to 1.2% of the country's GDP. The White House hopes that giants like Walmart will cover the costs at their own expense, without passing them on to customers. But how long they can withstand the blow is another question.
The Donald Trump administration continues to actively use tariffs not only as a lever of pressure in international trade, but also as a source of finance within the country. One of the goals is to cover the costs of a large-scale package of tax breaks, which was recently discussed in the relevant committee of the House of Representatives and may soon be put to a vote.
The president's tax plan is considered extremely expensive, with analysts predicting that it will add $3 trillion to $5 trillion to the US national debt over the next decade. Such a massive increase in the fiscal deficit has not gone unnoticed: Moody's followed the example of other rating agencies and downgraded the US credit rating, indicating growing anxiety in the market.
The news has not passed without a trace on global markets. Foreign investors, already wary of Washington's chaotic and unpredictable policies, reacted immediately. On Monday morning, futures on the main Wall Street indices fell by more than 1%, indicating growing nervousness amid new fiscal and political risks.
While stock markets began to lose weight, the yield on the 10-year U.S. Treasury note jumped about five basis points, indicating rising inflation expectations and a possible tightening of financial conditions. The U.S. dollar also responded, but only moderately, falling, reflecting a general decline in confidence in the sustainability of the U.S. budget.
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