Stock market futures climb due to expectations of Federal Reserve rate cuts and with a spotlight on corporate earnings
The tech industry is bracing for potential impacts from the proposed 100% tariff on semiconductor imports, a part of a Section 232 investigation targeting chips for national security and domestic supply chain concerns.
The tariffs, if implemented, would drastically increase the cost of chips entering the U.S., directly affecting companies reliant on imported AI chips and semiconductors. This could raise prices for AI hardware manufacturers, potentially slowing innovation due to reduced cost-efficiency.
However, the tariff threat has coincided with major industry moves to increase U.S. semiconductor manufacturing capacity. Companies like Apple are committing large investments, with Apple pledging $100 billion over four years. Leading chipmakers such as TSMC and Nvidia are unveiling multi-billion dollar U.S. investment plans, which may accelerate reshoring and capacity building within the U.S. AI chip ecosystem.
The heavy tariffs could also disrupt global semiconductor supply chains, complicating access to cutting-edge AI chips produced outside the U.S. Since the AI chip segment depends heavily on global supply networks, these tariffs could create bottlenecks or shifts in sourcing strategies.
Wall Street is also keeping a close eye on earnings reports from tech giants such as Disney, Uber, and McDonald's before the opening bell, as well as Airbnb, DoorDash, and Lyft after the market closes. Traders expect at least two rate cuts by the end of 2025.
Meanwhile, the Federal Reserve's odds for a September rate cut stand at 85.5%, up from 46.7% a week ago, suggesting deteriorating labour market conditions. The US services activity unexpectedly stalled in July, and a series of weak economic data pushed Wall Street lower the previous day. However, Dow E-minis were up 149 points, or 0.34%, and S&P 500 E-minis were up 16 points, or 0.25%, at 5:37am.
San Francisco Fed president Mary Daly, Boston Fed chief Susan Collins, and Fed board governor Lisa Cook are scheduled to speak later in the day, providing further insights into the Fed's monetary policy decisions. The damage from the US trade war affected the results of Yum Brands, Caterpillar, and Marriott, while Beijing's trade truce with the US is set to expire on Aug 12.
Investors will also be watching for Trump's decision on a nominee to replace outgoing Fed governor Adriana Kugler by the end of the week. New tariffs on semiconductors and chips are expected to be announced within the next week or so, and Trump's tariff threats on pharmaceutical imports may be implemented, with plans to increase to triple-digit percentages in a year or two.
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- The proposed tariffs on semiconductor imports could potentially have significant implications for the business sector in Malaysia, as Malaysia is a major exporter of semiconductors and electronics.
- The finance industry is closely monitoring the ongoing tech-related policies and decisions, such as the Section 232 investigation on semiconductors and the potential impacts of new tariffs, as they could target some key financial indicators like trade balances and corporate profits.
- The political climate is influencing the technology industry in various ways, with the US government's 232 investigation on semiconductors potentially reshaping the global technology landscape and influencing various aspects, including research, development, and manufacturing, both domestically and internationally. Furthermore, the upcoming decision on a nominee to replace an outgoing Fed governor adds another layer of uncertainty for the global financial markets.
