In today's edition of The Morning Brief, Hosts Seana Smith and Brad Smith break down current market trends and what you need to know for the trading day ahead.

Stocks (^DJI, ^IXIC, ^GSPC) opened relatively flat on Tuesday morning following hotter-than-expected Producer Price Index (PPI) inflation data for April. Jefferies Senior US Economist Thomas Simons joins the show to break down the PPI print and what it signals for the Federal Reserve, believing there is a chance interest rate cuts may not happen this year at all.

Meanwhile, President Biden is set to unveil a new wave of tariffs on Chinese imports, including electric vehicles, semiconductors, and precious minerals. Yahoo Finance's Jennifer Schonberger analyzes the sectors most likely to be impacted.

Meme stocks like GameStop (GME) continue to soar in a second-day rally following the online return of user "Roaring Kitty" on X (formerly Twitter), who was largely responsible for the 2021 GameStop short squeeze.

However, the retail sector is under pressure, as Walmart (WMT) is reportedly preparing to lay off hundreds of corporate workers and Home Depot (HD) posted first-quarter earnings that fell below Wall Street estimates, signaling a pullback on consumer spending. Shares of Alibaba (BABA) also sunk after the company posted an 86% loss in profit year-over-year.

Tesla (TSLA) is backpedaling its recent decision to lay off most of its Supercharger team, as Bloomberg reports the electric vehicle giant is preparing to rehire some of them.

Alphabet (GOOG, GOOGL) is expected to unveil new artificial intelligence initiatives in its Google I/O developer conference today.

This post was written by Melanie Riehl

Video Transcript

It's 9 a.m. here in New York City.

I'm Charles Smith alongside Brad Smith and this is Yahoo Finance's flagship show the morning Brief 30 minutes until the opening bell on Wall Street features are muted on the heels of what was initially another hot inflation print.

Although revisions calming some of those fears surrounding inflation, both the headline and core readings coming in stronger than expected.

That's right.

Plus a fresh read on the Consumer Home Depot missing revenue expectations.

Consumers pull back on spending their shoppers postponing those bigger.

Do it yourself.

The diy projects that weighed on results for sure.

So let's get to the three things that you need to know before the opening bell.

Yahoo Finance is J. Jennifer S and Madison Mills have more stock futures muted this morning after a fresh reading on inflation PP I data coming in a little bit hotter than expected in April showing signs that the stubborn inflation.

Well, they're just not letting up and investors are going to be looking to fed share Jay Powell speech later this morning that could shed light on the path of interest rates.

More signs of sticky inflation could further diminish expectation of the fed's interest rate cuts this year.

President Biden announcing the sweeping increases on tariffs on $18 billion of Chinese imports.

Retooling former President Trump's phase one trade deal with China, imports of electric vehicles, semiconductors, precious critical minerals and lithium ion batteries will see levies doubled or even tripled to as high as 100% in the case of and the stocks roaring back to life driven by game stop that stock.

So as much as 110% on Monday before paying back its gains J me was halted for volatility numerous times on Monday.

So while all the first here roaring kitty, of course, the person is seen as the Kickstarter of the meme stock Frey during the pandemic.

He posted online for the first time since 2021 games.

Stop moving to the upside up over 80% year to date.

Well, our top story today, stock futures mostly flat here after a hotter than expected inflation, print producer prices, the PP I rising half a percent in April from the prior month.

That's above the estimate for 3/10 of a percent here.

And we're taking a look at some of the future's activity out of the gate here this morning, as we were mentioning, flats roughly as we were taking a look at a little bit of mixed activity a moment ago.

And here we're taking a look at some of the futures as well on the Wi Fi interactive zeroing in first on the flat dow futures up by about 5/100 of a percent.

But we're down right now for the NASDAQ futures and the S and P 500 futures.

Yes, you can see Brad right after this inflation print, the PP print was released, we did see a bit of Doward pressure here across the board.

This happened for the Dow futures when you take a look at the S and P futures, very similar action here, right at 830.

And that was because initially when you a look at those PP I prints both on the headline number and that core reading coming in hotter than expected.

But the revisions is really helping to ease some of the fears surrounding inflation.

Right now.

We did see a bit of revision here for the March reading lower to a decline of 1/10 of a percent.

That was from the initial reading of growth of 2/10 of a percent.

So that has helped relieve some of the fear that was initially out there.

And then when you take a look at the action we're seeing in the bond market here this morning, you're seeing prices under a bit of pressure, you're seeing yields move higher.

We also saw some strength in the dollar as well on the heels of this print here out this morning.

And of course, this comes ahead of the CP I print later this week.

Yeah, and all this in focus because it gives us more read on the consumer, but as well as the production of those goods and services and even more of those reads on the consumer.

We're going to hear throughout the course of this week with some big earnings set still to drop.

Even though we got Home Depot earlier this morning, we'll dive into that in just a little bit.

All right.

First, let's start off with that hotter than expected inflation print that PP I figure for that we want to bring in Thomas Simons.

He's Jeffries, a senior US economist Thomas.

It's great to have you here.

So first just give us your reaction to that PP I print out this morning and whether or not there really is helping or maybe fueling some of the concern out there surrounding inflation, maybe the worst isn't over.

Yeah.

Uh Good morning.

Uh You know, I, I think that it's, it's an interesting dynamic that we have here this month because we have the PP I data released the day before this, the, the CP I, right, the CPI I think is actually much more sort of informative about what's going on with consumer inflation and what people are really seeing on the, on the shelves and you know, prices at the pump, et cetera.

Uh You know what, what they're actually paying out of pocket.

But the PP I data is informative about uh things like margin that uh you know, producers are, are capturing uh you know, and sort of like how much they're able to pass prices through uh to people that are, you know, or, you know, sort of uh influencers that are further on down the, the supply chain, right.

So uh we see some pretty strong pricing power here for the data that we got in April.

Uh you know, you mentioned earlier, there are some downward revisions to the March data.

Uh but you know, as we see things here this month, it, it suggests that there is still pretty significant inflation pressure that you know, is, is going to continue to be passed along.

Thomas if we, if we continue to see a higher than expected prints come in for CP I, what does that do for the Fed's calculus?

And, and does that mean that we won't get a cut until perhaps December or even next year?

Yeah, I mean, that would be consistent with our view.

Uh We don't think that we're going to see any rate cuts before maybe November or December and at this pace, you know, possibly not even this year at all.

Uh You know, the the inflation data continues to show that there is risk that if the fed were to cut rates that they, you know, could risk uh you know, stoking the inflation pressures even a little bit more and, and you know, potentially sending inflation to higher levels uh that are, you know, really uncomfortable relative to the uh to their 2% goal.

So, uh you know, that we, we still see the the economy as generally being relatively high pressure.

Uh there are a lot of different sources of inflation that are not really particularly sensitive to interest rates, but those that are uh are going to, you know, sort of obviously, you know, kind of uh jump higher again if, if interest rates are cut And, you know, broadly, we see a lot of uh issues with just an inability for the economy to really expand capacity to produce uh you know, more uh you know, more, more supply in, in areas, especially in the service sector, uh where there is uh you know, significant demand and, and a lot of, in a lot of cases demand that is inelastic and, and difficult to really see substitutes for Thomas.

Talk to us a little bit more about the relationship between CP I and PP I and how much PP I is really an early indicator, a leading indicator of maybe what we could see tomorrow morning.

Yeah.

So, I mean, the, you know, getting a little bit inside baseball, I suppose the PP I and the CP I are um I guess a little bit sort of less related than they used to be in the past because of some methodology changes that went through with the PPI a few years ago.

Uh But, you know, right now we look at the PP I again, you know, I sort of hinted at this a little bit earlier.

It, it's really measuring the margin that's captured by wholesalers.

So to the extent that they are capturing more margin, and PP I goes up, that means that uh their pricing power is improving, that they're, you know, more and more able to pass through price increases to the uh you know, uh agents, you know, sort of further on the supply chain.

And, you know, the the consumer really is that last person on the supply chain and eventually, you know, is, is the one that's going to be seeing that uh price increase, uh you know, eventually is sort of at the end.

And I think that if we were seeing a stronger disinflationary trend, we would see it in the PP I first, right, we would see first that uh producers are less sort of, you know, able to pass through price increases, their margins would shrink, that would eventually lead to uh you know, consumer prices falling further on down the chain.

But to the extent that we see the, you know, continued price pressure here earlier on in the supply chain suggests that we're further away from seeing more relief for the consumer.

Thomas.

Uh I know you're an economist, you're probably not tracking some of these earnings reports that come out at the same degree that we're discussing them on a daily basis.

But for a lot of the CEO S that we've heard from over the course of the earnings season, they're trying to really spell out what this macro environment means for their business and where consumers are starting to push back on price.

If there is from the economists perspective areas where you're starting to see that more pronounced than others, where is that as we continue to try and figure out which CEO S are, are being extremely forthright versus those who are perhaps just trying to go under the veil of what everyone else is citing.

Yeah, I mean, you know, uh I would, I would agree that as an economist, I'm probably one of the worst persons to be uh you know, sort of thinking about the single names and stocks and, and, you know, kind of analyzing the, the individual businesses.

But uh you know, I, I do try to pay attention to earnings reports to get a sense of kind of the temperature of the room, es especially as it relates to the consumer.

And right now I think what we're seeing is just a really, really, really, really mixed picture, right?

Whether it's, uh you know, better health of consumers that are at the upper end of the income stream than uh than at the lower end or just differing, you know, consumer tastes, uh clearly, you know, we went through this period of time post pandemic when, you know, simulate demand was, was strong for everything and now, consumers are becoming a little bit more, uh, you know, discreet and, and more, uh, you know, discerning about what, what they're spending their money on.

Uh, so, you know, II, I think that we're going to continue to see that, you know, we're, we're going to see more trade down activity, uh, and more, uh, you know, kind of indications that sort of middle of the range.

Consumers are probably squeezed a little bit and having to make some more difficult choices in terms of what they're spending their money on.

Uh, the higher end I think is going to continue to do quite well and the lower end is going to do.

Ok.

So long as we continue to see more wage gains down at the sort of lower end of the, the income spectrum, uh, but, you know, really that middle ground is where, you know, the sort of overall delta for the, uh, for the economy, for the, the stock market really lies and, and that is a very muddled mixed messy picture right now.

Uh, it's very, very hard to have a, a strong view on exactly how those folks are, are, are really, you know, sort of getting by.

All right, Thomas Simons, always great to talk to you.

Thanks so much for hopping on with us this morning.

Jeffrey is a senior US economist.

Thank you another big story that we're tracking today.

President Biden announcing new tariffs on $18 billion.

Worth of Chinese goods.

The biggest increase will be the quadrupling of tariffs on Chinese EVs electric vehicles to 100%.

That's up from the current tariff of 25% here to break that down.

And more.

Yahoo finances Jennifer Schomer Jen.

Good morning, President Biden announcing sweeping increases in tariffs on $18 billion of Chinese imports.

Retooling former President Trump's phase one trade deal with China, imports of electric vehicles, semiconductors, critical minerals and more will see levies doubled or tripled to as high as even 100%.

In the case of electric vehicles.

Take a look at that list.

Aluminum and steel will see tariffs triple to 25% this year, semi conductors will double to 50% by next year.

Electric cars as mentioned will quadruple to 100% this year and lithium ion batteries will triple the 25% starting this year and being phased in through 2026.

The jump in tariffs a result of a four year review mandated by US.

Trade Representative's office to re evaluate the economic impact of tariffs implemented under the phase one deal by former President Trump.

The US tr concluded that China has not eliminated many of its poor transfer technologies and practices and instead has become more aggressive in certain actions including cyber intrusions and cyber theft.

Treasury Secretary Janet Yellen warned China during her trip there last month about us concerns of overcapacity in certain sectors including solar panels and China's Foreign Ministry reportedly responding this morning opposing the tariffs saying that there are violation of the WTO rules and that they intend to take measures of their own to protect their interests.

Senior White House officials say that these actions are not political in nature and that officials have been assessing China's unfair trade practices for some time.

They argue that these actions are key to the transition to green energy here in the United States and creating manufacturing jobs here at home.

They refute the premise that these tariffs will be inflationary saying that they are.

And if there were 10% tariffs across the board, that would be inflationary.

Former president Trump says President Biden is ripping off his strategy and he's proposed 60% tariffs on all Chinese imports if he were to be elected back to you.

All right.

Thank you, Jennifer.

Stay tuned for our live coverage of President Biden's speech coming up 12:10 p.m. Eastern.

You do not want to miss it.

Well, the meme trade, it's back.

Gamestop A MC and Blackberry all surging here pre market.

They're taking a look at some of the big jumps.

This is after the return of roaring kitty to social media, but shares still remain far below their 2021 highs.

Yahoo Finance's Jared Blier, the main master has the breakdown.

Uh What do I do to deserve that title?

I I appreciate that.

Let's put up the Wi Fi Interactive behind me and I wanna show you what happened yesterday.

More importantly what is happening this morning.

So here's a MC, by the way, this is our Yahoo finance trending takers list and we're going down a lot of those memes, meme names are just dominating.

But here's a MC.

It was up 78% yesterday.

It is up 125% in the pre market to $11.

69 cents have not seen that price.

And I believe years here's gamestop.

Very similar return to yesterday, about 75%.

Gamestop was up yesterday today.

This morning, it's up 122 percent to $67.74.

You take a look at Blackberry, that's 23% this morning.

Beyond me, that's another 20% this morning.

Virgin galactic cost.

And the list goes on so been really impressed to see these uh resurgence and I would say that we actually saw this a few weeks ago.

We saw, I saw Carvana beyond me kind of perking up.

So there was a lead up to it.

But I want to close here with uh some longer term charts and just show you because Brad, you said something very important that we are still in the bottom end.

Basically, of these long term trading ranges.

Here's ac here are the all time highs we had in 2021.

Here's where we are now still at the bottom.

Gamestop.

Actually looking a little bit better for this cohort, but here's blackberry at the bottom, here's til re going to be off the bottom again and then here's beyond me.

So there's a lot, there's a lot to be proven here.

And I don't know that we're going to be able to get up to some of those record highs in anything other than gamestop, which is the only one seeing uh signs of life here that are uh material to its past.

But we'll have to see how this plays out.

I would also mention options.

Expiration this Friday gonna be a lot going into that guys.

All thanks to Ro and Gitty for right now.

All right, Jared.

Thanks so much.

Let's take a look at one stock that is trending here this morning and that's Home Depot shares are under a bit of pressure.

It did miss revenue expectations falling just a bit short.

You're looking at losses of about 8/10 of a percent, the Home Improvement stock under some pressure after spending after consumers spent less on home improvement for the quarter.

Yahoo Finance senior reporter Brooke Dipalma is in the newsroom with a breakdown.

Brooke.

Yeah, good morning Shana.

We're seeing shares down roughly 1% of pre market trading here as investors digest.

Yet another of softer than expected sales from the home improvement retailer.

Now, the company did report a 2.8% drop in sales and a 3.2% decline here in the US alone as consumers pushed off those larger discretionary projects.

Yet again, this as interest rates and inflation have remained high, causing consumers to think twice before heading to the stores.

During this past quarter, they did visit the Home Improvement retailer, Home Depot less and when they did go, they spent less and that caused foot traffic to drop roughly roughly 1% in the quarter.

And ticket sizes came in 1.3% less compared to last year.

Now, cold and wet weather also cause a delay to the key spring selling season at Home Depot and investors though they are somewhat encouraged that the management did reiterate its full year guidance with total sales growth of 1% and a comparable sales sales growth which takes out store openings and closures to drop 1%.

And so really uh investors really digesting here.

The call is still underway.

We'll continue to monitor it this morning.

Thank you, Brooke a lot to track on shares of HD here today.

Stay tuned for more of our coverage on Home Depot earnings.

Former Ceo Bob Nardelli will join our flagship show, Catalysts at 11:15 a.m. Eastern.

You don't want to miss that.

Uh 10 a.m. 1015 AM Eastern, excuse me, because that's what time Catalyst is and I that's at 11.

It's a different show.

Yeah, let's talk Walmart here this morning, Walmart, unfortunately, cutting hundreds of corporate jobs and asking both remote workers and employees in smaller satellite offices to move to their larger hubs in Arkansas, New Jersey and southern California.

According to multiple reports, the retail giant which will report its latest earnings on Thursday will allow remote workers to keep a hybrid schedule as long as they are in the office for the majority of the time here.

So this is a significant move that we're hearing from Walmart.

Uh, the country's largest employer, we should remind folks out there as well.

And one of the huge things when they do make an announcement like this, it's a larger question of where they might be repositioning or reallocating certain human capital resources within the organization, knowing some of the areas that they're spending heavily on right now, trying to beef up their rewards program and then also trying to best manage inventory at a juncture where they've continued to really invest more into that e commerce platform to kind of in a period of normalization that we're hearing about in the consumer right now too.

Yeah.

And obviously this also just goes to cost cutting efforts here across the board.

They're trying to slim down some of their budgets here elsewhere.

They're trying to reallocate some or I guess move some of their employees there to areas where they already have a large presence where they already have a large office.

They are saying that they are going to maintain some flexibility which you think is going to help in terms of some of those retention rates that they want for some of their top employees.

But again, as we talk about the shift back to the office, it's kind of been remarkable because here we are four years out from the pandemic.

So many people have still been able to work at home now for so long.

And it seems like ever since the start of the year we have started and also just anecdotally in my conversations with friends with colleagues with those elsewhere.

And more and more people are being asked to return to the office.

So it is a bit interesting that it's taken so long for these companies to implement uh more stricter return to office return to office guidance.

But I do think this goes beyond just that they're talking about moving some of their employees from some of their smaller locations, bringing them to the headquarters in Arkansas or some of their larger offices in Hoboken, New Jersey or in San Francisco.

So it does make sense for Mr T standpoint and from a cost cutting effort, maybe there's a bargaining chip, maybe there's uh yes, we'll return to office for a four day work week.

I don't know, just throwing it out there just keeping it on the table.

Folks, guys coming up, Alibaba shares are seeking after reporting an 86% drop in profit from a year ago, we've got some top trending tickers on the other side of the short break shares of Alibaba sinking this morning after it saw profit plunge 86% from a year ago.

But the Chinese e commerce giant did see a revenue come in and beat expectations for the third uh for the fourth quarter here.

Taking a look at the shares.

They're down by about 5.2%.

Shana.

I don't print off too many earnings reports, but I printed off this one here today for Alibaba.

One of the huge things of course was the profit drop.

It was just so striking that I thought it was worth the printed paper and the ink.

But at the end of the day, one of the things that they also mentioned was air of acceleration, acceleration of growth in customers and cloud computing revenue specifically, that's the more profit friendly part of their business.

However, you still got to look across one of the major items within China as this moderating consumer continues to impact the ecommerce and marketplace revenue there.

You could have just printed the 86% number, save some paper.

I could have done that.

Killing a lot of tree with that.

It's worth it.

You made your point.

So it was it was worth the prop to make the point.

But I say back to the large story because this is also Ali when you take a look at Alibaba, you take a look at these results like you're talking about here that 86% drop in profit.

It is so our net income, it is it's worth taking a look at it as we're zeroing in on because Alibaba is a barometer for so many of these other larger Chinese companies here and also just gives us a sense of the recovery or lack thereof that is playing out the pressure that Chinese consumers remain under as the economy does it continue to struggle?

And then Alibaba specifically, there has been some concerns as been voiced by a number of analysts, even some inside the company about losing some of their market share here to some of their rivals out there, namely Pinduoduo PDD when it comes to some of that lost business.

So there are certainly a number of concerns that continue to surround Alibaba.

But when you take a look at the extended action here on shares off just about 5% I think you could chalk that up to some of those persistent worries that the company has had around the weakening consumer here in China, the 86% drop that you noted there in net income.

And then also just how long it's going to take for this recovery to play out and to really start to pick up more.

Yeah.

And I think that's where they're gonna lean into one of the more profitable elements of their business here, especially as we had all expected for Alibaba to be in kind of the six different group break up uh and six different segment break up by this point in time, you, you kind of move past all of that and now focus is really on all right, where they're gonna be able to drum up even more demand for some of their portfolio clients within that cloud intelligence group, which actually saw for the quarter ended uh March 31st, that ultimately grew by about 3% year over year.

And so, really investing further in that um further in compute database and A I products there.

Larger question of what those A I products will look like.

You, you don't really annex Alibaba to the same A I conversation that you would a Microsoft an alphabet or Google uh or even uh well, I'm not gonna put Apple in there but a meta platforms at this juncture.

Yeah.

Yeah.

Yeah.

And, and I think that that's a big question too just in terms of what that growth looks like and what their plans in terms of future capital allocation.

What that exactly looks like their investments here for A I.

All right, let's talk about another turning ticker here on Yahoo Finance and that is Tesla reportedly starting to bring back some of the employees that they let go not too long ago.

Now, remember this is the group that EO Elon Musk laid off part of the supercharger unit that was just last month.

This is according to a report here from Bloomberg.

Now among those being rehired is Tesla's of charging for North America.

And this comes on the heels of what seems to be a massive reversal here under Musk, initially making headlines last week just about the plans to pretty much dismantle the entire group.

Now, it looks like he is bringing some of those key former employees back.

We talked to, I I spoke to the CEO of blink charging on the show yesterday and was asking him what exactly this means for his business, whether or not he would potentially be interested in some of these Tesla employees that have been let go and essentially said yes, right.

It could be very, it could be very beneficial for his business, given their experience, given their knowledge within Tesla.

So I think as you see this quick reaction from others within the industry looking to capitalize on what Tesla had seemingly left behind at least for a couple of days.

But again, this reversal under Musk, I mean, you can go so many ways with this conversation.

One if you want to focus on the supercharging business itself and that industry.

But two, I think and maybe the more interesting part of this conversation is just a dysfunction that seems to be playing out right now inside Tesla and exactly what that culture is and maybe potentially a toxic culture as some former employees are calling it right now.

I mean, many employees have come out in the past whether it be the toxic workplace environment, whether it be allegations of discrimination within the workplace.

I mean, you just continue to file this under, file this away under what the heck is happening at Tesla as of right now.

And it really comes back to what the leadership team is doing to actually push back on Elon Musk.

And if they feel like they actually have enough weight when they're lending their own opinion or their own mindset towards what management is looking like, what it's doing on the delivery of so many of the vehicles that this company has promised.

And now lagging some of the expectations once they put it into the market, looking at you cyber truck, also, you think about the ultimate investigations that are still taking and on going into full self driving a major marketing point for Tesla, that's still a large question mark.

And then it comes down to the culture that you mentioned in dove into a moment ago.

This company has had question marks around its culture, swirling around it for the better part of the last 78 years.

Let's just sum it up as that.

And so all these things considered, it can be a hit on talent acquisition in the future.

If you have people, highly skilled, very smart, people who don't want to go work for T Elon Musk, what does that do for the profile and for the valuation in terms of factoring in any type of growth prospect for this company to eventually get to the same type of production standard, sentiment standard as some of the large behemoths within this motor vehicle landscape that yes have pulled back on some of their own ambitions for electric vehicles in this near term, given some of the waning demand but still have far more expertise in operating and making sure that they can scale up when the time is necessary.

Certainly.

All right, let's take a look at another training taker here ahead of the opening bell.

We got the opening bell in just about 90 seconds from now on holding that a soaring up just about 15% here in early trading.

The company reporting net sales that jumped 21% from a year ago also reiterated its full year net sales target of at least 30% growth now.

So obviously the street very encouraged by what it all.

I'm taking a look at quick analyst reaction here in the terminal.

Baird saying that it's given Q one had had been seen as the low point of the year for revenue growth and merging expansion.

The update here, strengthening Baird's conviction in the full year outlook.

So again, very optimistic at this point just in terms of that outlook and what the next couple of quarters could look like for on hold.

Yeah, I don't want people to be confused by me saying love it as you were mentioning it with a recommend at all, it's not, you just love to see a, a solid reaction on an earnings report like this, especially when you've got a beat on top and bottom line here.

And of course, we've spoken with the CEO S, the CO CEO S here on Yahoo Finance.

One of those co Ceo S Martin saying the first quarter was a very strong start to the year further step in the execution of that long term strategy.

Um And this is a premium sportswear brand.

Uh And that's where they want to play at.

And that's why it's so darn expensive.

It is very expensive, but, you know, people are buying them.

And then I also point to the fact that the consumer, certain pockets remaining a bit more resilient than forecasters had.

Initially, we're taking a look at the opening bell here on Wall Street and in midtown, Manhattan Times Square at the NASDAQ where you've got Nano ringing the opening bell.

Ok. Good for them.

Nano got some fun Fetty.

Then you've got the waltz.

Is anybody in the construction mood today?

Oh, my goodness, Bob the builder.

Yes, we can.

Right.

Energy is served over at the NYC.

Let's do a check of the markets sponsored by Tasty trade here this morning.

Everybody loves Bob the Builder one.

Yeah.

All right.

Well, I'm not sure if he's affiliated with uh the WS or not.

But anyway, taking a look at some of the major moves that we're seeing here out of the gate this morning, the Dow Jones industrial average flat just barely to the upside here right now.

And then additionally, the S and P 500 you seen that flat.

But to the upside and the NASDAQ composite says, hey, yeah, we can be flat but to the upside too.

So we'll see if we can get a more concerted move to the upside here.

But as of right now, markets still making up their mind that if a muted reaction or that we should say here for the market.

All right, let's get over to Jared has a closer look at maybe some of the movement that we are seeing elsewhere.

Jared just trading around the unch that is the unchanged, as I say, I'm going to show you the S and P 500 over a little bit of a longer term frame than I usually do.

Here's a three year look, just want to point out we are now S and P 500 trying to make its fourth straight week of gains here.

And the prior times when it had a three week bounce off, the lows was back there in October of last year and also in March of last year, both of those produced really nice runs with some upside follow through.

So I think that's what traders are looking forward to potentially this time.

Now.

I think a lot of that hinges on CP I and what's going to happen tomorrow.

That could be the catalyst up or back down.

But until then maybe we're in a little bit of a holding pattern.

The PP I number is really not moving the market too much.

Now, here are the sector actions for today.

We have real estate up 8/10 of a percent.

Utilities also in the leadership position.

Really interesting that interest rate sensitive sectors continue to lead here energy down about 1/10 of a percent.

But everybody wants to see what's going on with the meme.

Stocks.

Just want to get a check of game stop.

That stock is up 98% today alone.

Here is a three day look and you can see at the highs here, I don't think we've seen these levels since 2021 you'd have to go back all the way to almost the original Reddit phenomenon back in 2021 guys.

All right, Jared.

Thanks so much for breaking that down for us here.

Right.

Well, here we are today with markets are not too far from those record closing highs, but are we in store for a pullback ahead?

You've got the dow up just around 59 points right now.

You got the S and P up just above the flat line as well as the NASDAQ.

So where is the market head from here?

We will discuss right after the break.

Stocks are trading to the upside, at least for the dow and the NASDAQ here shortly after the open.

Now, quickly pairing some of those earlier moves to the downside that we did see on the heels of this morning's PP I print.

Why?

Well, we did see downward revisions to March's report that is offering investors some relief in terms of efforts and progress on inflation.

So where does the market trade from here?

We want to bring in Megan Horne and Veron's Capital Advisors, Chief Investment Officer, Megan.

It's great to see you here.

So when we talk about the move that we're seeing here to the upside, at least to a little bit today, but really coming off the heels of what was a rally last week, what's your take away from that PP I print and exactly that movement that we could see ahead of tomorrow's CP I report.

Um I think what we're seeing right now in the market is it's getting very complacent.

Um The PP I report today, the slight downward revision we had to march.

I'm not focusing on that.

What I'm focusing on is that 3.1% year over year when you exclude all of those volatile items, when you look at within that PP I report it's services.

And what is the fed told us that service inflation is very sticky.

Um This isn't the only report that has us that inflation is not going in the right direction.

You can look at the ISM manufacturing report, you can look at the ISM Services report, all of these things are showing that inflation and prices are trending higher.

Again, the market is completely complacent to this.

The Federal Reserve is, is complacent to this.

And we need to get some more hawkish rhetoric or we're going to continue to see inflation pressures go higher.

So what does that mean in terms of portfolio repositioning right now?

So we've been holding on to cash um overweight cash position really this whole year.

Um We did rebalance portfolios in the beginning of this year to get rid of some of those or take some profits on some of those uh parts of the market, your growth, your technology that rallied so much because we've always been in the camp that six rate hikes was absolutely ridiculous.

That was never going to happen.

Um We're now in the camp that honestly, I think that they're gonna have to, to remain on hold for the, the rest of this year.

We're not quite ready to say a, a hike is he is in the cards yet.

Um But we, we did have at least one rate cut at the end of this year and I'm leaning towards removing that for our forecast.

So Megan, I'm curious how you're looking at this resurgence that we've seen in the meme stock trade and exactly how that may be potentially plays into the fed's calculus here down the road because we did hear from Kashkari suggesting in a blog post just last week, that as we do see more and more interest in this meme trade, it is signaling maybe to some extent that financial conditions aren't really as tight as they should be up into this point.

Do you see any truth to that?

Absolutely.

Um It was, this meme stock craze was crazy when it occurred back in 2021.

It's just as crazy as it is now.

And if you look at something like the the US financial conditions index, um this is showing that financial conditions are actually easy.

Um This is a problem and now we're seeing this specula speculation trades.

Um The fear of missing out, this is all a bigger risk to the market.

This is why we think we can still see at least a 10% correction.

Um The timing of that, we're not exactly sure because remember markets can stay overbought, they can stay in this complacent area for longer than they should be.

But when they do that crash can be actually a little bit more than people I anticipate.

And so compare what we've seen in some of the trading frenzy within this kind of meme stock iteration versus the one of 2021.

I mean that one saw much larger short interest positions uh really become eradicated essentially or have to be covered, but that's not the same case.

Shorts have not, you know, even been as vocal about the positions.

Uh in comparison to what they were back in 2021.

Mhm.

Yes.

Um, and if you think that the people that are putting this stuff on, on Reddit or whatever social media recommendation tool that they're using, if you think they got smarter over the past couple of years, well, I'll tell you hedge funds got much smarter.

So I think that you're seeing that hedge funds learned from the mistakes back then and they're not going to be positioned or as exposed if this were to reoccur like we're seeing lately.

Me, do you start to hear from Fed Chair Powell on this?

He's speaking just about 20 minutes from now, but he has kind of bursted this meme.

So bubble in the past when you take into account what he had said a couple of years ago, I'm curious how you look at that from a strategist perspective.

I'm not sure that he's gonna really comment on the meme stocks.

I think he's got some bigger issues.

Honestly, the meme stocks is just noise to me.

I think it should be noise to him.

I think he needs to come out and address the, the information that we got today, inflation is not going where he wants it to go.

It's going the other way and what's problematic and he continues to downplay is it's going in the wrong direction from a sticky perspective.

Services is a problem.

Housing is a problem and these are things that he can't necessarily fix, but he does need to address it.

Where do retails, where, where do retail traders typically go after a main stock frenzy?

What is there anything that we noticed outside about where some of those traders flowed into?

After all the dust settled?

Uh I think that they probably go back into some of this, the, the safe haven types of blue chip stocks.

But um that's if they have any money after this does settle out and they haven't lost a significant amount from being on the wrong side of this.

Megan Harman, who is the Verdin Capital advisors, Chief Investment Officer Megan, always a pleasure to get some of your insights and perspective.

Thanks so much.

Thank you coming up, President Biden hiking tariffs on several Chinese imports.

But how will this impact semiconductors?

We're gonna speak with an analyst from Bernstein, next President Biden raising tariffs on several Chinese imports including chips.

Now, chips are going to be subject to a 50% tariff rate starting in 2025 double currently, which is 25% tariff.

So what could this mean for the broader escalation of the chip war that's playing out between the US and China and who stands to have the most to lose for that?

We want to bring in Stacy Raskin Bernstein, managing director and senior analyst.

Ay, it's great to have you here.

So talk to me just about this broader escalation.

You brought it up in your notes and it's one of the things that's on your radar here as we get news of the tariffs today.

So, what exactly does that mean then for the larger chip sector?

I mean, to be fair, this has been going on for years and years ever since the Trump administration, I think the first uh trade tariffs on, on chips as well as lots of other stuff.

That wouldn't, when was, it was 2018?

I think so.

It's been quite a while.

We've been looking at this.

Um there were export controls and Commerce Department restrictions that were put on things over the years.

Uh The US put uh Chinese companies like Huawei and others on the entity list, which made it very difficult for them to do business with the US companies.

So it's not like this is a new thing, this has been going on for like many, many years at, at this point, right?

And so Stacey, it also comes back to what's exported here.

And, and I think you started to get at that in your answer is, is it clear right now?

Because I mean, we're taking a look and we were taking a look in our morning meeting at some of the companies that have the largest outsized revenue exposure to China here and intel applied material instruments.

You need to be a little careful with this.

Number one, I think the tariffs he's talking about don't are not exports those are imports from China into the US and, and I notice it, it's, you're right, it's going on from semiconductors from 25 to 25% to 50%.

The US actually imports very, very little in the amount in, in terms of like raw semiconductors from China.

Last time I looked at this was again from, from 2017, but even then the US imported less than $10 billion of, of raw semiconductors from China in into the US today.

It's likely lower.

Um because of, of, of the nature, some of these controls have been put on over the years.

But in the context of a semiconductor industry, that's, that's over $500 billion it's a drop in the bucket.

You have to remember most semiconductors travel between the US and China inside other things rather than chips.

They, they come here in inside smartphones and P CS and TV S and that sort of thing.

Um um You were talking about uh a revenue exposure, you need to be a little careful there as well.

Lots of most semiconductor companies will have an outsized um reported revenue exposure to China.

That's because the electronics are assembled in China.

So for example, you know, if a company is selling stuff to apple, all of that revenue will show up as China revenue likely because the iphones were assembled in China, whether or not those iphones are actually consumed in China or not.

So you have to be a little careful when you're, when you're just looking at the raw reported numbers certainly.

And, and that's what we were trying to get at.

That's what we were trying to clarify at the end of the day.

So for investors who are trying to figure out exactly if there is a significant delta or if there is a change in operations at all.

Here, the direct impact from tariff from raised tariffs on semiconductors is likely very little.

Again, that that's like the, the reason I alluded to earlier, the US just doesn't import a lot of semiconductor direct semiconductors from China.

They just, they just don't, it's, it's maybe a few billion dollars, it's not any more than that.

Um So there's no direct now now the indirect impact, you know, again, risks of further escalation you, you, you know, like counter like actions from China II.

I don't know.

Um those have been the issues that we've been dealing with the last several years by and large.

They have been manageable.

You know, I can remember going back a few years ago, people were very worried about, about the escalation of all this stuff, trade and tariffs and everything.

Um I think there was some impact at the end of the day.

It's not like it slowed anything down, like things have been broadly fine in semiconductors since then.

Yeah, Stacy there is a report out from the information, it looks like overnight saying that China is asking T te tech giants to ditch NVIDIA chips and, and trying to um I guess encouraging them to buy local and said, and going back to what you were saying, the escalation, the tit for tat what exactly this could mean?

Maybe it's not specific or maybe it's not gonna have a huge impact on Nvidia's business.

But I guess go back to what Brad was just saying how we should be thinking about the escalation in the Yeah, so, so so for NVIDIA for that, I mean, NVIDIA already is barred from selling most of their stuff into China.

Anyways, they do have some some parts that they have made redesigned to, to um constrain to the export restrictions that are legal to sell.

The problem with those parts unfortunately be be to fit them within the confines of the export controls.

They have to really hamstring the performance because of that, the performance of some of the local Chinese stuff is actually better than the legal parts that NVIDIA is allowed to sell.

And so because of that, it's likely that the Chinese are are are gonna be buying more of the local parts anyways with, with whether or not the government is mandating it or not.

So I don't think there's a lot of direct impact the issue though, however, is the growth of these local ecosystems.

So we are seeing Chinese companies that are starting to build A I chips.

We're seeing Chinese companies that are, you know, that China has been really buying a lot of um uh uh trailing older generation process uh manufacturing equipment and they're building up a local um older generation semiconductor uh ecosystem because we've shut them out of the leading edge most of this stuff.

I don't think you'd want to do stuff like that, you know, always making chips on, on really older generation process technology.

You wouldn't want to do it if you didn't have to do it.

But if you have no choice, you will do it.

And I think that is, is the longer term risk is the US by their actions and, and, and I understand the, you know, the national security rationale to go after this, but we are forcing China to become creative in all senses of that word.

And, you know, you're gonna, you're gonna force them, you know, drive them to find other solutions that maybe they would not have done in the past.

And again, in 10 years, like we may have a much broader decoupling.

Um China may develop, they're already developing local solutions which are not as good as, you know, what's available like in the rest of the world.

But with, if you don't have any choice, you'll, you'll go ahead and you'll go down that path and, and, and they are clearly going down that path.

Stacey Rasin, who is the Bernstein managing director and senior analyst, Stacey, thanks for taking the time here today.

You bet.

All right, everyone.

We've got some breaking news.

Adam Sippy, who is the CEO of Amazon's cloud unit?

Aws is stepping down next month after 20 years with the company, senior vice president, Matt Garman will take sips.

He's role effective June 3rd in a memo to employees.

Sips said he was leaving Aws to spend more time with his family saying the future is bright for the co company here.

We're taking a look at shares of Amazon here as well this morning ticker symbol am ZN.

They're down right now by about 9, 10 of a percent here.

Of course, this one of the largest profit producing parts of the Amazon business here.

And so a major impact when you've got a seat change at the head of this division.

Yeah, ma he inherited the job or took over the job as the Aws head three years ago, following the footsteps of Jasse and Jasse in the same right now was writing quote.

I'd like to thank Adam for everything he's done to lead Aws over the past three years, he took over in the middle of the pandemic, which presented a wide array of leadership and business is the challenges here.

And like you were saying, obviously, the importance of Aws, the revenue, the growth driver that it is for the larger, for larger uh for Amazon's larger business here.

That is why we are seeing the impact on the stock here with that executive shake up with the stock off just about 1%.

So again, Amazon saying that Adam Zippy, it will be stepping down as Aws CEO.

Yeah, this just after he had made an appearance as well here on Yahoo Finance with opening bid with Brian Sazi as well.

Talking about the cloud services businesses reaching a monumental milestone, talking about hitting the $100 billion run rate as well.

Uh You can see that full conversation, a larger question of all right.

So where does this kind of pivot some of the larger ways of getting towards uh even more capitalization or compound annual growth on top of the milestones that this part of the business for Amazon has already hit everyone.

We've got all your markets action ahead.

We'll continue to track Amazon and all of the other thousands of tickers out there on the other side of this short break, you're watching the morning brief as usual.

It's all about A I on Wall Street hot on the heels of Apple's ipad launch event last week, Google is going all out for its IO developer conference today.

The company expected to announce new A I offerings for its services.

Meanwhile, as Apple and Google transform their voice assistance into chat bots open it A I is transforming its chatbot into a voice assistant.

The company just announced a new chat GP T that listens looks and talks.

OK?

So we're getting one step closer to Black Mirror here.

But ultimately, I think it really does continue to showcase just how much of the capital expenditures that are going into these generative A I ambitions for companies which we've heard about on the earnings calls for Microsoft for alphabet for meta platforms and how they're all anticipating for the spending in this first quarter to really have been perhaps the trough of that spending that they're continuing to put forward here.

And the return on that investment is key.

And I was looking at one of the particular surveys around Deloitte's digital media trend surveys and the return on investment that these companies are looking for uh within the organizations for productivity, for scaling up growth and or hyper scaling even.

Um it really is going to take billions of dollars for a lot of these companies quite frankly earmarked and put forward into some of the major investments in generative A I to actually see the results of this come forward in the near term period of time, but it's a long term bet it is.

And I think the pressure is on Google, right?

And what is going to announce today on the heels of the OPEN A I announcement that you talked about that we got yesterday.

Also on the heels of reports that Apple is actually teaming up here with Open A I that of course, and it was viewed as a loss here for alphabet.

We saw that in yesterday's trading action.

It's off just a fraction here today ahead of this.

But I think Apple or excuse me alphabet does have the potential here to surprise to the upside.

It is expected to unveil some new features that could be enough to excite the street to excite analysts when it comes to tie ins to its search business and to its broader ecosystem here, Bank of America writing about the event here that it could help solidify the case for Google and the Android ecosystem as a net A I beneficiary.

So exactly what we are going to hear remains to be seen.

And also we got to note that this comes ahead of what is expected to be a pretty big announcement from Apple next month when they're going to be expected to talk about their A I strategy.

So we'll see because I think the criticism when it does come to alphabet is that it still lags behind Microsoft when it comes to this efforts options A I, since we're talking about A I has an expected move by the end of this week, post this announcement of about 3% here for shares of Google.

Well, coming up next Ma Mills, she is joining me at the desk for the next hour of catalyst.

We are going to be taking a deeper dive into the mean stock rally and also what it means for the broader market.

Plus President Biden's China trade tariffs.

Why he's announcing them now and what it means for the industries that are set to be impacted.

You're watching Yahoo Finance.