Chips, Carrots, and Central Banks

At the heart of this rally lies a symbolic gesture with very real financial consequences: Apple’s announcement of a $100 billion expansion of U.S. investment, bringing its four-year commitment to a staggering $600 billion. In return, the company finds itself insulated from the latest round of 100% semiconductor import tariffs. 

Markets reacted with glee. Apple climbed 5.1% on Wednesday and another 3.2% in premarket trading Thursday. Chipmakers like Nvidia and Intel followed suit, riding the rising tide.

Previously, Trump had raised customs surcharges on India from 25% to 50%. New Delhi continues to resist, refusing to accept a trade agreement that it considers too unbalanced. This standoff could have a considerable impact, as around 55% of products exported from India to the United States will be affected.

Wall Street, increasingly reliant on the caprices of political maneuvering, now treats policy leaks and off-the-cuff presidential statements as catalysts. Calling this tariff policy inconsistent would be an understatement. While it purports to protect American chip manufacturing, its carve-outs function as subsidies—if not in dollars, then in strategic favoritism. The winners are clear: Apple, Intel, and others with deep U.S. footprints. The losers? Multinational firms still wedded to global supply chains, and potentially consumers, who will see the costs of non-exempt chips passed on.

This “stick-and-carrot” approach turns the president into the de facto central planner of Silicon Valley’s future. The risk here is that investment decisions are no longer dictated by innovation, efficiency, or market demand—but by how well a company can curry political favor.

Layered atop tariff exemptions is another intoxicant: the Federal Reserve’s looming pivot. A weaker-than-expected July payroll report has traders almost certain of a 25 basis point rate cut come September. Two cuts before year’s end seem probable. This, coupled with unrelenting optimism around AI spending, has kept markets near all-time highs—even as economic fundamentals wobble.

But the Fed’s apparent dovish turn raises a fundamental question: if poor economic data is met with policy easing and good corporate news with soaring valuations, what is the market not pricing in? It’s a system drunk on stimulus and addicted to central bank reassurance. Adriana Kugler’s exit from the Fed Board and expectations of a more dovish replacement only feed the anticipation.

Second-quarter earnings have only added fuel. DoorDash exceeded expectations, surging 8.5% on optimistic guidance. Shopify shares surged 21% after reporting its biggest earnings beat in over two years, raising Q3 revenue guidance.

The density of quarterly corporate results will begin to decline from next week, but the season is still in full swing. Small disappointments are being punished severely (Super Micro Computer, Mosaic, AMD, Bayer, Zalando and Beiersdorf yesterday), while pleasant surprises are being richly rewarded (Arista, Hiscox, Diageo) and Palantir is rising regardless of the configuration. The S&P 500 close 0.73% higher yesterday, helped by Apple’s surge.

In Asia-Pacific, green is still the dominant colour, except in India, where the stock market was down 0.5% due to the toughening of US threats of tariffs. The Japanese Nikkei 225, Hong Kong’s Hang Seng and South Korea’s KOSPI were up around 0.5%. In Taiwan, the TAIEX jumped more than 2% in the wake of TSMC, whose share price rose after Trump’s comments on semiconductors, as the group is expected to escape tariffs thanks to its investments in the United States. The Australian ASX closed down slightly, by 0.2%. European leading indicators are in the green, and so are futures on Wall Street.

Today’s economic highlights:

On today’s agenda: France’s current account balance, trade balance, and wages; Germany’s industrial production; in the United Kingdom, the Bank of England’s bank rate; in the United States, new jobless claims, non-farm productivity, unit labor costs, and wholesale inventories. See the full calendar here.

Dollar index: 98,205Gold: $3,380Crude Oil (BRENT): $67.14 (WTI) $64.62United States 10 years: 4.25%BITCOIN: $114,682

In corporate news:

Martin Marietta reported a 12% rise in Q2 profit to $328 million, driven by strong infrastructure demand and higher pricing, with revenues up 3% to $1.81 billion.Novo Nordisk shares surged up to 14% after Eli Lilly‘s weight-loss pill orforglipron showed weaker-than-expected trial results, easing competitive pressure on Novo’s obesity treatments.Eli Lilly‘s GLP-1 pill orforglipron showed 12.4% weight loss in a key trial, below Novo Nordisk’s Wegovy, leading to a nearly 8% drop in Lilly shares.Warner Music Group beat revenue estimates with $1.69 billion in Q3 sales but swung to a $16 million loss due to forex impacts and restructuring costs.UnitedHealth is under investigation by U.S. senators over alleged secret payments to nursing homes that may have endangered patient care to cut hospitalizations.
Israel’s Leviathan gas field, partly owned by NewMed and operated by Chevron, signed a $35 billion deal to supply 130 bcm of natural gas to Egypt through 2040.Insulet beat Q2 earnings estimates with strong demand for its Omnipod insulin pumps and raised its full-year revenue forecast, sending shares up nearly 10%.
President Trump instructed U.S. diplomats to lobby against the EU’s Digital Services Act, arguing it censors American speech and harms U.S. tech firms like Meta, Tesla, Amazon, and Alphabet.ConocoPhillips beat Q2 profit expectations and raised its asset sale target to $5 billion, including the $1.3 billion sale of Anadarko Basin assets.Baker Hughes completed its acquisition of Continental Disc Corporation, expanding its industrial portfolio.
Shopify shares surged 21% after reporting its biggest earnings beat in over two years, raising Q3 revenue guidance and prompting RBC Capital Markets to hike its price target to $170, citing strong momentum and long-term growth visibility.Generali and Mediobanca are negotiating a commercial agreement concerning Banca Generali.Merck KGaA has increased its full-year operating earnings guidance following strong performances in its pharmaceuticals and lab equipment sectors.Apple announces significant investments in US manufacturing, including a partnership with Samsung for chip production in Texas.Microsoft has launched Azure Storage Discovery for its cloud platform.General Motors and Hyundai have announced a partnership to jointly develop five new vehicles.RB Global‘s second-quarter revenue exceeded expectations, showing an 8% increase compared to the same period last year.

Analyst Recommendations:

Abbvie Inc.: Daiwa Securities upgrades to outperform from neutral with a price target raised from USD 190 to USD 214.Airbnb, Inc.: Punto Research downgrades to hold from buy with a target price reduced from USD 148.52 to USD 138.36.Amd (Advanced Micro Devices): DZ Bank AG Research upgrades to hold from sell with a price target raised from USD 150 to USD 165.Campbell Soup Company: Piper Sandler & Co downgrades to neutral from overweight with a target price reduced from USD 35 to USD 34.Coca-Cola Europacific Partners Plc: Morgan Stanley downgrades to equalwt from overwt with a target price reduced from 89 to EUR 83.Ebay Inc.: Arete Research upgrades to neutral from sell with a price target raised from USD 50 to USD 91.Emerson Electric Co.: Barclays upgrades to equalweight from underweight with a price target raised from USD 125 to USD 127.Etsy, Inc.: Arete Research upgrades to neutral from sell with a price target raised from USD 43 to USD 54.Fortinet, Inc.: KeyBanc Capital Markets downgrades to sector weight from overweight.Ge Vernova Inc.: CLSA upgrades to accumulate from buy with a price target raised from USD 525 to USD 720.Hubspot, Inc.: Piper Sandler & Co upgrades to overweight from neutral with a price target raised from USD 645 to USD 675.Lyft, Inc.: Canaccord Genuity maintains its hold recommendation with a price target reduced from 14 to USD 11.Informatica Inc.: Guggenheim downgrades to neutral from buy.Walt Disney Company (The): Punto Research upgrades to buy from hold with a target price of USD 128.