It’s still volatile out there, historically so, according to Dow Jones Market Data: The S&P 500 had moved up or down at least 1% in seven of the 10 trading sessions before Thursday.
Make it eight for 11. But today saw the positive kind of spike for stocks, despite pre-market reports that China and President Xi Jinping will work a hard bargain out of the United States and President Donald Trump.
So a true trade war detente may be a ways away. And April remains on track to be the most volatile month since March 2020 – with big moves up as well as big moves down.
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“President Trump’s apparent softening on tariffs against China in recent days has buoyed markets and raised hopes for a detente between the world’s two largest economies,” The Wall Street Journal reported early Thursday morning. “For Chinese leaders, it only strengthens their resolve that Trump will eventually cave if they wait him out.”
“Fake news” is how the Chinese Foreign Ministry described recent reports that Beijing is negotiating with Washington. “This tariff war was launched by the U.S., and the Chinese side’s position has always been clear and consistent,” said Guo Jiakum, a ministry spokesman.
“If we fight, we will fight to the end; if we talk, the door is wide open. Any dialogue or negotiation must be based on equality, respect and mutual benefit.” President Xi’s position is that President Trump should “completely eliminate unilateral tariffs against China if he is serious about resolving trade disputes through dialogue.”
The Cboe Volatility Index (VIX) peaked at 29.66 about six hours ahead of the opening bell at the New York Stock Exchange, settled into a range in the 27s, and closed at 26.64, the intraday low. A “normal” reading for the “fear gauge” is between 12 and 20.
“Shifting narratives out of Washington have kept volatility elevated,” observes Daniel Skelly, who heads Morgan Stanley’s wealth management research and strategy team, “but it’s possible that tariffs will turn out to be more of a hit to earnings and the markets rather than a recession event.”
Skelly notes that a “benign” initial jobless claims report for the week ending April 19 “confirms we haven’t yet seen any major cracks in the labor market.”
The strategist also notes that markets “remain stuck trading in a range, with choppiness the order of the day,” emphasizing that “investors should continue to focus on the long term, with an eye toward companies with high earnings achievability, limited tariff exposure, and quality balance sheets.”
Indeed, Warren Buffett‘s benevolent behemoth Berkshire Hathaway (BRK.B, +0.9%) is first among 5 Stocks to Buy for a Trump Presidency.
By the closing bell of a third straight risk-on session, the tech-heavy Nasdaq Composite had added 2.7% to 17,166, the broad-based S&P 500 was up 2.0% at 5,484, and the blue-chip Dow Jones Industrial Average had risen to 1.2% at 40,093.
Big Blue sings the policy blues
Perhaps it’s more accurate to say shareholders of International Business Machines (IBM, -6.6%) are singing the blues after the Dow Jones stock sank on Thursday.
Management was straight-up and conservative in its conference-call commentary. “In the near term,” explained CEO Arvind Krishna, “uncertainty may cause clients to pause.” The CEO added that IBM hasn’t seen “a material difference in client buying behavior.”
IBM reported first-quarter earnings of $1.60 per share on revenue of $14.54 billion, ahead of a FactSet-compiled Wall Street forecast of $1.42 on $14.39 billion. Free cash flow was $2.0 billion.
Describing the prevailing environment as “fluid,” Krishna noted that for IBM’s “clients with a more direct impact from current policy, the slowdown may be more pronounced.”
And yet IBM reiterated guidance for at least 5% revenue growth and free cash flow of about $13.5 billion for the full year. Second-quarter revenue will be in a range of $16.40 billion to $16.75 billion, which at the midpoint exceeds the Wall Street forecast but marks a 3% year-over-year decline.
What stands out about IBM’s first quarter to Morgan Stanley analyst Erik Woodring is the relative weakness of its Software business, where “growth now needs to accelerate in the face of an uncertain macro backdrop and increasingly more difficult” quarterly comparisons.
“Execution for the remainder of the year needs to be flawless,” Woodring concludes, “with any incremental downside surprises in software likely to result in further multiple compression.” Woodring maintained an Equal-Weight (or “Hold”) rating on IBM but cut his 12-month price target to $233 from $237.
When the chips are up
Texas Instruments (TXN, +6.6%) doesn’t crack the list of the best semiconductor stocks to buy, but its first-quarter results and second-quarter forecast shone a guiding light for the group on Thursday.
Texas Instruments posted first-quarter earnings of $1.28 per share on revenue of $4.07 billion vs Wall Street expectations of $1.07 on $3.91 billion. And management expects second-quarter revenue of $4.17 billion to $4.53 billion, ahead of what FactSet says is a $4.10 billion consensus estimate.
During its conference call, TXN noted “high uncertainty” related to tariffs and trade war politics, but management said it saw no impact on revenue for the current quarter.
Management also said revenue for its industrials business grew quarter over quarter from January to March – reversing seven straight quarters of declining revenue.
JPMorgan analyst Harlan Sur expects trade-war effects to show up later this year. “We expect tariff and trade-related issues to weaken the outlook for the second half of the year,” Sur said, “leading to negative earnings revisions.”
Sur maintained his Overweight (or “Buy”) rating on TXN but reduced his 12-month price target from $230 to $195 to reflect a lower earnings multiple.
The analyst noted that low inventories and the fact that semiconductor makers are coming out of a cyclical slump could “mitigate the magnitude of the downside risks compared to previous cycles.”
Nvidia (NVDA, +3.6%) – the biggest semiconductor stock by market capitalization and the leader of the AI revolution – will report its fiscal 2026 first-quarter results on or about May 28.
