Futures fall, Nvidia caught in trade war, United Airlines pops, Parkland CEO out, Metro miss, Suncor downgraded
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Death cross: US futures are under pressure with tech stocks lagging as the trade war intensifies between the US and China. US President Donald Trump effectively barred Nvidia from selling its H20 chips to China. These were chips specially designed to be exported to China because they aren’t as good at training AI models. Shares of Nvidia are down 6.5% in the pre-market after warning it will have to take a $5.5 billion writedown. “The financial impact is small relatively,” wrote Dan Ives at Wedbush, “but the strategic blow is the focus of the market as Nvidia now has massive blockades going after the China market in the middle of this raging US/China tariff battle.” Shares of AMD (-7%), Micron (-5%) and Broadcom (-4%) are also taking a hit. A big drop in bookings at ASML is aggravating the tech trade this morning with the semiconductor equipment maker down 5% in the pre-market. The tech trade continues to be hobbled, underperforming the S&P 500 so far this year. This as the S&P 500 has put in an official “death cross,” when the 50-day moving average crosses below the 200-day moving average. In the last 50 years there have only been 24 death crosses, but its ability to predict future declines is spotty. In 46% of the incidents, the sell-off worsened. However, the S&P 500 averaged a 6.3% gain in the 12 months following a death cross with positive returns 72% of the time according to David Lutz at Jones Trading. There are also some positives this morning that the market is overlooking. China’s GDP grew more than expected at 5.4% and Bloomberg is reporting that China is open to talks with the US if they show “more respect” and name a point person for trade talks. Still, the mood remains risk-off with gold hitting another fresh all-time high. We just got a read of retail sales that show Americans rushed to buy cars ahead of tariffs. This morning we will get the Bank of Canada rate decision (9:45amET) and it is a nail-biter. On one hand, a higher loonie, tariffs, and deteriorating job picture support another rate cut. On the other hand, the most recent read of inflation showed some cooling and a Federal election in two weeks could persuade them to stay on the sidelines for now.
Take flight: Shares of United Airlines are surging 7% in the pre-market after offering two different profit forecasts. In what might become a common occurrence, United Airlines gave a profit forecast for the current environment and a forecast if there is a recession. However, even in the recession scenario United Airlines expects to churn a profit giving comfort to investors who have endured a 40% sell-off in the stock from the January peak. While United Airlines put in its best first quarter in five years, there are signs of a slowdown in the quarterly results. Domestic travel demand is waning and United said they would cut back on capacity.
Knives out: Watch Parkland at the open as a full blown proxy battle is under way. This morning the gas station operator announced its CEO Bob Espey would step down while warning profit in Q1 would be significantly lower than expectations and profit for year would come in at the low end of its forecast. This comes after Simpson Oil called for a CEO change last night in a presentation recommending its own slate of directors come the May 6 AGM. “Under the leadership of the current Board of Directors (the “Board”) and long-tenured CEO Bob Espey, the Company has repeatedly missed guidance and consensus, experienced significant management churn, allowed expenses to spiral out of control, and pursued a deeply flawed M&A strategy that has stunted profitability for years,” stated the Simpson Oil release. One of the directors they are proposing for the board is Darcy Morris of Ewing Morris. We interviewed him just last week where he said Parkland was one of his top investment ideas. “There have been a lot of corporate governance missteps that have led to value destruction,” he said of Parkland. You can watch the full interview here with the Parkland conversation beginning at 50:28.
Clean up on Aisle 6: Watch shares of Metro at the open after the grocery chain put in a small but rare earnings miss. On the plus side, food sales came in higher than expected. The company also said to date tariffs and counter-tariffs have not had a material impact on the business. “Q2/F25 results consistent with expectations and supportive of MRU hard-earned premium valuation,” wrote RBC’s Irene Nattel, “(Metro’s) 20+- year track record of delivering visible, predictable, consistent results is valued by investors across the cycle, but even more so during periods like the current one, where every day brings fresh news and challenges.” Metro is trading near an all-time high.
Notable calls: Suncor was downgraded to sell at Veritas. The stock has already lost about 20% in value so far in 2025 and is trading around the lowest level in more than a year. The price target of $47/share doesn’t suggest more downside and is part of a larger note lowering estimates for oil prices and energy producers. Shares of Target are dipping 1% in the pre-market after Goldman Sachs downgraded the stock to neutral. The analyst says pressure on discretionary spending will weigh on results. “Given uncertainty around tariffs and the inflation outlook appear to be taking a toll on consumer sentiment and expectations, we believe a recovery in growth for discretionary categories will be delayed versus our expectations heading into 2025,” wrote Goldman’s Kate McShane.
