European stock market moves have mostly evaporated this morning, as the focus shifts to some key event risk later this week. Apple’s earnings report that is due along with Friday’s jobs report for April, are both seen as litmus tests for the damage caused by US trade tariffs on the US economy and on corporate America.
US equity market futures received a boost from Microsoft and Meta’s earnings that were released late on Wednesday night. Futures have been rising throughout the morning, although they did pull back slightly when GM, the US car maker, reported ugly forward earnings guidance. GM lowered its profit forecast by $5bn for this year, which is a direct result of its exposure to US auto tariffs. Gross earnings are now expected to fall into a range between $10bn – $12.5bn. This could be offset if the US lowers auto tariffs, and if the US can negotiate trade deals with key GM trading partners. However, if that doesn’t happen, then GM has laid out the impact on its bottom line.
GM reports weaker guidance, but the stock continues to push higher
GM shares fell sharply on Wednesday, however, the weaker profit outlook has not impacted its stock price on Thursday, as optimism remains high that tariff deals can be struck, and as traders and investors dismiss the worst-case scenarios from companies. The President has already changed the 25% tariff on imported auto parts, which is why the market is hopeful for further positive change. Added to this, the market is grateful for the guidance from GM, especially as so many companies have avoided giving forward guidance this earnings season, including Walmart, which is another reason why GM’s stock price has not reacted so far on Wednesday and is higher by 2.7% in the pre-market.
A mixed picture for tech
The Q1 earnings season has highlighted the companies that are more or less exposed to Donald Trump’s economic policies, and their resilience to economic uncertainty. Auto firms are highly exposed to economic risks, notably tariffs, whereas big tech, including Microsoft, Google and Meta, have shown that they can continue to grow as AI demand remains strong.
After reporting better than expected results on Wednesday night, Meta’s share price is higher by 6% in the pre-market, and Microsoft’s share price is surging in the pre-market, and is currently higher by more than 9 %. If this is maintained on Thursday, then it suggests that Microsoft’s Q1 earnings report has been the most important for the company for years. The average move in the stock price in the 1-day after an earnings report is 3.08% for the last 8 quarters, today’s move in the pre-market is three times that.
Nvidia gets a boost from Microsoft and Meta
These earnings are boosting the overall tech sector, Nvidia is higher by more than 4.5% on Thursday, as Meta boosts its Capex spend. Microsoft is also maintaining its capex spend on AI, but it is doing so at a slightly slower pace than recent quarters, which is welcomed by the market. Meta is Nvidia’s second largest customer, and its orders account for more than 9% of Nvidia’s revenue, so it is no wonder that the chip maker is also getting a leg higher in the pre-market on Thursday.
The Big Tech recovery continues, but not everyone is treated equal
The focus now is on whether some tech stocks can erase 2025 losses and move into the green for the year. Microsoft is down 7% YTD, which could be erased on Thursday if the stock can maintain current gains. Meta could also erase its losses for the year, while Google, Nvidia, Amazon, Apple and Tesla are all down sharply YTD, and may take longer to erase all of their losses.
The Q1 earnings season is telling us who is more or less exposed to tariffs, and this is impacting price action. For example, as Microsoft’s share price is on its way to moving into positive territory, General Motors is down 15% YTD, as car makers remain exposed to US trade barriers.
Apple earnings preview
Ahead on Thursday, Apple earnings are key. The market is expecting Apple’s revenue to rise by 4% to $94.1bn, this would follow a 4% decline a year earlier. Earnings per share is expected to be $1.62, operating margin is expected to be 31.3%, a gain of 55bps. Product sales could also rise by 1%, after a 9.5% decline a year earlier.
Apple’s supply chain is likely to be the focus for this earnings report. The market wants to know how Apple is reducing its exposure to China for assembly and components. Although smartphones have been exempted from the bulk of US tariffs on Chinese imports, Apple has promised to move production elsewhere otherwise these penalties could return.
Apple could report stronger than expected sales, as demand was pulled forward last quarter to avoid the worst of the tariffs. However, the risk is that demand could weaken in Apple’s fiscal Q3 and beyond, as consumer spending weakens and demand for its iconic iPhone suffers. We expect Apple to avoid giving forward guidance, which may weigh on its share price later this week. The market could also be disappointed if the CEO does not hint at product upgrades down the line. Apple’s share price is bucking the wider trend on Thursday, and its share price is down 1.16% in the pre-market. A weak earnings report is already weighing on the stock price. We will follow Apple’s earnings report later tonight, to see if the company can give any glimmer of hope about how resilient the company will be to US trade policy.