Pandemic-era meme stocks GameStop (GME) and AMC Entertainment (AMC) continue to soar in premarket trading following the return to social media of famed investor &#;Roaring Kitty"; President Joe Biden imposes sweeping tariffs on a large swath of Chinese imports from steel to semiconductors and electric vehicles, turning up the heat in trade tensions between the two countries; Home Depot (HD) posts higher-than-forecast first-quarter earnings but undershoots on sales; the Producer Price Index numbers for April are due today, giving a read on whether price pressures are cooling enough to encourage Federal Reserve officials to cut interest rates; and Anglo American is planning to split up and sell several assets after rejecting a sweetened $43 billion offer by rival mining giant BHP Group (BHP). U.S. stock futures are little changed ahead of the U.S. producer prices numbers and a speech by Federal Reserve Chair Jerome Powell today at an event in the Netherlands. Here&#;s what investors need to know today.
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1. GameStop and AMC Continue the Rally Sparked by Return of 'Roaring Kitty'
Pandemic-era meme stocks GameStop (GME) and AMC Entertainment (AMC), which both surged more than 70% to multi-month highs on Monday, continued soaring in premarket trading. The brick-and-mortar video game retailer and the cinema chain operator were both around 100% higher in premarket trading two hours before the opening bell. In , the social media-fueled meme stock frenzy that swept Wall Street squeezed hedge funds that held short positions in either stock. Monday&#;s rally was triggered by key meme online persona "Roaring Kitty" making his first post on X in three years&#;causing losses nearing $1 billion for GameStop short sellers, according to data from S3 Partners cited by CNBC.
2. Biden Levies Sweeping Tariffs on Chinese Chips, Minerals, EVs
President Joe Biden imposed sweeping tariffs on a large swath of Chinese imports from steel to semiconductors and electric vehicles, turning up the heat in trade tensions between the two countries as U.S. officials accuse China of overcapacity in manufacturing. The changes, the culmination of a review of the Section 301 tariffs under former President Donald Trump starting in , are projected to affect around $18 billion in current annual imports, according to the White House. The administration said that the tariff rate on certain steel and aluminum products under Section 301 will increase to 25% in from 0%&#;7.5%; the rate on semiconductors will increase to 50% by from 25%; and the rate on electric vehicles will rise to 100% from 25%.
3. Home Depot Q1 Revenue Lags Forecasts But Profit Beats
Home Depot (HD) posted higher-than-forecast first-quarter earnings but undershot Wall Street analysts&#; projections on revenue, signaling that elevated interest rates continue to weigh on home improvement spending. The retailer reported diluted earnings per share (EPS) of $3.63, topping the $3.58 consensus expectation, but revenue for the three months through April 28 of $36.42 billion was shy of the forecasted $36.65 billion. Home Depot affirmed its previous guidance and said it expects total sales to rise about 1% in fiscal . Chief Executive Officer (CEO) Ted Decker said the quarter "was impacted by a delayed start to spring and continued softness in certain larger discretionary projects." Home Depot shares were up less than 1% in premarket trading.
4. Wholesale Prices for April Due in Latest Read on Inflation&#;s Path
Investors will be closely watching today&#;s wholesale price numbers and tomorrow&#;s consumer price index data to give a read on whether price pressures are cooling enough to encourage Federal Reserve officials to cut interest rates. The Bureau of Labor Statistics is due to report the Producer Price Index (PPI) at 8:30 a.m. ET. Wholesale prices are seen rising 0.3% in April from the previous month, according to economists surveyed by The Wall Street Journal and Dow Jones Newswires. In March, the PPI rose 0.2% from the previous month, less than economists had expected. Core PPI is expected to rise 0.2% in April. Inflation readings have continued to move higher in , and consumers have been raising their expectations for future price increases.
5. Anglo American Plans Breakup After Rejecting BHP&#;s $43B Bid
Anglo American is planning to split up and sell several assets after rejecting a sweetened $43 billion offer by rival mining giant BHP Group (BHP) in a break-up plan CEO Duncan Wanblad called its most &#;radical&#; shakeup in decades. Anglo said Tuesday that it would spin off its platinum-metals subsidiary Anglo American Platinum; explore options for putting its nickel operation on &#;care and maintenance&#; before divesting it; divest or demerge its diamond unit De Beers; and sell its steelmaking coal assets. BHP had made the bid for Anglo on soaring demand for copper at a time when the world is moving away from fossil fuels toward more renewable energy projects and electric vehicles. Wanblad said the breakup will mean the miner&#;s assets base will be focused on copper and premium iron ore. BHP shares were 2.5% higher in premarket trading, while Anglo was trading down around 1.6% in London.
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&#;As US supply chains decouple from China, Mexico&#;s manufacturing sector is emerging as a winner.
Manufacturing in Mexico is attractive for companies that experienced pandemic-era supply chain snarls or want to decrease reliance on trade between the US and China amid geopolitical uncertainty.
That&#;s called nearshoring, which is when companies bring production facilities closer to home markets.
As nearshoring continues and global supply chains are reorganized, Mexico&#;s manufacturing sector has an opportunity for long-term success, according to Alberto Ramos, head of Latin American economics research at Goldman Sachs, who spoke with CNN.
Ramos said Mexico and China have been competing for the US manufacturing market for years, but amid a shifting US-China relationship, Mexico looks poised to pull ahead.
Mexico surpassed China as the top exporter to the US in . Those exports were driven by manufacturing, which comprises 40% of Mexico&#;s economy, according to Morgan Stanley.
US imports from Mexico continued to increase in February, according to April 4 trade data released by the Commerce Department. Meanwhile, Chinese exports to the US were down 20% in , compared to .
US Trade Representative Katherine Tai told CNN&#;s Julia Chatterley that supply chains have made the US economy over-reliant on the Chinese economy in the past.
&#;The challenge for us is how do you create more resilience in your economy and in trade? Because right now, the way trade has been operating, our supply chains have been so entangled and they have created so much concentration in the Chinese economy, that we all feel extremely vulnerable because the supply chains are fragile,&#; Tai said.
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Amid shifting geopolitics and competition, US and Chinese companies both see potential in Mexican manufacturing: Low labor costs, geographic proximity to American markets and the US-Mexico-Canada (USMCA) agreement &#; a free trade accord established in that makes trade in North America more cost-effective and efficient &#; are all factors contributing to a potential boom.
While US policy intends to decrease reliance on China and &#;create more resilience&#; in US trade, moving supply chains can be tricky.
In fact, the US drive to disengage from the Chinese economy might be enabling China to access new markets and avoid US tariffs.
Cars are a major export for Mexico, and they illustrate much of what&#;s happening.
Mexico is a global hub for car factories, hosting plants from major companies operating in the US, including General Motors, Ford, Stellantis and nearly a dozen more.
Virtually every American auto manufacturer depends on parts from Mexico to build its cars or trucks, because those parts can be substantially cheaper than those made in the US.
Free trade agreements like the USMCA mean companies in the US, Mexico and Canada face fewer barriers moving, selling and buying parts across North America.
A diversion from free trade is tariff policy: In , the US hiked tariffs on imports from China, which makes it more expensive for Chinese goods to enter US markets and dissuades companies from relying on Chinese supply chains.
An employee working at a Ciudad Juarez factory that exports its automotive products to the United States
Jose Luis Gonzalez/ReutersCars require tens of thousands of parts, which can be made in any number of places. And while Mexico&#;s manufacturing sector is increasing exports to the US, Chinese companies might be using Mexico as a route to avoid US tariffs on Chinese goods, according to Xeneta, an ocean freight rate benchmarking and market intelligence platform.
Shipping container exports from China to Mexico were up nearly 60% in January compared to a year ago, according to Container Trade Statistics analyzed by Xeneta.
The surge in exports from China to Mexico suggests the possibility &#;that the increase in trade we are witnessing is due to importers trying to circumvent US tariffs,&#; Peter Sand, chief analyst at Xeneta, wrote in a March 15 research note.
An April report by Moody&#;s Analytics said that while Mexico has increased its manufacturing output, production may be boosted by goods manufactured outside of the country.
The increase in Mexican exports to the US has &#;been roughly matched by simultaneous and closely correlated growth in Mexican imports from China,&#; according to S&P Global Market Intelligence country risk analysts Jose Enrique Sevilla-Macip and John Raines.
Goldman&#;s Ramos said there is an economic incentive to move production to Mexico to avoid tariffs. &#;It&#;s a way to circumvent the policy objectives that were behind the enactment of tariffs,&#; he told CNN.
On Capitol Hill, the possibility that Chinese steel is ducking US tariffs has garnered attention from lawmakers. The Biden administration announced that it is working with the Mexican government to prevent China and other countries from evading US tariffs on steel and aluminum via US imports from Mexico.
As early as February, Tai inquired about &#;the lack of transparency&#; around Mexico&#;s steel and aluminum imports from &#;third countries&#; during a meeting with Raquel Buenrostro, Mexico&#;s secretary of economy.
Concerns of tariff evasion are drawing a response from the US president &#; and will continue to beyond November&#;s election. The USMCA is set to be reviewed in .
Both US President Joe Biden and his challenger, former President Donald Trump, espouse goals to grow domestic manufacturing, but they diverge on how to go about doing so.
Biden told steelworkers in Pittsburgh recently that the US government should consider tripling tariffs on Chinese steel. And Trump has proposed a potential 60% tariff on Chinese goods if he returns to the presidency.
&#;With both US presidential candidates vying to win important Midwestern swing states that have significant auto industries, the issue of US-Mexico-China trade will only increase as the presidential campaign unfolds,&#; S&P Global&#;s Sevilla-Macip and Raines said.
While supply chains are shifting, moving factories isn&#;t always that simple. It can take significant investment, from time to money to people. The companies that are moving forward, though, are creating long-term opportunities for the Mexican manufacturing industry.
&#;It certainly feels like things are booming in Monterrey,&#; a city in northern Mexico, said Christoffer Enemaerke, a portfolio manager at RBC. On a recent trip there, he told CNN, &#;we met with companies and experts in the real estate industry and the feedback was that nearshoring is likely to be a multi-year driver of growth for Mexico, particularly in the northern part of the country.&#;
Tesla (TSLA), for example, said last year that it would build a new plant in Monterrey. &#;We&#;re super excited about it,&#; CEO Elon Musk said during an investor day for the company, adding that the plant would add capacity, rather than replace capacity elsewhere.
A billboard announcing the arrival of Tesla seen in Monterrey, state of Nuevo Leon, Mexico, on March 12,
Julio Cesar Aguilar/AFP/Getty ImagesSentiment on the ground is exciting, but most investment flows are yet to be seen, Ramos told CNN.
Analysts at Morgan Stanley see the value of Mexico&#;s exports to the United States growing from $455 billion to about $609 billion in the next five years.
That also makes Mexico an attractive base for many Chinese companies. EV maker BYD, a global competitor to Musk&#;s Tesla, announced in February plans for a major expansion in Mexico.
While BYD doesn&#;t currently sell cars in the US market, a move to Mexico would provide better access to the Mexican market while preparing the company for a potential move into the US.
&#;Chinese investment and exports to Mexico are highly likely to become a headline issue ahead of the scheduled review of the USMCA,&#; Sevilla-Macip and Raines said.
Until then, though, places like Monterrey continue to reap the rewards.
Monterrey, said RBC&#;s Enemaerke, &#;feels booming, new and vibrant, more so than other industrial cities I&#;ve been to, which have mainly been in Asia.&#;
CNN&#;s Michael Nam contributed to this report.
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