Wall Street kicked off the week on a strong footing, led by a rebound in small-cap stocks and regional banks, easing some of the credit-driven anxiety that shook markets last week.
The Russell 2000 Index climbed 1.8% on Monday, outperforming large caps, as the SPDR Regional Banking ETF (NYSE:KRE) rose 2%, extending Friday’s 1.6% gain.
The recovery comes after KRE plunged 6.2% on Thursday, its worst single-day drop since April, following fresh credit concerns tied to regional lenders.
Large-cap benchmarks also posted solid gains. The Nasdaq 100 advanced 1.4% to 25,155, just shy of its all-time high of 25,195 set on Oct. 10. The S&P 500 gained 1.1% to 6,733, now within 0.5% of its record, while the Dow Jones Industrial Average added 1% to 46,630.
Investor attention now turns to a packed earnings calendar. Key reports are due this week from Netflix Inc. (NASDAQ:NFLX), Tesla Inc. (NASDAQ:TSLA), Intel Corp. (NASDAQ:INTC), and International Business MachinesInc. (NYSE:IBM), along with industrial heavyweights GE Aerospace (NYSE:GE), GE Vernova (NYSE:GEV), Raytheon Technologies Corp. (NYSE:RTX) and T-Mobile US Inc. (NASDAQ:TMUS).
Moderna Inc. (NASDAQ:MRNA) was the top gainer in the S&P 500, jumping over 7%, after announcing that new data on two investigational flu vaccines will be presented at IDWeek 2025, running from Oct. 19–22 in Atlanta.
On the flip side, Seagate Technology Holdings plc (NASDAQ:STX)—up 145% year-to-date and one of the index’s best performers—was Monday’s biggest loser, as profit-taking pressure that began earlier this month continued to weigh on the stock.
Gold prices rebounded 2.3% to $4,350, fully recovering Friday’s 1.8% pullback and pushing further into record territory amid ongoing macro uncertainty.
The biggest surprise came from natural gas, with Henry Hub prices surging over 11% to $3.34, driven by a combination of colder weather forecasts and aggressive short covering.
Meanwhile, oil extended its slide. West Texas Intermediate (WTI) crude fell 0.8% to $56.70 a barrel, inching closer to April lows of $55.10, the weakest level since February 2021, as surplus concerns continued to pressure the energy market.
The Vanguard S&P 500 ETF (NYSE:VOO) rose 1.1% to $617.46.
The SPDR Dow Jones Industrial Average (NYSE:DIA) rose 1.1% to $466.64.
The tech-heavy Invesco QQQ Trust Series (NASDAQ:QQQ) soared 1.4% to $612.33.
The iShares Russell 2000 ETF (NYSE:IWM) rallied 1.8% to $247.83.
The TechnologySelect Sector SPDR Fund (NYSE:XLK) outperformed, up 1.4%; the Utilities Select Sector SPDR Fund (NYSE:XLU) lagged, down 0.3%.
Stocks scheduled to report earnings after the close include W.R. Berkley Corp. (NYSE:WRB), Crown Holdings Inc. (NYSE:CCK), AGNC Investment Corp. (NASDAQ:AGNC), Wintrust Financial Corp. (NASDAQ:WTFC), Zions Bancorporation (NASDAQ:ZION), BOK Financial Corp. (NASDAQ:BOKF), Cleveland-Cliffs Inc. (NYSE:CLF), and Cadence Bank (NYSE:BXS).
Gold futures rallied early Monday to fresh record highs near $3,970 per ounce, pushing year-to-date gains to 50%—marking the metal’s best performance since 1979—yet top analysts say the bull run is far from over.
Market veteran Ed Yardeni has sharply raised his price target for gold, saying the metal is “within shouting distance” of his initial $4,000 forecast for 2025.
With momentum accelerating, he now expects gold to reach $5,000 by 2026 and $10,000 by 2030.
“If it continues on its current path,” Yardeni said in an emailed note, “it could reach $10,000 by the end of the decade.”
Record Inflows Into Gold ETFs Fuel The Rally
Gold’s explosive rally has been fueled by unprecedented demand from investors seeking safety amid global uncertainty.
The SPDR Gold Shares ETF (NYSE:GLD), the largest physically backed gold ETF, has seen massive inflows in 2025.
So far this year, the fund has collected $15.3 billion, beating the previous record set in 2020. On Sept. 19, the ETF registered its largest-ever single-day inflow at $2.2 billion.
Similarly, the iShares Gold Trust (NYSE:IAU) — the world’s second biggest gold-backed ETF — has already attracted $9.7 billion this year, outpacing inflows in its record year of 2020.
The fund recorded positive daily inflows in 20 of the last 21 sessions and posted weekly inflows in 12 of the past 13 weeks.
What’s Driving This Gold Rush?
According to Yardeni, there are key macroeconomic and geopolitical reasons behind his bullish gold outlook.
He pointed to President Donald Trump‘s return to office, and the ongoing uncertainty surrounding global trade and U.S. foreign policy.
“We reckoned that President Donald Trump’s attempts to reorder the world’s geopolitical order, including America’s relationships with its major trading partners, might be unsettling and bullish for gold,” Yardeni said.
Yardeni also said Trump’s efforts to pressure the Federal Reserve into cutting interest rates could compromise central bank independence, again favoring gold as a hedge.
Beyond politics, Yardeni highlighted China’s housing market collapse, which has triggered a “significant adverse wealth effect” for Chinese households. Many are now shifting their savings into gold as a safe-haven alternative.
India, too, has played a role. “The rising standard of living in India has increased wealth, thereby boosting demand for gold, which is widely regarded as a valuable asset,” Yardeni added.
The best-performing September in 15 years just sent U.S. stock indexes to new highs — but that party could soon end, with Goldman Sachs expecting a surge in market volatility as October kicks off a gauntlet of earnings and macro risk.
With just days left in the month, the S&P 500, tracked by the Vanguard S&P 500 ETF (NYSE:VOO), is up 3.6%, on pace for its best September since 2010. That year, the index jumped 8.76%, while in 1997 it rose 6.22% — two of the only times the market defied September’s historically weak trend to this degree.
Tech stocks are doing even better. The Nasdaq 100, via the Invesco QQQ Trust (NASDAQ:QQQ), is up 5.5%, and the Technology Select Sector SPDR Fund (NYSE:XLK) has surged 7.5%, its second-strongest September since the ETF launched in 1999.
That’s not normal. Over the last 25 years, tech stocks have averaged a 2.2% loss in September.
But this year, names like Oracle Corp. (NYSE:ORCL), Tesla Inc. (NASDAQ:TSLA), Micron Technology Inc. (NASDAQ:MU) and Apple Inc. (NASDAQ:AAPL) have led a momentum surge fueled by AI demand and expectations of Federal Reserve rate cuts.
The result? A rare, almost euphoric September rally that feels more like July or December.
October Might Snap Investors Back To Reality
In a note published Tuesday, Goldman Sachs equity analyst John Marshall said the good times may not last. “Using history as a guide, we expect global equity volatility to increase in October.”
And the data supports that. Over the past several decades, realized volatility in October has been more than 25% higher than in other months, according to Goldman. The firm pointed to a long-standing pattern of surging trading activity, driven by corporate earnings pressure, year-end performance benchmarking and major macro catalysts.
“Event volatility could increase further as October earnings season is typically the most volatile of the year,” Goldman said, adding that FOMC meetings, Fed commentary, and the Consumer Price Index (CPI) report will all be in sharp focus.
October Is a Pressure Cooker for Wall Street
Goldman also noted that single stock trading volumes — both in shares and options — have historically peaked in October. From 1996 to 2024, the average daily notional volume of individual stocks and their options reached its highest point in October, reinforcing the idea that investors feel forced to act.
“We see this as further validating our hypothesis that performance pressure potentially drives investors to increase trading activity,” Goldman said.
The firm expects the volatility spike to be broad-based, but sees opportunities in single-stock options as a way to position around earnings-driven moves.
Brace For The Shift
After a rare, euphoric September where stocks broadly defied seasonal gravity, October may come with a price. While earnings optimism and Fed tailwinds have powered this rally, volatility season is approaching — and traders might want to buckle up.
Key Tech Events Could Stir the Pot
October won’t just be about macro. A wave of tech-related events is also on the calendar, which could further stir price action in key stocks:
Confluent Inc. (NASDAQ:CFLT) – Oct. 29–30: Confluent Current
Dell Technologies Inc. (NYSE:DELL) – Oct. 7: Corporate Analyst Meeting
Autodesk Inc. (NASDAQ:ADSK) – Oct. 7: Digital Investor Day
Elastic NV (NYSE:ESTC) – Oct. 9: Financial Analyst Day
Big bank earnings season kicks off Tuesday, July 15, with key industry heavyweight JPMorgan Chase & Co. (NYSE:JPM), Citigroup Inc. (NYSE:C) and Wells Fargo Corp. (NYSE:WFC) headlining a crucial reporting day for financials, as Wall Street eyes a rebound in quarterly profits fueled by stronger net interest income and healthy capital markets activity.
Here’s what to expect as the second-quarter 2025 numbers roll in before the bell.
Bank Profits Growth Expected
Wall Street expects a strong quarter for major banks, with JPMorgan Chase & Co. forecast to deliver earnings per share (EPS) of $4.48 in the second quarter, a modest 1.8% increase from $4.40 a year ago. Revenue is projected at $44.17 billion, reflecting a pullback from last year’s $50.2 billion.
Citigroup is expected to post more robust growth, with EPS projected to rise 6.6% year over year to $1.62 from $1.52. Revenue is also expected to improve slightly to $20.89 billion, up 3.9% from last year’s Q2.
Wells Fargo is forecast to earn $1.40 per share, a 5.3% increase over the prior-year quarter. Revenue is expected to remain flat at $20.78 billion, indicating stable core banking performance despite macroeconomic headwinds.
BlackRock Inc. (NYSE:BLK), although not a traditional bank, is poised for a solid performance in asset management, with EPS expected to reach $10.80, representing a 4.2% increase over last year. Revenues are projected to be $5.34 billion, representing an 11% increase.
Other names in focus include Bank of New York Mellon Corp. (NYSE:BK), expected to post EPS of $1.76 on $4.83 billion in revenue, and State Street Corp. (NYSE:STT), which is projected to earn $2.37 per share on $3.35 billion in revenue—both reflecting ongoing resilience in custody and asset servicing segments.
The positive earnings outlook follows banks passing the Federal Reserve’s June stress tests with ease, prompting widespread dividend hikes.
The median dividend per share across major banks rose 7%, with standouts like Goldman Sachs Group Inc. (NYSE:GS) lifting its quarterly payout 33% to $4.00.
JPMorgan raised its dividend by 7% to $1.50 and authorized a massive $50 billion stock buyback program.
Citigroup boosted its dividend by 7% and continues its $20 billion multi-year repurchase plan.
Analyst Views: Where’s The Opportunity?
Goldman Sachs analyst Richard Ramsden said Wells Fargo and Bank of America Corp. (NYSE:BAC) offer the best earnings upside for investors heading into 2026.
He sees Bank of America’s net interest income (NII) growing 7% annually through 2026, outperforming large bank peers, driven by stronger loan growth, favorable asset sensitivity and lower deposit costs. “We view BAC’s current ~1.5x 2026E price-to-tangible book value as attractive,” Ramsden said.
For Wells Fargo, the recent removal of its asset cap opens the door to deposit growth, capital markets expansion and cost savings. Ramsden believes these factors could boost earnings by as much as 19% and push return on tangible common equity (ROTCE) to as high as 17.3%.
Bank of America analyst Ebrahim Poonawala echoed bullish sentiment, saying the sector could see “positive EPS revisions and further stock re-rating” if capital expenditures and client activity pick up.
He flagged Citigroup, Wells Fargo, and Goldman Sachs as offering the best risk-reward among money center banks.
What’s At Stake For Investors?
With the Financial Select Sector SPDR Fund (NYSE:XLF) up more than 8% year-to-date, bank stocks have already benefited from a more stable rate environment and strong capital positions.
However, any surprises in loan demand, expense growth, or trading revenue could quickly swing sentiment.
Tuesday’s results will set the tone for the rest of earnings season and could determine whether banks still have room to run, or whether Wall Street has already priced in the rebound.
Apple Inc. (NASDAQ:AAPL) has had a bruising start to 2025, with its stock down about 18% year-to-date and underperforming the broader stock market by 22%—its worst half-year stretch since 2013.
But as July kicks off, investors may find a surprisingly bullish signal in an unexpected place: the calendar.
Why Has Apple Struggled So Much In 2025?
The first half of the year was defined by a perfect storm for Apple—trade tensions, delays in product innovation and a growing AI gap all chipped away at investor confidence.
One of the biggest headwinds came from President Donald Trump‘s renewed tariff agenda. In 2024, Apple generated 64% of its total revenue from overseas, with Greater China and Europe being among its most profitable regions. But in early 2025, trade-related uncertainty soured consumer sentiment abroad, especially in China.
The numbers confirm it: in the first quarter of 2025, Apple’s revenue from Greater China dropped 13% year-over-year to $16.37 billion, down from $18.25 billion during the same quarter of 2024. Local rivals, such as Huawei and Xiaomi, gained market share, while demand for iPhones softened.
Then came Apple’s AI problem. While Microsoft Corp. (NYSE:MSFT), Alphabet Inc. (NASDAQ:GOOGL), and Nvidia Corp. (NASDAQ:NVDA) captured market buzz with new AI-driven features and products, Apple offered few details.
With no firm AI roadmap and delays around the iPhone 17 and the Vision Pro international rollout, many investors began rotating out of Apple into higher-growth tech names like Nvidia, Palantir Technologies Inc. (NASDAQ:PLTR) Meta Platforms Inc. (NASDAQ:META) and Broadcom Inc. (NASDAQ:AVGO)
Can Apple Turn Things Around In July?
On the surface, Apple seems out of favor. But dig into the seasonality, and July could offer the kind of bullish argument that flips the narrative.
Apple’s seasonal gains in July are unmatched. Over the past 20 years, the stock has ended July higher 17 times, with an average return of 7.6%.
Even more impressive, Apple is riding a 9-year winning streak in July. The best performances came in 2022 (+18.9%) and 2006 (+18.6%).
Expand the scope to 30 years, and the signal remains intact: Apple averaged a 7.3% gain in July, with a 77% win rate (23 positive closes out of 30).
The biggest drawdowns occurred in 2001 (-19.2%), 2002 (-13.9%), and 2008 (-5.1%)—but those were years defined by broader market crises.
More recently, pullbacks have been minor, like -3.3% in 2015 or -0.6% in 2004.
Apple’s relative performance versus the S&P 500 in July has been positive in 77% of the past 30 years, with an average outperformance of 5.8%.
No other S&P 500 stock has matched that consistency or magnitude over the same period.
In short, Apple hasn’t just risen in July—it’s crushed the market in July, time and time again. And with sentiment scraping cycle lows in 2025, history suggests July has often been Apple’s golden window for a rebound.
Year
Apple July Return (%)
AAPL vs. S&P 500 (%)
1994
27.12
+23.24
1995
-3.10
-6.08
1996
4.76
+9.78
1997
22.81
+13.91
1998
20.70
+22.12
1999
20.24
+24.22
2000
-2.98
-1.37
2001
-19.18
-18.13
2002
-13.88
-6.53
2003
10.60
+8.83
2004
-0.61
+2.91
2005
15.87
+11.84
2006
18.67
+18.07
2007
7.96
+11.53
2008
-5.07
-4.13
2009
14.72
+6.80
2010
2.27
+8.85
2011
16.33
+18.88
2012
4.58
+3.28
2013
14.12
+8.74
2014
2.87
+4.45
2015
-3.29
-5.16
2016
9.01
+3.75
2017
3.27
+1.96
2018
2.80
+3.58
2019
7.64
+1.40
2020
16.51
+6.08
2021
6.50
+2.37
2022
18.86
+9.92
2023
1.28
+3.06
2024
5.44
+1.18
Averagegain
7.3%
5.8%
Win ratio
77%
71%
Source: Author’s own elaboration based on TradingView data
Cruise line stocks are historically among the strongest seasonal performers in the S&P 500 heading into the second half of May, with Royal Caribbean Group (NYSE:RCL), Norwegian Cruise Line Holdings Ltd. (NYSE:NCLH) and Carnival Corp. (NYSE:CCL) averaging double-digit returns over a three-week window.
Historical data from Seasonax platforms shows that from May 14 to early June, these three stocks have consistently outperformed over the past decade, with average gains north of 10%.
Among all S&P 500 constituents, they rank at the very top for late-spring seasonality. Seasonal strength is typically fueled by ramping summer demand, strong forward bookings, and an uptick in consumer travel spending ahead of peak vacation months.
Here are the top five S&P 500 stocks by average return in a three-week period starting from May 14:
In a note from late April, Goldman Sachs analyst Lizzie Dove pointed to a strong reversal in booking momentum despite broader macro uncertainty and uneven travel data across the sector.
April bookings at RCL exceeded the same month last year, while close-in bookings remained firm.
The company also reported stronger-than-usual onboard spending and pre-cruise purchases. Forward bookings for 2026 were tracking in line with 2024 levels but at higher prices—a sign of pricing power in an inflation-sensitive market.
With approximately 86% of the 2025 cruise calendar already booked, Dove’s team raised their estimates and lifted the stock’s price target from $245 to $260. However, they retained a slightly more cautious tone in 2026, pending more clarity on consumer resilience.
Since hitting tariff-driven lows on April 9, shares of RCL have surged 50% through mid-May —more than twice the gain of the S&P 500. CCL shares matched the performance during the same period.
NCLH Flags Demand Softness Amid Macro Pressures
In contrast, Norwegian Cruise Line is facing a different set of conditions.
In early May, Bank of America analyst Andrew Didora highlighted NCLH as the first in the group to show softness in its 12-month forward-booked position.
While this wasn’t viewed as unexpected—given the macro backdrop, consumer sentiment, and fare discounts introduced under the Oceania brand—it raised questions about forward pricing discipline across the cruise industry. Didora added that weakening demand isn’t isolated to NCLH, and other operators may be seeing similar dynamics.
BofA cut its 2025 and 2026 EPS forecasts for NCLH by 3% and 2%, now expecting $2.07 and $2.53, respectively. It revised the price objective down from $23 to $20 while maintaining a Neutral rating on concerns around leverage and top-line pressures.
Shares of NCLH have rallied 36% since April lows, underperforming versus peers.
Donald Trump wasted no time in his return to the White House, signing a flurry of executive orders, and, most notably, declaring a national energy emergency.
During his inauguration speech on Monday, he reaffirmed his commitment to fossil fuels, pledging to “drill, baby, drill” and revoke the electric vehicle mandate.
“The inflation crisis was caused by massive overspending and escalating energy prices. And that is why today I will also declare a national energy emergency. We will drill, baby, drill,” Trump said.
Trump also announced his intent to withdraw the U.S. from the Paris Climate Accord, calling wind turbines “ugly” and reiterating his policy against renewable energy expansion. His focus is clear: expand drilling, restore the Strategic Petroleum Reserve and flood global markets with U.S. oil and gas.
Oil markets are already reacting, but will this push for American energy dominance send crude prices soaring or lead to an oversupply crisis?
What Happens To Oil Prices?
The immediate impact of Trump’s pro-drilling stance on oil markets has been strong, with traders already reassessing their outlooks on crude prices.
The U.S. benchmark West Texas Intermediate crude – as tracked by the United States Oil Fund (NYSE:USO) – tumbled by 2.6% during morning trading on Tuesday, heading for a third straight session of losses.
“Mr. Trump’s full-throated yell for U.S. producers to: ‘Drill, baby, drill!’ is not new. And it’s perfectly logical that prices should fall at the prospect of increased supply. But producers are highly price-sensitive, and there comes a time/price where it’s uneconomical to raise production,” commented David Morrison, senior market analyst at Trade Nation.
“Day 1 executive orders in these areas are expected to be followed by further action in the coming days and weeks, with Trump set to test the limits of presidential authority to pursue an agenda that aims to unravel Biden’s energy and climate policies,” wrote Energy Intelligence in a note Tuesday.
David Goldman, head of trading at Novion said Trump’s policy shift “is unlikely to have any significant impact in the short term but may have bearish repercussions in the long term.”
Goldman highlighted that a sharp increase in U.S. production, particularly if global demand slows due to the ongoing transition to renewable energy, could weigh on prices. “Increased production without sufficient export infrastructure risks bottlenecks, while protectionist trade measures could stifle international cooperation and reduce market efficiency.”
Energy Stocks See A Small Lift
Oil and gas stocks saw modest gains in premarket trading Tuesday as investors weighed the potential for increased drilling activity.
The Energy Select Sector SPDR Fund (NYSE:XLE), which tracks major oil companies, was up 0.1% during premarket trading, while the SPDR S&P Oil & Gas Exploration & Production ETF (NYSE:XOP) saw similar gains.
Schlumberger Ltd. (NYSE:SLB) climbed 1.04% to $44.03
Kinder Morgan Inc. (NYSE:KMI) increased 0.96% to $30.60
Baker Hughes Co. (NASDAQ:BKR) moved 0.90% higher to $46.96
Smaller energy players saw sharper moves, with Gulfport Energy Corp. (NYSE:GPOR) surging 9.13% to $213.25 and Sable Offshore Corp. (NYSE:SOC) jumping 5.20% to $25.77.
Bank of America is bullish on U.S. brokers, asset managers and exchanges heading into 2025, raising price targets across the sector by an average of 14%, citing strong tailwinds from deregulation, rising retail investor engagement and solid U.S. GDP growth projected at 2%-2.5%.
In a new report released Wednesday, analyst Craig Siegenthaler dubbed 2025 as the year of “extensions” of ongoing trends, amid a fresh boost from a red political sweep and deregulation efforts under a Trump presidency.
According to Bank of America, the red wave of the 2024 elections is also set to open new doors for crypto and alternative investments (Alts) and give brokers and asset managers room to shine.
The report highlights three top Buy-rated stocks — Blue Owl CapitalInc. (NYSE:OWL), Interactive BrokersGroup Inc. (NASDAQ:IBKR), and Tradeweb Markets Inc. (NASDAQ:TW) — and two key Underperformers: Charles Schwab Corp. (NYSE:SCHW) and Carlyle Group Inc. (NASDAQ:CG).
Alts: Blue Owl Leads The Charge
Alternative asset managers (Alts) are primed for a strong year, with Blue Owl Capital emerging as the standout pick.
Buy Rating and $33 price target. Bank of America expects a four-fold earnings per share (EPS) growth by 2027.
Valuation: Blue Owl trades at just 16x its 2027 EPS, offering a 4% dividend yield.
Earnings Quality: Remarkably, 100% of Blue Owl’s EPS is Fee-Related Earnings (FRE), and nearly all of its asset under management (AUM) is locked in either permanently or long-term capital.
Secular Growth Drivers: Key tailwinds include retail access to Alts (via RIAs), insurance partnerships, and consolidation among general partners.
Siegenthaler highlighted Blue Owl’s unique position: “Under-owned, undervalued and underappreciated.”
Brokers: Interactive Brokers In A “Goldilocks” Setup
Interactive Brokers is Bank of America’s top broker pick for 2025, as solid U.S. GDP growth (2.0%-2.5%) and sticky inflation (>2.5%) create a “Goldilocks” environment for brokers.
Bank of America is also bullish on Robinhood Markets Inc. (NASDAQ:HOOD), seen as “best-positioned given high tech/low legacy cost models with strong innovation track records.”
Interactive Brokers
Buy Rating and $288 price target
Fundamentals: Interactive Brokers boasts an operating margin of over 70%, with incremental margins exceeding 80%. It also holds $7 billion in excess capital, which supports reinvestment and growth.
Competitive Edge: The broker’s tech-first approach, including investments in R&D and innovative tools like its Global Trader app, has spurred 20-40% annual account growth.
Valuation: “Undervalued due to unique set of factors — float, voting rights/control, capital retention.”
Exchanges: Tradeweb Offers Long-Term Growth
Tradeweb Markets is Bank of America’s top pick among exchanges due to its wide product breadth, first-mover innovation, and long-term visibility.
Buy Rating and $205 price target
Competitive advantages: Tradeweb Markets offers a diverse menu spanning fixed income, ETFs and money markets, appealing to a broad client base, including market makers, financial advisors, and corporate treasurers.
Innovation edge: Tradeweb Market’s portfolio trading and session trading protocols have driven consistent market share gains.
Long-term growth visibility: The secular shift from voice to electronic bond trading provides a long runway for growth.
The U.S. Commerce Department proposed Monday an outright block on the import and sale of Chinese-made vehicles that contain key communications and automated driving systems due to national security concerns.
This sweeping proposal, reported by Reuters, would have the effect of shutting out nearly all Chinese cars from the U.S. market, intensifying the ongoing economic standoff between the two global superpowers.
The proposed regulation would not only target vehicles but also encompass the software and hardware integral to modern connected cars.
This means that any vehicle equipped with systems that facilitate internet connectivity or data sharing — which are now ubiquitous in newer models — could be banned if these technologies are sourced from China or any other nation deemed a foreign adversary, including Russia.
Heightened Security Concerns
The Biden administration has expressed growing concerns over the potential for data collected by Chinese automakers and tech companies to be used for espionage or to undermine U.S. infrastructure.
With many modern cars linked to the internet, allowing them to communicate with external systems for navigation, safety features, and data storage, officials worry that Chinese companies could exploit these connections to gather sensitive information or even manipulate vehicle operations remotely.
For instance, an extreme scenario, as warned by government officials, could see adversaries remotely controlling vehicles or causing accidents at scale.
Impact On The Auto Industry, Stock Reactions
This new ban, if enacted, could be a game changer for the automotive industry. Chinese automakers such as BYD, Nio and Xpeng, which have been eyeing the U.S. market, would face significant roadblocks.
Even American and other international automakers that source components from Chinese suppliers could be impacted, especially when it comes to hardware and software development.
The Alliance for Automotive Innovation – a trade group representing major automakers including General Motors Co. (NYSE:GM), Toyota Motor Co. (NYSE:TM), Volkswagen AG (OTCPK: VWAGY), and Hyundai Motor Co., Ltd (OTCPK: HYMTF) – has expressed caution about the proposed bans, according to Reuters.
Automakers noted that connected vehicle components are sourced globally, including from China, and that reconfiguring supply chains to avoid Chinese software and hardware could prove challenging.
While the group has not yet provided a detailed breakdown of how extensively Chinese-made parts are used in U.S. vehicles, it’s clear the proposed bans would require significant adjustments for automakers operating in the U.S. market.
Shares of General Motors fell over 3% during Monday premarket trading, while Ford Motor Co. (NYSE:F) rose 1.3%.
Shares of major Chinese automakers had mixed reactions. NIO Inc. (NYSE:NIO) fell over 2%, while XPeng Inc. (NYSE:XPEV) dropped 0.8%. In contrast, Li Auto Inc. (NASDAQ:LI) managed to rise by 1%, bucking the downward trend.
Broadening Trade War
This move is part of a broader campaign by the U.S. government to curb China’s influence in the American economy. Just last week, the Biden administration imposed hefty tariffs on Chinese imports, including a 100% duty on electric vehicles and key minerals used in EV batteries.
These combined measures could reshape the competitive landscape in the U.S. auto market, particularly in the growing electric vehicle sector.
In addition, the proposal could hamper Chinese companies’ ability to test self-driving or autonomous cars on U.S. soil, limiting their participation in an industry expected to revolutionize transportation over the coming decades.
Timeline For Ban
The proposed rules would phase in over the next several years. Software restrictions would apply to vehicles from the 2027 model year onward, while hardware bans would take effect for 2030 models, starting as early as January 2029, Reuters said.
This phased approach is designed to allow automakers time to adapt their supply chains and eliminate Chinese components from their vehicles. Given the global nature of the automotive supply chain, transitioning away from Chinese-made components could be a costly and complex process.
Hosted by Aaron Bry and Dennis Dick, the discussion highlighted how the massive expiration of key options contracts can drive unusual market activity and set the stage for turbulence ahead.
Triple witching, which occurs quarterly on the third Friday of March, June, September, and December, is when stock index futures, stock index options, and individual stock options expire simultaneously.
This event often creates market turbulence, as traders scramble to close, roll over, or offset expiring contracts.
Over $5 trillion in notional options, including $605 billion in single-stock options, are expected to expire during Friday’s session.
Historically, triple witching has led to increased volatility and unusual price movements. The S&P 500, tracked by the SPDRS&P 500 ETF Trust (NYSE:SPY), closed in the red on the last three triple witching days:
June 21, 2024: S&P 500 fell by 0.5%.
March 15, 2024: S&P 500 dropped by 1%.
Dec. 15, 2023: S&P 500 declined by 0.6%.
Historical Weakness Post-Witching Week
During his appearance on Benzinga PreMarket Prep, CC Lagator explained how the convergence of expiring options impacts the market.
“You might see some imbalances that you wouldn’t have seen on a normal day at the open,” CC Lagator said, highlighting how trading activity starts to unwind a couple of days before but accelerates toward the close of the session.
This often stems from big hedge funds and mutual funds rolling options positions into the next month, which can lead to increased volatility. He further noted that the market environment shifts drastically after triple witching, with traders facing a completely new landscape in the following week.
“Next week historically is a terrible week going back decades,” Lagator said, noting that the week after triple witching in September has rarely shown positive returns over the last 30 years.
With volatility expected to pick up, he cautioned that traders should brace for a challenging week due to the impact of unwinding positions on the broader market.
The conversation also turned to the Volatility Index (VIX), often referred to as the “fear gauge,” which CC Lagator described as being relatively low and attractive for call option buyers at these levels.
“The VIX is at 16 right now, it’s not high,” CC Lagator stated, adding that it trades below its long-term average of 19.
“If this was July and we were at all-time highs, the VIX would probably be 13,” he noted, attributing the slight uptick to recent market events and the seasonal volatility that accompanies the fall months.
“For traders looking at the next month and a half, there’s not much worry about volatility dropping much lower than where it is now,” Lagator predicted, adding that “we’re probably not seeing it hit 12 until Christmas.”
Lagator advised that traders could use this period of low volatility to their advantage when considering options positions.
“If you were buying at-the-money options right now, you probably don’t have much to worry about in terms of volatility going much lower,” he said, emphasizing the stability of current volatility levels as a potential buying opportunity for those seeking to hedge or position themselves for a breakout.
A similar view has also been shared by Goldman Sachs, which estimates that, given macroeconomic conditions, the VIX should be at 24.5 points.
The investment bank issued a recommendation for investors to hedge their portfolios using VIX calls. Specifically, Goldman Sachs analysts advise buying CBOE Volatility Index (VIX) November calls at a strike price of 18.
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