🚀 USMCA not being extended

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Market Overview
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Year To Date Performances:

1. The anticipated decision by the Trump administration to forgo a clean 16-year extension of the USMCA has plunged the North American automotive sector, which drives roughly 18% of the $2 trillion USD trilateral trade zone, into a volatile, multi-year review process that threatens to stifle capital investments and fracture deeply integrated cross-border supply chains. While automakers urging a stable trilateral framework emphasize that billions have already been spent to comply with current mandates, the U.S. Trade Representative is aggressively pushing to counter Chinese industrial influence by hiking regional parts requirements from 75% to 82%, while introducing a strict new mandate requiring 50% of that value to be produced specifically within the United States. Industry analysts warn that these aggressive targets could add up to a 50% cost premium on shifted components and backfire entirely; since nearly all modern vehicles fall short of an 80% domestic parts threshold, some manufacturers may choose to bypass North American sourcing altogether, absorb the standard import tariffs, and pass the costs along, though emerging proposals to count U.S.-developed automotive software toward content minimums could offer a viable legal compromise.

2. To kick off the second half of 2026, tech and semiconductor stocks faced a steep pullback on Wednesday morning, dragging down the major averages after a historic, record-smashing first six months of the year. Investors aggressively locked in profits following a massive second-quarter rally that added $2 trillion USD in combined market capitalization to industry giants Micron, Intel, and AMD. This sudden profit-taking triggered an opening drop for the Nasdaq Composite of 0.7%, while the S&P 500 slid 0.3% and the Dow Jones Industrial Average dipped 0.1% (27 points). Leading the morning's declines, SanDisk plunged 7% and Micron tumbled 6%—cooling down from respective first-half surges of over 850% and 277%—while Nvidia fell 5% and Broadcom dropped 7%. This pullback follows a legendary run for the VanEck Semiconductor ETF (SMH), which posted an 82% gain in the first half of the year to secure its best opening six months since its inception in May 2000. Market participants also kept a close eye on the European Central Bank conference in Portugal, where newly appointed Federal Reserve Chairman Kevin Warsh delivered remarks emphasizing that while inflation and prices remain too high, he would offer no explicit hints regarding the central bank's upcoming monetary policy meeting later this month.

3. Nike shares fell to a 10-year low near $40 USD on Wednesday morning after its fiscal fourth-quarter earnings report revealed a steep 12% sales drop in Greater China, prompting Wall Street analysts to express deep skepticism regarding CEO Elliott Hill’s multi-year corporate turnaround plan. Although headline numbers technically beat expectations with revenue reaching $10.97 billion USD and diluted earnings per share hitting $0.72 USD, the spectacular bottom-line growth carried a massive asterisk: a one-time, $986 million USD accounting windfall from a Supreme Court tariff recovery that artificially inflated gross margins to 49.2%. Strip out this temporary benefit, and Nike’s underlying operating EPS stood at a modest $0.20 USD while core gross margins actually ticked down 10 basis points to 40.2%, reinforcing fears that promotional discounting and stagnant lifestyle sales continue to dog the brand. Major institutions universally flashed caution following management’s warning that revenue could continue to slide by low to mid-single digits over the next three quarters. UBS maintained its neutral rating and lowered its price target, observing that at roughly 27 times its fiscal year 2027 earnings estimates, the stock is still not cheap enough to justify a premature entry point. Bank of America and Goldman Sachs also reiterated neutral stances, advising investors that they must practice immense patience as Nike restricts low-quality wholesale sales and attempts to engineer an innovation-led margin recovery that likely won't take full flight until calendar year 2027.

   Headlines

   1. The US House Judiciary Committee has accused South Korea’s government of discriminating against Coupang and US companies.

   2. PlayStation will end all physical disc production in 2028 with games only being available for download online.