{"id":246848,"date":"2025-05-19T07:03:08","date_gmt":"2025-05-19T07:03:08","guid":{"rendered":"https:\/\/peraltafinancing.com\/business\/finance\/tariffs-surprise-downgrade-will-weigh-on-market\/"},"modified":"2025-05-19T07:03:08","modified_gmt":"2025-05-19T07:03:08","slug":"tariffs-surprise-downgrade-will-weigh-on-market","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=246848","title":{"rendered":"Tariffs, surprise downgrade will weigh on market"},"content":{"rendered":"


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Walmart\u00a0 (WMT<\/a><\/strong>) <\/span>\u00a0gave its fellow retailers a gift last week.\u00a0<\/p>\n

In the midst of saying Walmart\u00a0had a solid first quarter, CEO Doug McMillon and Chief Financial Officer John David Rainey minced no words about what’s coming.\u00a0<\/p>\n

\ud83d\udcb5\ud83d\udcb0<\/strong>Don’t miss the move: Subscribe to TheStreet’s free daily newsletter<\/strong><\/a> <\/strong>\ud83d\udcb0\ud83d\udcb5<\/strong><\/p>\n

Tariffs will force the retail giant to raise many of its prices in the coming quarters. How much? Neither man would say during the company’s earnings call on Thursday. But Rainey said prices could head higher at the end of May and certainly by June.<\/p>\n

Related: A critical industry is slamming the economy<\/a><\/strong><\/p>\n

Walmart sources\u00a0much of its non-grocery merchandise from China, and those products still may be subject to 30% tariffs.\u00a0<\/p>\n

That comes after the Trump Administration agreed to trim its tariffs on Chinese goods from 145%. China dropped its tariffs on U.S. imports to 10%.\u00a0<\/p>\n

Walmart’s first-quarter operating profit margin in its first quarter was 4.3% on revenue of $165.6 billion. But that revenue number includes grocery sales, which are now about 60% of sales.\u00a0<\/p>\n

If you go to general merchandise, about 25% of revenue, maybe 70% comes from China. With 30% tariffs, that might add around $8.7 billion to Walmart’s\u00a0quarterly cost of goods sold.\u00a0<\/p>\n

Walmart’s first-quarter operating profit was $7.1 billion.\u00a0<\/p>\n

In other words, the quarterly tariff bill might be larger than the operating profit.<\/p>\n

That’s the gift Walmart handed to its retail competitors who report earnings this week: You can talk about the tariff hit.\u00a0\u00a0<\/p>\n

And that’s just one of the issues markets will face on Monday and for the rest of the week.<\/p>\n

Related: Warren Buffett, Berkshire Hathaway sell banks to buy booze<\/a><\/strong><\/p>\n

Another emotional problem erupted Friday’s when Moody’s Ratings downgraded U.S. debt from Aaa, its highest rating, to Aa1, the next level down. Standard & Poor’s and Fitch Ratings had stripped the U.S, of its top ratings in 2011 and August 2023, respectively.<\/p>\n

The reason: failure to get control of federal deficits, and the tax bill now pending in Congress may make the issue worse, Moody’s said.<\/p>\n

Bond yields rose slightly in response, but stock futures trading on Sunday sold down with the S&P 500 futures moving down roughly 1% from Friday. Futures trading on the Dow Jones Industrial Average suggests the blue-chip average will open down 300 points.\u00a0<\/p>\n

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A trader works on the New York Stock Exchange Floor last week. Futures trading sees lower stocks at the open on Monday. <\/p>\n

Bloomberg&sol;Getty Images<\/a><\/p>\n<\/figcaption><\/figure>\n

The weakness will come after a solidly bullish week for stocks.\u00a0<\/p>\n

That assumes the weakness holds. Lately, futures trading might signal a weak open, but retail investors have then aggressively bought market dips.\u00a0<\/p>\n

So, the S&P 500 ended the week up 5.3%. The Nasdaq Composite Index jumped 7.2%, and the Dow\u00a0 Jones Industrial Average climbed 3.4%.<\/p>\n

Among the week’s winners: Tesla\u00a0 (TSLA<\/a><\/strong>) <\/span>, up 17%. Nvidia\u00a0 (NVDA<\/a><\/strong>) <\/span>\u00a0jumped 16.1%, and CoreWeave\u00a0 (CRWV<\/a><\/strong>) <\/span>, up a whopping 56.3%.<\/p>\n

President Trump and tariffs<\/h2>\n

The Administration wasn’t happy with Moody’s or with Walmart.\u00a0<\/p>\n

Over the weekend, President Trump complained about the downgrade\u00a0 while also demanding that Walmart eat the tariff costs, which, as noted, could wipe out Walmart’s profits.<\/p>\n

Treasury Secretary Scott Bessent said on CNN’s State of the Nation program Sunday Walmart has to offer draconian view of the situation for SEC disclosure reasons.<\/p>\n

While Bessent said he was confident Walmart would absorb some of the tariffs costs, he did concede some costs will be passed on.<\/p>\n

That said, remember that\u00a0McMillon, Brian Cornell CEO of Target\u00a0 (TGT<\/a><\/strong>) <\/span>\u00a0and Home Depot\u00a0 (HD<\/a><\/strong>) <\/span>\u00a0CEO Ted Decker visited President Trump at the White House on April 21. They warned the Administration that store shelves would be empty if its original sky-high tariffs were allowed to persist.\u00a0<\/p>\n

A Bessent-led team was sent to meet with Chinese trade officials. And soon the tariffs came down.\u00a0<\/p>\n

Related: Billionaire fund manager unloads 600 million of Tesla stock<\/a><\/strong><\/p>\n

A big week for retail earnings<\/h2>\n

The week ahead is one of the biggest for results from big retailers, all of whom source inventory all over the world, including China, and are thus subject to import tariffs.\u00a0<\/p>\n

They have mostly been warning about the tariff threat since Trump’s inauguration.<\/p>\n

Among retailers reporting are:<\/p>\n

Tuesday<\/strong><\/p>\n