Apple and 10 other stocks tied to China supply chains are at risk, but 7 others may benefit, says Morgan Stanley

By Barbara Kollmeyer

Critical information for the U.S. trading day

The countdown to a Federal Reserve decision is on, and markets seem just a little nervous. Markets are largely counting on a one-and-done playbook for interest rate rises, but note the curve ball we got from Down Under Tuesday where the Aussie central bank delivered a rate-hike shocker

Shifting gears, our call of the day from Morgan Stanley warns of hurdles to come for tech companies such as Apple (AAPL), and rewards for others amid shifting global supply chains.

As lead equity analyst Shawn Kim and his team explain, the pandemic exposed vulnerabilities in supply chains, driving companies to "re-shore" key manufacturing, or relocate to perceived friendlier countries.

Take the semiconductor sector, where U.S. and China frictions have heated up in recent years. "Complete decoupling would resemble the 1980s, when the competitive intensity between the U.S. and Japan in the semiconductor industry skyrocketed," said the analysts, who say limiting the flow of technology could slice 16% from the 2030 global information and communications technology market total addressable market.

The meat of this report talks about what's in store for specific companies, and what investors should know, broken down by those potentially at risk and those that could benefit. Here's the at-risk list:

As for those potential beneficiaries:

Last word from the analysts at Morgan Stanley: "It will take many years to shift the supply chain, and the U.S. will remain dependent on China in many areas. However, investing in the technology sector now requires a change in thinking to navigate the economic implications of multipolarization. Investors need to consider the broad investment themes associated with geopolitical risks rather than just taking a bottom-up view."

The markets

Stocks are lower in early trading, with Treasury yields inching higher, along with the dollar . The Aussie dollar and the country's bond yields got a boost from a surprise RBA rate hike. Oil prices are modestly lower and silver is getting drubbed, down over 1%.

For more market updates plus actionable trade ideas for stocks, options and crypto, subscribe to MarketDiem by Investor's Business Daily.

The buzz

The U.S. could breach its debt ceiling as soon as June 1 if Congress doesn't lift the nation's borrowing limit, Treasury Secretary Janet Yellen warned

Shares of pharma giant Pfizer (PFE) are up 2% after results beat expectations, Uber (UBER) stock is up 8% as the ride-hailing group gave an upbeat forecast and Marriott stock (MAR) is up 2% on upbeat results. Molson Coors (TAP) was up modestly on a profit beat and T Rowe Price (TROW)reported a drop in earnings, with shares off slightly. AMD (AMD) (see preview), Starbucks (SBUX), Ford (F) and Caesars (CZR) will report after the close, along with several others.

And: J&J's Kenvue spinoff to hit IPO market this week in the biggest deal since late 2021

Shares of Chegg (CHGG) are down 45% post-earnings after the online education company said ChatGPT has been eating its lunch. In London, shares of education publisher Pearson fell 9%. On that note, IBM (IBM) is reportedly set to pause hiring of thousands who could be replaced by AI in coming years. And former Google (GOOGL) AI research head Geoffrey Hinton said he resigned from the company to warn others about AI misuse

Read:Tech companies ramping up AI efforts while cutting ethics teams 'might not be a good look,' feds warn

And: After TOP Financial's surge, influential meme-stock trader looks for next big opportunity

Chip maker NXP Semiconductor's shares (NXPI) are up 4% after upbeat results. Arista Networks shares (ANET) are down 7% after the cloud-network group warned of slowing cloud growth demand from Microsoft and Meta.

U.S.-listed shares of HSBC (HSBA.LN) are up 4% after a threefold profit gain and more buybacks. Elsewhere, Morgan Stanley (MS) reportedly plans to lay off thousands more workers.

AMC Entertainment's (AMC) CEO Adam Aron slammed Robinhood Markets (HOOD) over an erroneous tweet claiming the movie-theater chain had filed for bankruptcy

The two-day Fed meeting kicks off on Tuesday. U.S. job openings and factory orders are due at 10 a.m. Eastern.

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The chart

For those wondering about the S&P 500's next moves, @tomthetrader1 shares his thoughts (h/t The Chart Report):

You can read his full views here on SubStack In October, Tom correctly predicted the S&P 500 would rise towards 3,900, as he lays out in this chart:

The tickers

These were the top-searched tickers on MarketWatch as of 6 a.m.:

TSLA  Tesla 
BBBY  Bed Bath & Beyond 
AMC   AMC Entertainment 
BUD   Anheuser-Busch InBev 
MULN  Mullen Automotive 
GME   GameStop 
FRC   First Republic Bank 
AMZN  Amazon.com 
NVDA  Nvidia 
AAPL  Apple 
NIO   Nio 

Random reads

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Japan changed its mind on the benefits of a street piano

Just eight fox cubs messing around on a trampoline

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-Barbara Kollmeyer

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05-02-23 1438ET

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