First Solar leads earnings selloff as tariffs start to bite
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At some point, the chaotic circus around White House tariffs on U.S. imports was always going to move from an economic debate to actual pain. Investors in First Solar FSLR 0.00%↑ and a host of other stocks reached that point this week as first quarter earnings dramatically exposed the challenge that these shifting tariffs cause Wall Street.
As investors wait, frustrated for news of any trade deals between other countries and the Trump administration, the downside of tariffs was on display in bright red prices on trading screens, particularly in an 11% selloff in First Solar shares Wednesday.
The largest U.S. solar panel company said the tariffs were even more painful than expected and that their shifting nature makes it difficult to predict how imports from its plants in Malaysia and Vietnam will be affected for the rest of the year. As a result, it might need to slow or even temporarily halt production in the plants.
Other companies reporting this week also suffered. Global banks Deutsche Bank and HSBC both said they lifted their provisions for bad loans in the first quarter to reflect the impact of tariffs, while oil giant BP BP 0.00%↑ reported lower-than-expected earnings and cut the size of its share buyback plan. Oil prices fell below $60 a barrel on Wednesday as investors reduced their expectations for international oil demand going forward.
And early Wednesday, the U.S. reported that gross domestic product fell 0.3% in the first quarter after America’s trade deficit soared to a new record in March, a first step toward a recession as companies stockpiled imports ahead of potential tariffs.
Stocks have rallied recently in hopes that the trade deals the White House keeps talking about will materialize, but earnings from international operations don’t turn on a dime with every headline like stock prices have been doing. The slow-motion car crash of these earnings disasters will take a long time to unwind even if the tariff picture changes dramatically.
Investors and political pundits will spend a lot of time this week debating the economic damage from the new administration’s first 100 days. But as first quarter earnings show, that damage is already here.
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Hulbert: The myth of the climate premium
. . . . Companies that pay up to produce and sell their products in sustainable fashion are losing out to a public perception that the climate certification means the product is more expensive, and even worse, of lesser quality, writes Mark Hulbert. Citing a new study by professors at Hong Kong University’s business school, Hulbert said that the negative perception, which is often false in terms of both quality and price, is reducing incentives for companies to produce their products in sustainable fashion. The study. which used Amazon’s Climate Pledge Friendly (CPF) program, concluded that perceptions are the issue and that companies need to do more to market their products in a way that makes clear the climate badge is a plus and not a minus.
Thursday’s subscriber insights
Searching for ESG fund capitulation
. . . . Quarterly fund figures this week showed investors in ESG and sustainable funds withdrew a record $8.6 billion in assets in the past three months, and took money out of European sustainable funds for the first time as the anti-ESG backlash in the U.S. spreads overseas.
The withdrawals contrasted sharply with the $18 billion in net inflows to the sector in the fourth quarter of 2024, before the change in leadership at the White House, according to Morningstar. In total, assets in the sector remained the same at about $3.2 trillion.
Under normal circumstances, such a shift might be tied to a massive market move and be seen as a sort of capitulation among sustainable investors, which would be a bullish sign that the lows are in. After all, investments in renewable energy are still soaring worldwide, even in the U.S.
But with the ongoing tariff drama and attacks by the White House on anything with a whiff of climate in its remit, and with European investors succumbing for the first time, it's likely this will last a few more quarters. Europe is home to more than four-fifths of sustainable fund assets and has long been a bellwether for the sector as its governments have been friendlier to climate-fighting regulations.
If global stock markets continue their partial recovery of the past few weeks from March’s rout, it's likely that some bargain-hunters will be attracted to the beaten down sustainable funds. But given the ferocity of the swing last quarter, we aren't holding our breath.
Editor’s picks: Ocean fossils on the highest mountains; plus, Trump’s surprising first 100 days
Watch the video: The rise of the Himalayas affected more than just the immediate area. Turns out, we may have them to thank for everything from the rise of giant flightless birds in Madagascar; to the disappearance of plants from Antarctica; to the expansion of the great grasslands of North America, and more. PBS Eons reports.
Not what investors were expecting
Wall Street may have expected bull markets in President Donald Trump’s first 100 days in office, but got intense volatility and uncertainty instead. Sarah Hansen writes for Morningstar that the announcement on April 2 stunned investors with the scope and scale of new reciprocal tariffs announced for dozens of U.S. trading partners. “Stocks plunged, the dollar and U.S. government bonds slid, and investors sought safety in gold. The ‘worst since’ superlatives that accompanied the market’s declines harkened back to the collapse that accompanied the onset of the Covid-19 pandemic in 2020.” In this report headlined 9 Charts on Trump’s First 100 Days in the Markets, Hansen looks at U.S. stock market performance (see chart above), volatility, and Treasury yields, as well as gold and bitcoin. According to the report, “Amid the dramatic headlines and market turmoil, there was one market trend that was perhaps most important to investors: Diversified portfolios were better at riding out the storm.”
Latest findings: New research, studies and projects
Green innovation under pressure
As the impacts of climate change intensify, firms must overcome the technical challenges of emission reduction while coping with damage from frequent disasters, according to the authors of Green Innovation Under Pressure. This paper provides novel evidence on how firms adjust the pace and direction of their innovation in response to costly physical disasters. From the abstract: “Leveraging granular data on the joint spatial distribution of climate hazards and economic activity across the U.S., we do not find firms exposed to acute physical risks cut their R&D expenditure after disaster shocks. Instead, our patent analysis reveals a subsequent shift in these firms’ innovation efforts toward green technologies.” Authors: Xintong Li, University of California San Diego; and Anindo Sarkar, University of California San Diego - Rady School of Management
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Words to live by . . . .
“You cannot improve on it. The ages have been at work on it, and man can only mar it.” — Theodore Roosevelt, known as the “conservation president,” in a speech about the Grand Canyon.