Amazon‘s (Nasdaq: AMZN) stock price is poised to soar when markets open on Monday. Futures trading on Amazon shares points to an open that’s up about 8.2%, as of 8:10 a.m. ET.
The big news in the markets today is the announcement of a trade deal between the United States and China. The ongoing trade war has weighed on Amazon’s stock not only because its raising the price of many consumer goods Amazon sells, but also because it has raised the risk of a recession that would cut consumer spending for an extended period of time.
Let’s take a look at why Amazon might have such a good day on Monday and how its gains compare to other Magnificent 7 companies and competitors.
Key Points
Amazon shares are up 8% in pre-market trading on Monday.
The company’s gains are amongst the highest in the market following the announcement of a U.S. trade deal with China.
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U.S. Announces Trade Deal with China
Representatives from the United States and China met this weekend and were successful in negotiating a deal that eliminates reciprocal tariffs that had been announced on April 2nd for a 90-day period.
Tariffs on Chinese goods will drop from approximately 125% down to 30%, which adds a 20% ‘fentanyl tariff’ onto the 10% base tariff the Trump Administration is targeting in negotiations with all countries. China will retain a 10% tariff on U.S. goods coming into the country.
While those rates still remain elevated and will impact a company like Amazon that sells many goods imported from China, its another de-escalation in the ongoing trade war that began in mid-February. While rising costs on items like electronics and toys will that are often produced in China will hurt Amazon, even more troubling was the prospect of an extended recession that was caused by a near shutdown of global trade.
As more deals are struck, we’re moving to a scenario where ‘worst-case’ situations are off the table, and stocks are reacting positively.
Not All Stocks are Up in Pre-Market Trading
Amazon’s gains stand out in pre-market trading. Here’s how it compares to some other notable names:
Microsoft (Nasdaq: Up 2.3%)
Apple (Nasdaq: AAPL: Up 6.4%)
NVIDIA (Nasdaq: NVDA): Up 4.9%
Tesla (Nasdaq: TSLA): Up 8.1%
Walmart (NYSE: WMT): Up 2.4%
As you can see, Amazon’s 8% gain is on the top end of the gains major companies are seeing. Among the Magnificent 7, only Tesla is seeing comparable gains.
Amazon’s gains are also significantly higher than Walmart, which is up just 2.4% pre-market. In addition, pharmaceutical stocks are down pre-market with Eli Lilly down 4.1% and Johnson & Johnson down 2.6%. Plans by the Trump Administration to cut drug prices are weighing down the industry.
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