The US stock market faced a significant downturn. This was primarily due to escalating tariff concerns. President Donald Trump’s statements weighed heavily. His threats against Canada were a major factor.
Market Performance Overview
- The Dow Jones Industrial Average closed at 44,371.51. This marked a 0.63% decline on Friday. The index struggled to recover all day. Over five days, the Dow fell 0.87%.
- Meanwhile, the S&P 500 ended at 6,259.75. This represented a 0.33% drop. For the week, it was nearly flat, down 0.01%. Still, the S&P 500 hit a weekly high of 6,287.
- The Nasdaq Composite saw a slight decrease. It finished at 20585.53. This was a 0.22% decline. Despite this, the Nasdaq gained 0.46% for the week.
- In contrast, the Russell 2000 fell sharply. It dropped 1.26% to 2,234.83. This ended its recent positive trend.
- Furthermore, the VIX index climbed 3.93%. This indicates increased market volatility.
Tariffs: The Primary Market Driver
The primary cause of Friday’s market slump was tariff uncertainty. Trump threatened a 35% tariff on Canadian goods. Moreover, he mentioned broader 15-20% tariffs. These would apply to most imported goods. A 50% tariff on certain copper products begins August 1. These three tariff-related announcements rattled investors. Yesterday, the market was less sensitive. However, today these new threats instilled fear.
Economic Data and Policy
Interestingly, US trade talks with India showed progress. This suggested tariffs might drop below 20%. This news offered a brief rebound attempt. The US Treasury also reported a surplus. It earned $27 billion in June. This was up from $23 billion in May. This increased revenue is linked to tariffs.
However, tariffs are causing domestic issues. Walmart, for instance, stopped ordering clothes. These orders came from Bangladesh. They are awaiting clarity on import duties. Overall, tariff anxieties were high today. This fear extended to interest rate policy. Many now believe the Fed might delay rate cuts.
The probability of a September rate cut fell. It dropped to 61.1% for the 4-4.25% range. A cut in October seems more likely. The market anticipates two cuts by December. This places rates between 3.7-4.0%. Chicago Fed President Austan Goolsbee commented. He advised patience on the economy. He suggested waiting until tariff concerns ease. The economic picture remains “messy” he noted.
Bond Market and Commodities
Rising bond yields impacted stocks negatively. The 10-year Treasury yield rose. It passed 4.4% to 4.42%. This was a 6 basis point jump. The 30-year Treasury yield neared 5%. It hit 4.9%, up 9 basis points. While recent auctions went well, yields rebounded. Higher bond yields reduce stock valuations. This is because discount rates increase.
Conversely, the US dollar strengthened. It rose 0.2% to 97.54. This happened as tariff barriers increased. Gold prices also climbed. Gold reached $3,375, up 1.36%. Oil prices surged on trade restriction talks. Brent crude hit $80.58. It rose 2.83%. WTI crude reached $68.70. This was a 3.20% increase. Higher oil prices contribute to inflation worries.
Market Outlook and Expert Views
Analysts view the market as “overbought.” They suggest a potential pullback. Trump’s hawkish tariff stance is a key reason. Next week, the focus shifts to corporate earnings. S&P 500 earnings are projected to rise modestly. They expect about a 2.8% increase. However, Big Tech earnings anticipate a significant jump. They are forecasted to grow nearly 17%.
UBS projects the S&P 500 could reach 6,500. This forecast extends into next year. The official earnings season begins soon. Individual stock performance will vary. This depends on sector-specific results.
Key Earnings Releases Next Week
The banking sector kicks off earnings. JPMorgan, Citigroup, Wells Fargo, and BlackRock report on Tuesday. Semiconductor giants follow. ASML reports on Wednesday. TSMC reports on Thursday. These will impact chip stock performance. Bank of America and Goldman Sachs report Wednesday. Johnson & Johnson (pharmaceutical) also reports Wednesday. Growth stock Netflix releases earnings Thursday. Finally, 3M (economic bellwether) reports Friday. These releases will drive specific stock movements.
Leading Companies and Sector Analysis
The CNN Fear & Greed Index dropped. It moved back into “greed” territory. The index fell to 75. Big Tech companies largely supported the indices. Microsoft, Nvidia, Amazon, Google, and Tesla performed well. Google and Amazon saw increased price targets. Nvidia experienced strong buying interest. Its target price reached $177. Goldman Sachs recently raised Nvidia’s target to $185. CEO Jensen Huang reportedly met with Trump. Huang is also selling 75,000 shares daily. Nvidia’s market cap exceeds $4 trillion.
Apple faced a slight dip. It is more sensitive to tariffs. Meta also declined. This was due to a European fine. Meta received a $234 million penalty. This related to its “pay-or-consent” advertising model.
Sector Spotlights
The automotive sector had mixed results. Tesla performed strongly. Chinese EV makers like Li Auto and Nio rose. GM also did well. However, Ford, Lucid, and Rivian declined. They are more vulnerable to Canada-related tariffs. Tesla’s positive news yesterday boosted its performance. It recovered from an intraday dip. Tesla closed at $313. It broke above its 15-day moving average ($312).
Tesla’s positive momentum continued. Model Y sales in Norway surged. They increased by 115% year-over-year. Overall Norway sales rose 54% in June. Portugal, Norway, and the UK are strong European markets. Tesla will also begin India deliveries in August. This is despite high Indian tariffs. The Arizona robotaxi application also bolstered confidence. The integration of Grok AI into Tesla vehicles is a key development. Grok 4.0’s improved performance was also noted.
The semiconductor sector showed varied performance. AMD gained 1.57%. This was driven by its OpenAI collaboration. Nvidia continued its impressive ascent. The Philadelphia Semiconductor Index fell 0.1%. The SMH ETF also declined slightly. Micron Technology performed well. However, TSMC’s June revenue growth slowed. It was 26.9% year-over-year.
Amazon’s stock rose on higher price targets. Morgan Stanley set a $300 target. Its recent Prime Day sales were strong. Microsoft faces investor scrutiny. Some investors are questioning its AI operations. They are concerned about potential bias. Google also saw an increased price target.
Upcoming Inflation Data
A crucial release next week is the Consumer Price Index (CPI). This will be on Tuesday. Core CPI is expected to rise 0.3%. Headline CPI is also projected to increase 0.3%. This suggests annual inflation between 2.6% and 2.9%. The expectation of rising inflation contributes to higher interest rates.
Disclaimer: This content is for informational purposes only and does not constitute financial advice. Consult a qualified financial advisor before making investment decisions.