U.S. stock markets faced continued downward pressure today, primarily influenced by heightened anxieties around trade negotiations between the United States and China. The S&P 500 Index decreased by 0.25%, while the Dow Jones Industrial Average and the Nasdaq 100 Index also reflected declines of 0.11% and 0.25%, respectively. U.S. Treasury futures also experienced drops, with June E-mini S&P futures and June E-mini Nasdaq futures recording declines of 0.24% and 0.25% as well.
Market sentiment took a turn after U.S. Treasury Secretary Bessent disclosed that trade discussions with China appeared to be “a bit stalled.” This raised concerns that a formal dialogue between President Trump and Chinese President Xi Jinping may be essential to rejuvenate negotiations. The situation deteriorated further as President Trump publicly accused China of breaching an agreement aimed at tariff reductions, without detailing the specific nature of the violation.
Despite these challenges, some economic indicators released today provided a more positive backdrop for market participants. Personal spending in April increased by 0.2%, aligning perfectly with analysts’ expectations. Personal income showed even more robust growth, rising by 0.8% month-over-month, significantly above the projected 0.3% increase and marking the largest gain observed in over a year. Additionally, the April core Personal Consumption Expenditures (PCE) price index—considered the Federal Reserve’s preferred measure of inflation—stabilized at an annual rate of 2.5%, marking the lowest year-on-year advance in more than four years.
Investor sentiment slightly improved later in the trading session when the University of Michigan’s consumer sentiment index was revised upward to 52.2, surpassing expectations of 51.5. Moreover, inflation expectations for one year ahead decreased from 7.3% to 6.6%, providing further positive momentum for stocks, although expectations for the five- to ten-year inflation outlook were also revised downward to 4.2%.
Comments from Dallas Federal Reserve President Lorie Logan, delivered Thursday evening, signaled that the central bank may adopt a wait-and-see approach regarding interest rate adjustments. She mentioned it could be “quite some time” before the Fed understands how the economy will react to recent tariff impositions and other policy changes. Consequently, markets are currently pricing in just a 2% chance of a 25 basis point rate cut during the Federal Open Market Committee (FOMC) meeting scheduled for June 17-18.
As the Q1 earnings reporting season draws to a close, results from over 90% of the companies in the S&P 500 indicate a stronger-than-expected performance, with 77% of those firms beating analysts’ profit estimates—a figure not seen since the second quarter of 2024. Average earnings growth for Q1 stands at 13.1%, surpassing pre-season forecasts of 6.6%. Nevertheless, projections for full-year 2025 corporate profits for S&P 500 companies have been adjusted downwards, now anticipated to rise by 9.4%, compared to an earlier forecast of 12.5% made at the beginning of the year.
In international markets, trading outcomes were mixed today. The Euro Stoxx 50 edged up by 0.22%, while China’s Shanghai Composite saw a decline of 0.47%. Japan’s Nikkei Stock 225 closed down by 1.22%.
On the bond front, June 10-year Treasury notes registered an uptick of three ticks, following an increase in safe-haven demand triggered by stock market declines. The yield on the 10-year Treasury note declined by 0.2 basis points, settling at 4.416%. After fluctuating throughout the day, Treasury notes managed to recover from initial losses. Meanwhile, European government bond yields generally saw upward movement, in contrast to the behavior of U.S. Treasuries amidst a backdrop of cautious inflationary trends.
The Eurozone’s April M3 money supply increased by 3.9% year-over-year, exceeding expectations of 3.7%. German retail sales, however, presented a more complicated picture, unexpectedly falling by 1.1% month-over-month, diverging from anticipated growth of 0.2% and marking the steepest drop in over a year and a half. In another important indicator, Germany’s May Consumer Price Index (CPI), as harmonized by EU standards, increased by 0.2% on a month-over-month basis and 2.1% on a year-over-year basis, surpassing forecasts of 0.1% m/m and 2.0% y/y.
As markets continued to navigate these complex economic signals, individual equities showed significant volatility. Marvell Technology saw its shares decline by over 5% following disappointing Q2 gross margin forecasts, which fell short of consensus estimates. Other semiconductor stocks such as Micron Technology and Intel experienced dips of more than 2%. Regeneron Pharmaceuticals was one of the day’s largest losers, with shares plummeting more than 17% after its experimental COPD drug failed to deliver promising trial results. Similarly, The Gap’s shares fell more than 20% amid warnings that if tariffs remain elevated, the company could suffer significant earnings impacts.
On a brighter note, Ulta Beauty’s shares rose by over 12% after reporting a robust Q1 EPS well above expectations, prompting an upward revision of its future earnings forecast. Meanwhile, Zscaler’s stock gained more than 8% due to better-than-expected revenue forecasts, showcasing how individual companies are responding differently amidst broad market pressures.
As further earnings reports emerge and economic indicators continue to be scrutinized in the coming weeks, market participants remain attentive to how geopolitical tensions and domestic economic data will unfold, shaping the trajectory of not only stock markets but the broader U.S. economy in the coming months.