U.S. stock markets experienced a downturn today, reflecting persistent concerns surrounding trade negotiations between the United States and China. In midday trading, the S&P 500 Index recorded a decline of 0.40%, accompanied by a 0.23% drop in the Dow Jones Industrial Average and a 0.48% decrease in the Nasdaq 100. Futures for the S&P and Nasdaq also mirrored this negative sentiment, sliding by 0.42% and 0.48%, respectively. This downward movement in equity markets has been largely attributed to remarks made by U.S. Treasury Secretary Bessent, who stated that trade discussions with China appeared to be “a bit stalled,” and indicated that a conversation between U.S. President Donald Trump and Chinese President Xi Jinping might be necessary to facilitate progress.
The situation worsened later in the day as President Trump accused China of breaching an agreement aimed at mitigating tariffs without elaborating on the specific violations. This rhetoric contributed to a significant increase in market apprehension, leading to broader sell-offs across sectors.
Despite this negative backdrop, some economic indicators released today hinted at a more stable domestic economic environment. Personal spending for April rose by 0.2%, aligning with expectations, while personal income posted a more substantial increase of 0.8%, exceeding forecasts of 0.3%. Notably, this marked the largest increase in personal income in over a year. Additionally, the April core Personal Consumption Expenditures (PCE) price index, which the Federal Reserve uses as a key gauge of inflation, only rose by 0.1% month-over-month and 2.5% year-over-year, revealing its lowest annual growth in over four years. This data could offer some reassurance for the Fed as it navigates monetary policy amid ongoing economic uncertainties.
However, other economic updates indicated challenges. The Chicago Purchasing Managers’ Index (PMI) for May unexpectedly dropped by 4.1 points to 40.5, well below expectations of a rise to 45.0. Such figures could complicate the Fed’s decision-making process regarding interest rates, especially amid pressures from trade uncertainties.
Dallas Federal Reserve President Lorie Logan suggested that the central bank would likely maintain current interest rates in the near term. Logan noted that it may take a considerable amount of time before the Federal Reserve can effectively assess the economy’s response to tariffs and associated policy changes.
Market analysts are currently weighing the implications of these events on future Federal Open Market Committee (FOMC) meetings, particularly the one scheduled for June 17-18. Expectations appear muted, with markets pricing in only a 2% chance of a 25-basis-point rate cut at that meeting.
As the first quarter earnings reporting season approaches its conclusion, more than 90% of S&P 500 companies have now released their quarterly results. Impressively, roughly 77% of these companies exceeded analyst estimates, marking the highest proportion since the second quarter of 2024. Earnings growth for the first quarter averaged 13.1%—a significant increase compared to the 6.6% projected before the reporting season commenced. However, forecasts for full-year 2025 corporate profits have been revised downward to a growth rate of 9.4%, a decline from an earlier estimate of 12.5% made in early January.
Internationally, the performance of stock markets was mixed. The Euro Stoxx 50 saw a modest gain of 0.34%, while China’s Shanghai Composite experienced a decline of 0.47%. Japan’s Nikkei Stock 225 also reflected negative sentiment, closing down by 1.22%.
In the bond market, June 10-year T-note contracts edged down by a single tick, pushing the yield slightly higher to 4.426%. This reflects a rebound from a two-week low, as some investors sought the relative safety of government debt amid stock market volatility. Contributing to the decline in T-note prices were hawkish comments made by Dallas Fed President Logan about the potential for significant delays in interest rate adjustments, alongside growing concerns regarding wage pressures following the reported increase in personal income.
European government bond yields rose, with the 10-year German Bund yield climbing to 2.529%, recovering from a three-week low, while the UK’s 10-year gilt yield rose to 4.665%. In the Eurozone, April’s M3 money supply growth came in at 3.9% year-over-year, exceeding expectations, although German retail sales for April revealed a sharp decline of 1.1% month-over-month, marking the most considerable fall in over a year and a half.
In corporate news, Marvell Technology was one of the notable losers, with shares falling over 6% after the company projected a second-quarter adjusted gross margin slightly below expectations. Other tech stocks also faced downward pressure, including GlobalFoundries, Applied Materials, and Lam Research, all declining more than 2%. Advanced Micro Devices, Micron Technology, Intel, and Qualcomm were similarly affected, each losing more than 1% during the trading session.
On the other hand, Ulta Beauty’s stock surged by more than 14% following a robust first-quarter earnings report that surpassed analyst expectations. The company also raised its earnings per share forecast for the coming year. Zscaler and UiPath also reported strong results, leading to gains in their respective stocks, while Costco Wholesale reported better-than-expected earnings, leading to a 2% uptick in its shares.
The market will closely monitor the remaining economic data releases and any new developments in the trade negotiations as they shape investor sentiment and financial strategies. As analysts sift through the implications of domestic economic performance, corporate earnings, and the evolving landscape of international trade relations, the action on Wall Street continues to reflect an intricate balance of optimism and caution in an unpredictable environment.