Market Declines Amid Trade Tensions and Economic Concerns

The S&P 500 Index ($SPX) (SPY) is currently down -0.37%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.34%, and the Nasdaq 100 Index ($IUXX) (QQQ) has fallen -0.65%. Additionally, June E-mini S&P futures (ESM25) are down -0.37%, while June E-mini Nasdaq futures (NQM25) are down -0.63%.

Today, stock indexes are moderately lower following concerns raised by several U.S. companies regarding the economic impact of the trade war. Ford Motor Company, for instance, announced late Monday that it would withdraw its full-year financial guidance due to President Trump’s tariff plans. The company projects that these tariffs will reduce adjusted earnings for 2025 by approximately $1.5 billion this year, attributing this to “industrywide supply chain disruption.” The ongoing trade uncertainty linked to U.S. tariffs is also adversely affecting market sentiment and stock prices.

Stock indexes extended their losses upon the release of new data indicating that the March U.S. trade deficit reached a record -$140.5 billion, exceeding expectations of -$137.2 billion and posing a negative factor for first-quarter GDP.

However, stocks showed some recovery after Treasury Secretary Bessent stated that trade negotiations with multiple U.S. partners are “going well” and that some trade deals may be announced as early as this week.

Federal Reserve Policy Meeting and Market Focus

The Federal Open Market Committee (FOMC) has begun its two-day policy meeting, with expectations that it will maintain the federal funds target range between 4.25% and 4.50%. Recent economic data has outperformed expectations, leading to a decrease in market anticipation for a rate cut this week. Swap markets now expect three 25 basis point cuts by year-end, down from four anticipated cuts a week ago.

This week, investor attention will be heavily centered on tariffs and potential changes in U.S. trade policy. The FOMC is set to conclude its meeting on Wednesday, and post-meeting commentary from Fed Chair Powell will be closely analyzed for insights into future Fed actions. Thursday’s focus will include weekly initial unemployment claims, along with Q1 nonfarm productivity expected at 0.7%, and Q1 unit labor costs projected to increase by 5.2%.

The markets are currently assigning a 2% probability to a -25 basis point rate cut following the FOMC meeting concluding on Wednesday.

Earnings Reports and Market Reactions

As the Q1 earnings reporting season continues, data from Bloomberg Intelligence indicates a market consensus for S&P 500 year-over-year earnings growth of +6.7%, down from initial expectations of +11.1% in November. So far, 78% of the 365 S&P 500 companies that have reported earnings outperformed estimates. Additionally, full-year 2025 corporate profits for the S&P 500 are anticipated to grow by +9.4%, revised down from an earlier forecast of +12.5% in January.

Meanwhile, overseas stock markets show a mixed performance. The Euro Stoxx 50 fell by -0.39% from its one-month high, while China’s Shanghai Composite gained +1.13%, closing at a one-month high. Japan’s Nikkei Stock 225 was closed today for a national holiday.

Interest Rates and Bond Markets

June 10-year T-notes (ZNM25) are down -2 ticks, with the 10-year T-note yield rising by +0.6 basis points to reach 4.349%. Although T-notes fell to a one-and-a-half-week low before recovering, supply pressures from an upcoming $42 billion auction of 10-year T-notes have affected prices. Rising inflation expectations, indicated by the 10-year breakeven inflation rate climbing to a one-week high of 2.303%, also weigh negatively on T-notes. However, demand for safe-haven assets has mitigated losses due to the decline in stock prices and concerns about the trade deficit’s impact on Q1 GDP.

European government bond yields have increased today. The 10-year German bund yield rose to a three-week high of 2.558%, while the 10-year UK gilt yield increased to a two-week high of 4.575%.

In the Eurozone, the March Producer Price Index (PPI) fell -1.6% month-over-month and rose by +1.9% year-over-year, falling short of expectations which called for a -1.4% month-over-month decline and a +2.5% year-over-year increase. Additionally, the Eurozone’s April S&P composite PMI was revised upward to 50.4 from the previously reported 50.1.

Swaps currently price in a 96% chance of a -25 basis point rate cut by the European Central Bank (ECB) at its June 5 policy meeting.

U.S. Stock Performers

The “Magnificent Seven” stocks are facing significant pressure today, negatively impacting the broader market. Tesla (TSLA) has decreased by over -2% following a reported -62% year-over-year drop in UK new vehicle sales. Other major players like Nvidia (NVDA) and Meta Platforms (META) are down by more than -1%. Apple (AAPL) is down -0.45%, Alphabet (GOOGL) -0.24%, Amazon (AMZN) -0.05%, and Microsoft (MSFT) -0.04%.

In the semiconductor sector, stocks are declining. GlobalFoundries has dropped by more than -2%, while Advanced Micro Devices (AMD), NXP Semiconductors (NXPI), and other notable firms including Lam Research (LRCX), Intel (INTC), and Micron Technology (MU) have seen declines of more than -1%.

Palantir Technologies (PLTR) leads the losses in the S&P 500 and Nasdaq 100 with a drop exceeding -13% after reporting Q1 adjusted EPS of 13 cents, which aligned with expectations but failed to satisfy investors hoping for an earnings beat.

Vertex Pharmaceuticals (VRTX) is down more than -12% after its Q1 adjusted net income of $1.05 billion fell below the consensus estimate of $1.12 billion. DoorDash (DASH) declined over -7% after reporting Q1 revenue of $3.03 billion, which was below the consensus of $3.10 billion. The company also announced significant acquisitions, purchasing SevenRooms for $1.2 billion and Deliveroo for $3.9 billion.

Likewise, Coterra Energy (CTRA) is down more than -6% after posting Q1 operating revenue of $1.90 billion, below the consensus estimate of $1.99 billion, and reducing its full-year capital expenditure forecast to $2.0 billion-$2.3 billion from a prior estimate of $2.1 billion-$2.4 billion.

Fabrinet (FN) forecasted Q4 adjusted EPS of $2.55 to $2.70, with the midpoint falling below the consensus of $2.67, driving a decrease of over -6%. Clorox (CLX) is also down more than -2% after reporting Q3 net sales of $1.67 billion, short of the consensus of $1.72 billion, and revising its full-year organic sales estimate down to +4%-+5% from a previous +4%-+7%.

In contrast, Leidos Holdings (LDOS) rose by more than +4% after announcing Q1 revenue of $4.25 billion, surpassing the consensus of $4.09 billion. Celanese (CE) climbed over +9% after posting Q1 net sales of $2.39 billion, exceeding estimates of $2.27 billion. Ingredion (INGR) also gained more than +4% after its Q1 adjusted EPS reached $2.97, surpassing the consensus of $2.41 and raising its full-year adjusted EPS forecast to $10.90-$11.60 from a prior estimate of $10.75-$11.55.

Archer-Daniels-Midland (ADM) and Marriott International (MAR) both reported better-than-expected results, increasing more than +2% after Q1 adjusted EPS of 70 cents (above consensus of 66 cents) and Q1 revenue of $6.26 billion (beating the $6.20 billion consensus), respectively. Gold-mining shares are also experiencing gains, led by AngloGold Ashanti Plc (AU), which is up more than +2% as COMEX gold prices rise over +2% to a two-week high.

Earnings Reports (5/6/2025)

Upcoming earnings reports include companies such as Advanced Micro Devices (AMD), American Electric Power (AEP), Archer-Daniels-Midland (ADM), and many others across various sectors.

On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are for informational purposes only. For more information, please view the Barchart Disclosure Policy here.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of any affiliated entities.