Markets Slide as Trade Concerns and Earnings Weigh on Sentiment

The S&P 500 Index ($SPX) (SPY) closed down -0.77% on Tuesday, while the Dow Jones Industrials Index ($DOWI) (DIA) fell -0.95%, and the Nasdaq 100 Index ($IUXX) (QQQ) decreased by -0.88%. June E-mini S&P futures (ESM25) are down -0.83%, and June E-mini Nasdaq futures (NQM25) are down -0.89%.

Economic Concerns from Trade War Commentary

Stock indexes settled moderately lower as recent comments from various U.S. companies intensified fears about potential economic damage stemming from the trade war. Ford Motor announced late Monday that it is pulling its full-year financial guidance due to President Trump’s tariff plans, estimating the tariffs will impact its adjusted earnings by about $1.5 billion this year, citing “industrywide supply chain disruption.” The uncertainty surrounding U.S. tariffs continues to affect market sentiment and stock prices.

Trade Deficit and FOMC Meeting Updates

On Tuesday, U.S. economic news was also discouraging for stocks, with the March trade deficit reported at a record -$140.5 billion, wider than expectations of -$137.2 billion, which poses a negative factor for Q1 GDP.

However, stocks managed to recover from their worst levels based on Treasury Secretary Bessent’s comments that trade negotiations with several U.S. partners were “going well” and that some trade deals might be announced this week.

The FOMC began its two-day policy meeting on Tuesday, where it is expected to maintain its federal funds target range at 4.25%-4.50% upon conclusion on Wednesday. Recent economic data has been better than anticipated, leading to reduced expectations for a rate cut this week. Swap markets now reflect three 25 basis point Fed rate cuts by year-end, down from four expected a week prior.

Market Focus on Tariffs and Economic Indicators

This week, the market’s attention will center on tariffs and any changes to U.S. trade policy. On Wednesday, after the FOMC meeting, Fed Chair Powell’s comments will be scrutinized for insights on future Fed policy. Thursday will also bring key data, including weekly initial unemployment claims, expected Q1 nonfarm productivity growth of 0.7%, and predicted Q1 unit labor costs rising by 5.2%.

Following the FOMC meeting, the markets are assigning just a 2% probability to a -25 basis point rate cut.

Quarterly Earnings Trends and Global Market Update

The ongoing Q1 earnings reporting season shows a consensus for year-over-year earnings growth of +6.7% for the S&P 500, down from earlier expectations of +11.1% in November. So far, 78% of the 365 S&P 500 companies that have released results have exceeded estimates. For full-year 2025, corporate profits for the S&P 500 are projected to rise +9.4%, down from +12.5% forecasted earlier in January.

International markets displayed mixed results on Tuesday. The Euro Stoxx 50 fell -0.37% from a one-month high, while China’s Shanghai Composite rose to a one-month high with a gain of +1.13%. Japan’s Nikkei Stock 225 remained closed for a national holiday.

Interest Rates and Bond Market Activity

June 10-year T-notes (ZNM25) closed up +8 ticks, with the 10-year T-note yield declining by -3.7 basis points to 4.306%. T-notes recovered from a one-and-a-half-week low as the stock market slump increased safe-haven demand. Additionally, the widening trade deficit further supports a dovish stance for Fed policy. The T-notes rose to their highs in Tuesday afternoon trading, driven by strong demand at the Treasury’s $42 billion auction for 10-year notes, which had a bid-to-cover ratio of 2.60, surpassing the 10-auction average of 2.56.

Initially, T-notes moved lower due to negative carryover from weaker European government bonds, although rising inflation expectations also weighed on T-notes, with Tuesday’s 10-year breakeven inflation rate reaching a one-week high of 2.305%.

Global Bond Yields and Economic Indicators

European government bond yields also rose on Tuesday. The 10-year German bund yield increased to a three-week high of 2.558% before finishing up +2.3 basis points at 2.540%. The 10-year UK gilt yield rose to a two-week high of 4.575%, closing up +0.5 basis points at 4.514%.

In the Eurozone, March PPI decreased by -1.6% m/m and increased +1.9% y/y, falling short of expectations of -1.4% m/m and +2.5% y/y. The Eurozone’s April S&P composite PMI was revised upward by +0.3 to 50.4 from the previously reported 50.1. Markets are now pricing in a 95% probability for a -25 basis point rate cut by the ECB at its June 5 policy meeting.

U.S. Stock Movers

Tuesday’s market performance saw pharmaceutical stocks decline following President Trump’s announcement of forthcoming news regarding drug pricing. Regeneron Pharmaceuticals (REGN) fell over -7%, while Eli Lilly (LLY), Bristol-Myers Squibb (BMY), and Gilead Sciences (GILD) saw declines of over -5%. AbbVie (ABBV), Biogen (BIIB), and Pfizer (PFE) also dropped more than -4%, with Merck & Co (MRK) leading the Dow’s losses by falling over -4%.

Chip stocks contributed to the overall market dip. GlobalFoundries (GFS) and KLA Corp (KLAC) both experienced declines of over -2%. Advanced Micro Devices (AMD), Intel (INTC), NXP Semiconductors NV (NXPI), Marvell Technology (MRVL), Microchip Technology (MCHP), Analog Devices (ADI), Applied Materials (AMAT), and Lam Research (LRCX) reduced more than -1%.

Palantir Technologies (PLTR) led the Nasdaq 100 declines, closing down over -12% after reporting Q1 adjusted EPS of 13 cents, which aligned with expectations but disappointed investors anticipating an earnings beat.

Vertex Pharmaceuticals (VRTX) also fell more than -10% after announcing Q1 adjusted net income of $1.05 billion, below the consensus of $1.12 billion.

Coterra Energy (CTRA) reported Q1 operating revenue of $1.90 billion, missing the consensus of $1.99 billion and cutting its full-year CAPEX forecast, causing its stock to close down more than -9%.

DoorDash (DASH) fell over -7% after posting Q1 revenue of $3.03 billion, weaker than the consensus of $3.10 billion, alongside major acquisitions that raised investor concerns.

Fabrinet (FN) saw a decline of over -7% after forecasting Q4 adjusted EPS between $2.55 and $2.70, with the midpoint being below the consensus estimate of $2.67.

Clorox (CLX) closed down more than -2% after reporting Q3 net sales of $1.67 billion, which was below expectations of $1.72 billion, leading to a reduced full-year growth forecast.

In contrast, Celanese (CE) gained over +9% after reporting Q1 net sales of $2.39 billion, surpassing the consensus of $2.27 billion.

AngloGold Ashanti Plc (AU) led gold-mining stocks higher with a gain of over +4% following a rise in COMEX gold prices to a two-week high, while Leidos Holdings (LDOS) also increased over +4% after reporting strong Q1 revenue of $4.25 billion.

Ingredion (INGR) rose over +3% after exceeding Q1 adjusted EPS expectations at $2.97 and raising its full-year forecast. Archer-Daniels-Midland (ADM) and Marriott International (MAR) both closed up more than +1% after reporting strong Q1 earnings and revenues that beat market expectations.

Earnings Reports Scheduled for 5/7/2025

Reports are expected from companies including APA Corp (APA), Atmos Energy Corp (ATO), Axon Enterprise Inc (AXON), Bio-Techne Corp (TECH), Bunge Global SA (BG), CDW Corp/DE (CDW), Cencora Inc (COR), CF Industries Holdings Inc (CF), Charles River Laboratories International (CRL), Corteva Inc (CTVA), Dayforce Inc (DAY), Emerson Electric Co (EMR), Fortinet Inc (FTNT), Johnson Controls International (JCI), MarketAxess Holdings Inc (MKTX), NiSource Inc (NI), Occidental Petroleum Corp (OXY), Paycom Software Inc (PAYC), Rockwell Automation Inc (ROK), Skyworks Solutions Inc (SWKS), Texas Pacific Land Corp (TPL), Trimble Inc (TRMB), Uber Technologies Inc (UBER), Verisk Analytics Inc (VRSK), Vistra Corp (VST), and Walt Disney Co/The (DIS).

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 solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.