The S&P 500 Index closed down -0.27% on Friday, alongside the Dow Jones Industrials Index, which fell -0.66%, and the Nasdaq 100 Index, down -0.17%. September E-mini S&P futures decreased by -0.33%, while September E-mini Nasdaq futures dropped -0.21%. These declines were driven by escalating trade tensions as President Trump threatened to impose higher tariffs on trading partners, particularly a 35% tariff on select Canadian goods effective August 1, increasing from 25%. Additionally, a blanket tariff of 15% or 20% on most US trade partners is planned.
The 10-year T-note yield rose by +7 basis points to 4.419%, contributing to concerns about higher inflation potentially discouraging Federal Reserve interest rate cuts. The stock market sentiment was further impacted by projections of a modest +2.8% year-over-year rise in Q2 earnings for S&P 500 companies, the weakest increase in two years. In contrast, Bitcoin rallied over +3%, reaching a new record high, spurred by upcoming regulatory developments in the cryptocurrency space.
Overseas markets showed mixed results; the Euro Stoxx 50 fell -1.01%, while China’s Shanghai Composite rose to a 9-month high, closing up +0.01%. In the UK, May manufacturing production fell -1.0% month-over-month, larger than the expected -0.1% decline, marking the biggest decrease in ten months. Analysts are currently assigning only a 7% chance of a -25 basis point rate cut at the upcoming July 29-30 FOMC meeting.
