US Stock Markets React to Trade Tensions and Economic Data

The S&P 500 Index ($SPX) (SPY) has increased by +0.34%, while the Dow Jones Industrials Index ($DOWI) (DIA) has slightly decreased by -0.02%. The Nasdaq 100 Index ($IUXX) (QQQ) is up by +0.63%.

Despite heightened trade tensions between the US and China, stock indexes experienced gains during afternoon trading. China’s Ministry of Commerce accused the US of imposing new restrictions, such as AI chip export controls and visa revocations, and announced intentions to safeguard its interests. This escalation could exacerbate trade relations, even as President Trump has expressed interest in discussing a potential trade truce with China’s President Xi Jinping.

The yield on 10-year T-notes rose by +5 basis points to 4.46%, amidst a broad selloff of dollar assets due to trade tensions. Additionally, WTI crude prices surged by 3.36%, reaching a 1.5-week high, which could influence inflation expectations and Fed policy.

Recent economic data revealed unexpected contractions in US manufacturing activity last month, marking the sharpest decline in six months. April construction spending also fell unexpectedly.

As energy producers rallied following the rise in crude prices, stock indexes bounced back from earlier lows. US steel and aluminum producers surged after President Trump announced plans to double tariffs on these imports from 25% to 50%.

The May ISM manufacturing index unexpectedly dropped by -0.2 to 48.5, contrasting with expectations for a rise to 49.5. Similarly, April construction spending fell -0.4% month-over-month, while analysts anticipated a +0.2% increase.

Fed Governor Waller’s comments provided support for stocks and bonds as he indicated potential rate cuts later this year if certain economic conditions are met. Markets are currently pricing a 5% chance of a -25 basis point cut at the upcoming FOMC meeting on June 17-18.

Looking ahead, markets will focus on trade news and economic reports. Fed Chair Powell will deliver opening remarks today at a conference. Upcoming reports include April factory orders expected to decline -3.2%, and the JOLTS report expected to show a reduction of 92,000 job openings. The ADP employment change might increase by +110,000, while the ISM services index could gain +0.5 points to 52.1. Initial unemployment claims are forecasted to fall by -5,000, and nonfarm payrolls for May are set to rise by +125,000, with the unemployment rate expected to hold steady at 4.2%. Average hourly earnings are anticipated to increase by +0.3% month-over-month and +3.7% year-over-year.

International markets displayed declines, with the Euro Stoxx 50 dropping -0.26% to a one-week low. The Shanghai Composite was closed for the Dragon Boat Festival, while Japan’s Nikkei 225 fell -1.30%.

Interest Rates

The June 10-year T-notes (ZNM25) decreased by -2 ticks, with the 10-year T-note yield rising by +2.8 basis points to 4.428%. T-notes faced pressure due to US-China trade tensions and negative influences from European government bonds, though losses remained limited due to Waller’s dovish comments. Weaker reports on ISM manufacturing and construction spending were supportive of T-notes.

European bond yields increased, with the 10-year German bund yield up by +1.2 basis points at 2.512% and the UK gilt yield increasing by +0.6 basis points to 4.652%. The German May manufacturing PMI was revised downward to 48.3, while the UK’s was revised upward to 46.4. Swaps indicate a 98% chance for a -25 basis point rate cut by the ECB during Thursday’s meeting.

US Stock Movers

Adobe (ADBE) fell more than -3%, leading losses in the Nasdaq 100 after reports of funding cuts affecting tech contractors. CDW Corp (CDW) also saw a decline of over -3% on the news.

Science Applications International (SAIC) dropped by more than -13% after reporting Q1 EPS of $1.92, which missed the consensus estimate of $2.13.

Tesla (TSLA) decreased more than -3% following a -57% year-over-year drop in new vehicle registrations in France.

Centene (CNC) fell over -3% after Barclays downgraded its rating due to concerns surrounding Medicare and ACA businesses. Global e-Online Ltd (GLBE) also decreased more than -3% following a sell recommendation from Truist Securities with a price target of $31.

JB Hunt Transport Services (JBHT) fell more than -2% after Goldman Sachs downgraded the stock to neutral from buy.

In contrast, US steel and aluminum producers gained following Trump’s tariff announcement, with Cleveland-Cliffs (CLF) and Century Aluminum (CENX) rising over +20%. Nucor (NUE) climbed over +9%, while Steel Dynamics (STLD) and Commercial Metals (CMC) increased by over +7%.

Energy producers also saw gains as WTI crude prices increased over +4%. APA Corp (APA) rose by +3%, and Devon Energy (DVN) up more than +2%. Other energy stocks like Diamondback Energy (FANG) and Halliburton (HAL) gained more than +1%.

Chip stocks saw upward movements, supportive of the overall market, with Broadcom (AVGO) increasing over +2%. AMD, Marvel Technology, Micron Technology, Nvidia, and Microchip Technology also rose by more than +1%.

Zscaler (ZS) led Nasdaq 100 gainers, up by more than +4% following a price target increase from UBS to $315.

Moderna (MRNA) rose over +1% after the FDA approved its new Covid vaccine for adults over 65 and high-risk individuals. Vera Therapeutics (VERA) surged by over +57% due to positive results in a Phase 3 trial for its atacicept treatment.

Upcoming Earnings Reports (6/2/2025)

Credo Technology Group Holding (CRDO), Science Applications International Corp (SAIC), The Campbell Company (CPB).

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 is 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.