U.S. Markets Post Steep Losses Amid Trade Policy Shifts
The S&P 500 recorded a significant weekly decline of 9.1%, as investors responded to growing concerns over the economic fallout from new trade policies introduced by U.S. President Donald Trump. A blanket 10% tariff on all countries came into effect on April 5, accompanied by targeted duties against major partners including China and Japan.
In a retaliatory move, China imposed a 34% tariff on U.S. goods, intensifying trade tensions and fuelling anxiety about a broader global economic slowdown. Every sector within the S&P 500 ended the week lower, with energy, technology, financials, and industrials all suffering notable losses.
U.S. Economic Indicators Show Mixed Signals
On the macroeconomic front, March’s nonfarm payrolls rose by 228,000, indicating solid employment growth. However, revisions to prior months showed weaker-than-initially-reported figures, suggesting emerging softness in the labor market.
The unemployment rate edged up to 4.2%, still low by historical standards but a signal that job growth momentum may be slowing. Inflation concerns remain elevated as the impact of tariffs could lead to rising consumer prices due to increased import costs.
These developments, combined with the uncertainty surrounding global trade, continue to cloud the U.S. economic outlook.
Key Earnings and Economic Reports in Focus
Investors are now awaiting insights from the upcoming earnings season, with results expected from companies like JP Morgan Chase and Delta Air Lines. In addition, upcoming releases of the Consumer Price Index (CPI) and Producer Price Index (PPI) are anticipated to shed light on inflation and consumer spending trends.
Market volatility is likely to persist in the near term, underscoring the importance of maintaining a long-term and disciplined investment strategy.
Global Equities Under Pressure
Major Declines Across Asia
Asian equity markets experienced steep losses on Monday, driven by mounting trade-related concerns. Key market performance included:
- Japan’s Nikkei 225: Dropped 9%, reaching a 17-month low
- China’s Shanghai Composite: Fell approximately 6%
- Hong Kong’s Hang Seng Index: Lost around 9%
Other regional markets, such as Australia, South Korea, and Singapore, also faced heavy losses as fears of a global economic slowdown grew.
European Stocks Mark Weekly Losses
European equity markets also endured substantial declines. On Friday, the Stoxx 50 fell by 5.3%, and the Stoxx 600 dropped 5.1%, translating to an overall weekly loss of 8%.
Financial stocks were hit the hardest:
- Deutsche Bank: Down 10.1%
- Commerzbank: Fell 5.1%
- Societe Generale: Dropped 11%
- BNP Paribas: Declined 7.3%
These losses reflect growing concerns over sluggish economic growth and escalating global trade conflicts.
U.S. Futures Point to Continued Weakness
U.S. equity futures are expected to open sharply lower:
- Dow and S&P 500 futures: Down approximately 4%
- Nasdaq futures: Dropping another 5%
Investor sentiment remains fragile due to continuing tariff disputes, with potential retaliatory measures expected from Canada and the EU.
Market Movers and Company-Specific Developments
Corporate Reactions to Trade Uncertainty
Several major companies experienced stock price shifts driven by policy decisions, earnings results, or analyst updates:
- TikTok: Sale of U.S. assets put on hold as China pushes back against new U.S. tariffs. Despite prior approvals, Beijing’s retaliatory stance and President Trump’s tariff position have complicated the deal.
- Eli Lilly and Novo Nordisk: Faced headwinds after the Trump administration delayed a Medicare regulatory update that could have expanded coverage for obesity treatments, leaving the future of Medicare drug policy in question.
- Nike, Lululemon, and Crocs: Shares rose following news that Vietnam is seeking to reduce tariffs to zero as part of a potential trade deal with the U.S. Optimism was boosted by Trump’s statement about a “constructive call” with Vietnam’s General Secretary.
- GE Healthcare Technologies: Stock dropped 16% after China announced export restrictions on key rare earth elements like gadolinium, essential for MRI scanners. This move, seen as retaliation for U.S. tariffs, could severely affect GE’s supply chain.
Sector Impacts and Strategic Shifts
- Luxury Retailers in Europe: Shares in companies like Pandora, Swatch, and Burberry declined following China’s announcement of a 34% tariff on U.S. imports. Analysts warned that raising prices to offset tariffs could harm sales volumes.
- Nissan: Considering shifting production of U.S.-bound Rogue SUVs from Japan to the U.S., following increased U.S. tariffs. This comes after the firm cut production of Infiniti SUVs in Mexico, potentially impacting supply chains in both countries.
- Meta Platforms: Announced a nearly $1 billion investment in a new data center in Wisconsin to support AI infrastructure. Despite ongoing trade friction, Meta plans to allocate up to $65 billion this year toward AI development.
- Tesla: Wedbush analyst Dan Ives lowered the company’s price target from $550 to $315, citing negative impacts from tariffs and a weakening brand image, especially in China. He referred to Tesla’s situation as a “full-blown crisis” that could affect its long-term viability if unresolved.
- Booking Holdings: BTIG upgraded the stock to “Buy” with a new target of $5,500, highlighting strong earnings visibility, expected mid-teens EPS growth, and a ~20% valuation discount relative to large-cap internet peers.
- U.S. Lodging Sector: Bernstein analysts warned of reduced travel demand from Canada, Mexico, and France, potentially hurting U.S. hotels. Declining consumer confidence and potential backlash against U.S. brands were cited as ongoing risks.
- Leonardo SpA: Citi downgraded the stock to Neutral from Buy despite raising the price target to €48.4, following a 70% rally. The bank noted that much of the expected growth may already be priced in.
Upcoming Events and Economic Indicators
Today’s key data point in the U.S. is the Consumer Credit report, expected to show a rise in borrowing. This release will offer insights into consumer financial behavior. Additionally, Federal Reserve Governor Adriana Kugler is set to speak, and her comments may provide guidance on future monetary policy decisions.
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