US Markets Retreat Sharply Amid Renewed Tariff Concerns
US equity markets closed sharply lower on Tuesday after an early rally reversed, as investor sentiment turned negative on renewed tariff fears and a lack of progress toward compromise. The S&P 500 fell 1.57%, closing below the key 5,000 mark for the first time in nearly a year. The benchmark index is now down nearly 19% from its February peak, approaching bear market territory.
The Dow Jones Industrial Average declined 0.84%, while the Nasdaq Composite dropped 2.15%, weighed by heavy selling in growth-oriented technology shares. Market volatility surged, with the CBOE Volatility Index reaching its highest closing level since March 2020.
Sectors tied to commodities, including energy and materials, underperformed, while defensive sectors such as utilities held up comparatively better. Bond yields continued to climb, with the 10-year US Treasury yield hitting 4.28%, reflecting growing investor concern over inflation and economic uncertainty.
Tariff Developments and Global Implications
Investor anxiety intensified following confirmation that the United States will raise tariffs on Chinese imports to 104%, in response to China’s refusal to withdraw retaliatory tariffs. Despite speculation earlier in the day that President Trump might delay the move, the White House maintained its hardline stance, despite outreach from nearly 70 countries.
This development triggered the steepest four-day loss for the S&P 500 since its inception, with an estimated $5.83 trillion in market value wiped out. While the quarterly earnings season is approaching, analysts warned that even moderate performance could be overshadowed by cautious corporate guidance linked to the ongoing trade war.
Some stocks managed to buck the downtrend. Notably, UnitedHealth and Humana surged after the US government confirmed increased Medicare Advantage payment rates.
Market breadth was broadly negative, with declining stocks outnumbering advancing ones across both the NYSE and Nasdaq, as trading volumes remained elevated.
Asian Market Update
Asian equities fell sharply, led by significant declines in Japan and Hong Kong, after President Trump escalated tensions by raising tariffs on Chinese goods to 104%, sparking fears of a broader global trade slowdown. South Korea’s KOSPI edged closer to bear market territory. Other regional indices, including Australia and Singapore, also registered losses as investors awaited India’s interest rate decision.
US and European Market Outlook
US stock futures point to a weaker open as markets continue to digest the implications of 104% tariffs on Chinese imports and the worsening trade conflict. Investors are also awaiting the Federal Reserve’s latest meeting minutes for clues on the interest rate outlook.
European shares are expected to open lower, weighed by the intensifying trade dispute and stalled negotiations on tariff resolutions.
European Market Recap
Despite trade tensions, European equities rebounded strongly on Tuesday. The STOXX 50 gained 2%, while the broader STOXX 600 climbed 2.7%, marking its best session since 2022. The gains were driven by sectors such as financials, industrials, and defence.
The EU is preparing retaliatory tariffs in response to Trump’s trade measures. Meanwhile, Infineon rallied following news of a $2.5 billion deal to acquire Marvell’s automotive unit.
Currency Markets
The US dollar weakened for a second straight session, with the Dollar Index falling below 102.5, reflecting market concerns over the impact of President Trump’s aggressive tariff policy. The euro strengthened, with the EUR/USD exchange rate rising to 1.1038, amid growing fears of a potential US recession and the possibility of further Fed rate cuts.
Oil Market Declines Sharply
Oil prices dropped to a four-year low, suffering their worst five-day losing streak in three years. The escalating US-China trade war and resulting demand concerns have triggered a selloff, with crude oil losing around 20% of its value since early April.
Key Equity Movers
TSMC
Taiwan Semiconductor Manufacturing Company (TSMC) may face a penalty exceeding $1 billion due to involvement in manufacturing chips for Sophgo, which were reportedly used in Huawei’s AI processors, violating US export controls. The investigation centers on TSMC’s use of US-origin technology in its Taiwan operations, amid heightened scrutiny in US-Taiwan relations.
Health Insurers
UnitedHealth and Humana shares surged following the announcement of a 5.06% increase in Medicare Advantage reimbursement rates for 2026, more than double the earlier proposal. The increase is anticipated to enhance profit margins for the sector amid elevated medical costs.
Coal Stocks
Major coal producers saw share prices jump after reports indicated that President Trump will sign executive orders aimed at reviving the coal industry, including federal land leasing priorities and a new designation for metallurgical coal as a critical mineral.
Monster Beverage
Monster Beverage declined more than 3% after Spruce Point, a short-seller, raised concerns over its valuation, citing increased competition, heavy reliance on Coca-Cola for distribution, and potential long-term downside of 25%–40%.
Banco Santander
Banco Santander is exploring alternatives for its 62% stake in Santander Bank Polska, possibly including a sale. The stake is estimated to be worth $8 billion, with early-stage talks currently underway with potential investors.
Continental
Continental intends to spin off its ContiTech rubber and plastics division, transitioning toward becoming a pure-play tyre manufacturer. Despite ContiTech’s profitability, labour unions criticized the move due to the close operational ties between divisions.
Monte dei Paschi
Monte dei Paschi di Siena is advancing a €13 billion all-share acquisition bid for Mediobanca, despite market volatility and some opposition. The merger aims to build a stronger, diversified financial entity, with completion targeted by July.
Apple
Bank of America views the recent decline in Apple shares as an “enhanced buying opportunity”, pointing to a P/E ratio below 25x, strong cash flows, and promising AI integration. The bank reaffirmed its Buy rating, citing Apple’s historical resilience and premium strategy.
Tesla
Morgan Stanley analyst Adam Jonas reaffirmed Tesla as a Top Pick, maintaining an Overweight rating and a $410 price target. Jonas emphasized Tesla’s future in AI, robotics, and defence-tech, noting its underappreciated role in autonomous systems and embodied AI.
American Airlines & SkyWest
Goldman Sachs downgraded American Airlines to Sell, citing exposure to demand risk, and simultaneously upgraded SkyWest to Buy, referencing its more resilient business model. The firm anticipates ongoing demand softness in the airline sector into 2025.
Advanced Micro Devices (AMD)
Keybanc Capital Markets downgraded AMD from Overweight to Sector Weight due to challenges in its China AI business and increasing competition from Intel, which is deploying price cuts and new technologies to close the performance gap.
Netflix
Morgan Stanley named Netflix its new Top Pick in the Media & Entertainment sector, projecting 20-25% annual earnings growth over the next four years. Growth drivers include strong subscriber momentum, margin improvements, and a robust content pipeline, with a price target of $1,150 per share.
Affirm Holdings
TD Cowen initiated coverage on Affirm Holdings with a Buy rating and a $50 price target, citing strong e-commerce partnerships, a growing funding profile, and resilience in tighter credit conditions.
Upcoming Events and Data Releases
- FOMC Meeting Minutes
- EIA Crude Oil Inventories Report
- Delta Air Lines Earnings
- Final rollout of 104% tariffs on Chinese goods
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