Financial sector remains steadfast amidst ongoing customs disagreement
U.S. Stocks Experience Subdued Trading Amid Tariff Dispute with China
Wall Street concluded the week with minimal movement, as the ongoing tariff skirmish between the U.S. and China dominated investor attention. President Donald Trump's criticisms of Beijing during the trade war added fuel to the dispute, with the president accusing China of violating provisions from the recently agreed trade deal.
Despite the legal tussle over presidential powers and the White House's harsh accusations, the Dow Jones Index eked out a slight 0.1 percent gain to 42,270 points. The S&P-500 ended virtually unchanged, while the Nasdaq Composite slumped by 0.3 percent. Both indices finished May with gains for the first time since January, as optimism grow around a potential de-escalation of global trade tensions.
Adding to the uncertainty, a federal appeals court permitted the Trump administration's tariffs to remain in place for the time being. The market's reaction was limited due to its skepticism since a U.S. trade court had previously banned the tariffs — a decision now overturned by the higher court. The court's ruling was already circulating during late trading on Thursday.
The volatile trade policy has kept U.S. stocks on edge, with investors nervous about the potential impact of the trade war on corporate earnings and economic growth. As tensions rise or ease, markets respond accordingly, causing significant swings in both directions.
On the economic front, personal income and spending data for April, including the PCE price index, were released. Rising in line with expectations on a monthly basis, the PCE index increased less than anticipated compared to the same period last year and less sharply than in March. This should help allay inflation fears. Income rose more than expected and more than in the previous month, while spending increased at a slower pace but in line with expectations.
The Chicago Purchasing Managers' Index (PMI) unexpectedly softened in May, although the University of Michigan's consumer sentiment index for May came in slightly better than expected in its second reading.
Individual stocks experienced mixed fortunes, with Dell falling 2.1 percent following initial gains after raising its earnings guidance for the first quarter. In contrast, Gap plummeted 20.2 percent on concerns that U.S. tariffs could significantly increase its costs. American Eagle Outfitters slipped into the red in the first quarter and withdrew its full-year guidance, with its stock falling 2.0 percent. However, Marvell Technology returned to profitability, benefiting from strong AI demand, but its stock fell 5.6 percent as its outlook was only in line with expectations.
Beauty conglomerate Ulta Beauty saw its stock surge by 11.8 percent, while Regeneron's stock dropped by 19.1 percent due to disappointing result from a drug trial.
The dollar slightly recovered following the appeals court's ruling but overall showed little change. Analysts at Bank of America noted that US tariffs are more negative for the U.S. economy and the dollar than for other countries and currencies, as tariffs carry the risk of retaliatory measures.
Volatility prevailed in the bond market as yields dipped slightly. The 10-year yield decreased by 4 basis points to 4.39 percent due to signs of easing inflation. The firmer dollar put pressure on the gold price, with the troy ounce down by 0.8 percent to $3,294, ending May with losses, breaking a four-month winning streak.
Oil prices slumped following Trump's verbal attack on China but have since rebounded from steeper losses. Prices for Brent and WTI decreased up to 0.4 percent, with investors awaiting the outcome of the Opec+ meeting over the weekend, which could decide on a further reduction of voluntary production cuts for July.
- The ongoing tariff dispute between the U.S. and China, regarding their economic and monetary union, has led to subdued trading on Wall Street, as investors scrutinize the situation closely.
- The Dow Jones Index eked out a slight 0.1 percent gain, despite the legal tussle over presidential powers and the White House's harsh accusations, which keep the community policy uncertain and on edge.
- In the general-news section, rising personal income and spending data for April presented mixed results, with the PCE price index increasing less than anticipated compared to the same period last year, potentially allaying inflation fears.
- Amidst this economic turmoil, various businesses, such as Dell, Gap, American Eagle Outfitters, and Ulta Beauty, have experienced significant swings in their stock prices, highlighting the impact of tariffs and trade wars on personal-finance matters.
