U.S. Markets Decline Amid Lack of Reassurance on Tariffs: The record-breaking rally in U.S. stock markets halted
After President Donald Trump’s recent statements failed to reassure investors about tariffs.
This deepened concerns over the potential impacts of his trade war on the economy and corporate earnings.

Despite positive data indicating an improvement in the services sector,
the S&P 500 index ended its longest winning streak in nearly two decades.
Although Trump hinted at the possibility of reaching some trade agreements this week,
no signs of an imminent comprehensive deal with China have emerged.

Contents

Financial Warnings

Federal Reserve Decision

Market Performance

U.S. Assets

Investor Behavior

Potential Deal with China

Momentum Drives Market

Summary

Major Corporations Issue Financial Warnings

In after-hours trading, Ford Motor Company withdrew its financial forecasts,
announcing that auto tariffs would negatively affect its profits.
Similarly, sales projections for Palantir Technologies fell short of Wall Street’s high expectations.

While recent economic data helped ease fears of recession, the real consequences of Trump’s tariff war remain unclear.
Analysts fear the tariffs could eventually slow the U.S. economy by disrupting supply chains,
weakening consumer confidence, and potentially triggering at least a temporary inflationary shock.

Focus Shifts to the Federal Reserve’s Decision

All eyes are now on the Federal Reserve’s meeting scheduled for Wednesday,
especially after bond market participants dialed back their expectations for rate cuts,
despite the intensifying impact of the trade war.
Fed Chair Jerome Powell and his colleagues may be justified
in maintaining the current monetary policy if the economy remains resilient.

Greg McBride of Bankrate commented, “Uncertainty dominates amid tariffs and a volatile trade landscape,
but with consumer spending and employment data holding firm, the Fed will likely remain cautious.”

Market Performance

The S&P 500 declined by 0.6%, the Nasdaq 100 dropped by 0.7%,
and the Dow Jones Industrial Average fell by around 0.2%.
The yield on 10-year Treasury notes rose by three basis points to 4.34%,
while the Bloomberg Dollar Spot Index slipped by 0.2%.

Oil prices declined following the OPEC+ agreement to increase production in commodities and currency markets.
Meanwhile, the Taiwanese dollar surged amid expectations that authorities
might allow its appreciation in a bid to facilitate a trade deal with the United States.

Concerns Over the Attractiveness of U.S. Assets

U.S. Treasury Secretary Scott Bessent emphasized that the United States
remains the “number one destination” for global capital,
asserting that the Trump administration’s policies will reinforce this status.
His comments came amid a growing “Sell America” trend, highlighted by the recent decline in U.S. stocks and bonds.

Raquel Uden of HSBC noted that global and local clients are reacting to uncertainty and market volatility,
seeking opportunities amidst conflicting economic signals.

Shifting Investor Behavior in Bond Markets

After a previous rush into short-term Treasury bonds in hopes of imminent monetary easing,
Investors have now reversed course.
Yields on two-year bonds rose for a third consecutive day—the longest streak since December.

Invesco’s Global Market Strategy office stated that prolonged political uncertainty could further affect economic activity.

Dave Greskek, managing director at Aspirant, added,
“The tariff clock is ticking, and the Trump administration has a limited window
to make progress on trade deals before the economic damage becomes more widespread and less reversible.”

Potential Deal with China a Key to Market Gains

According to analysts at Morgan Stanley,
Securing a trade deal with China is essential
for the S&P 500 to reach new record highs in the near term.
A team led by Michael Wilson indicated that an agreement would be reached in the coming weeks
could help ease corporate fears over potential disruptions to global supply chains.

Momentum Drives the Market Despite Challenges

Despite several reasons to question the recent recovery in U.S. equities,
Momentum remains a powerful driving force.
The S&P 500 has marked its longest winning streak since 2004—an indicator often followed by further gains.

Jeff Weniger of WisdomTree analyzed data from the late 1980s
and found that the index typically posts average one-year gains of around 20% after similar runs,
along with positive short-term returns.

Weniger remarked, “Your gut might say it’s too much and time to take profits,
But historically, this momentum often leads to more upside in the market.”

Summary

U.S. markets declined due to the absence of reassurances on tariffs, halting a record-breaking rally.
Warnings from major companies and growing concerns over the trade war’s impact have shaken market confidence.
As attention turns to the Federal Reserve’s decision amid mixed economic signals,
reaching a trade agreement with China remains a key factor in sustaining momentum and securing further gains.

U.S. Markets Decline Amid Lack of Reassurance on Tariffs

U.S. Markets Decline Amid Lack of Reassurance on Tariffs

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