Stocks Settle Lower as President Trump Ramps Up Tariff Rhetoric

Stocks retreated on Friday, with the S&P 500, Dow Jones, and Nasdaq 100 posting multi-week lows amid escalating trade tensions spurred by President Trump's tariff threats against Apple, EU goods, and other device makers. The market initially recovered after unexpectedly strong new home sales data and dovish comments from Chicago Fed President Goolsbee, but ultimately closed lower, pressured by concerns over the fiscal outlook and Moody's recent downgrade of the US credit rating. Intuit was a notable gainer after a strong earnings report, while Deckers Outdoor, Workday, and Booz Allen Hamilton declined sharply on disappointing guidance.

Analysis

US stock indexes, including the S&P 500 (-0.67%), Dow Jones Industrials (-0.61%), and Nasdaq 100 (-0.93%), retreated on Friday, marking multi-week lows. This downturn was primarily driven by escalating trade tensions, highlighted by President Trump's threat of 25% tariffs on Apple (AAPL) if iPhones are not manufactured domestically, causing Apple shares to fall over 3%, and a broader threat of 50% tariffs on EU goods from June 1. These pronouncements significantly weighed on technology stocks, with numerous chipmakers like Microchip Technology (MCHP), ON Semiconductor (ON), and Intel (INTC) closing down more than 2%. Broader market pressure also stemmed from concerns over the US fiscal outlook, a recent Moody's credit rating downgrade, and the negative budget deficit projections. A partial market recovery occurred following an unexpected +10.9% m/m rise in US April new home sales to a 3-year high of 743,000, and comments from Chicago Fed President Goolsbee suggesting Fed rate cuts remain possible over a 10-16 month horizon. The 10-year T-note yield declined by 3 basis points to 4.50%, offering some support amidst safe-haven demand, though gains were tempered by concerns over increased Treasury debt issuance. Q1 earnings season has been largely positive, with 77% of S&P 500 companies beating estimates and Q1 earnings growth at +13.1%, significantly above the +6.6% expected. However, the full-year 2025 corporate profit growth forecast for the S&P 500 has been revised downwards to +9.4% from +12.5%. Notable stock-specific movements included sharp declines for Deckers Outdoor (DECK) (-19%) and Workday (WDAY) (-12%) on weak guidance, while Intuit (INTU) surged over +8% on strong earnings and an upgraded forecast, and United States Steel (X) rose +21% following presidential backing for its acquisition. Nuclear power stocks like Centrus Energy (LEU) (+19%) also rallied on reports of potential regulatory easing.

Key Decisions for Investors

• Exercise caution and consider defensive positioning given the heightened market volatility stemming from escalating trade rhetoric and US fiscal uncertainties, which are likely to persist.
• Closely monitor developments in US trade policy, particularly concerning tariffs on Chinese and EU goods, as these will be key drivers for market sentiment and sector performance, especially for technology and import/export-sensitive industries.
• Focus on companies with strong fundamentals and positive guidance, such as Intuit, or those exposed to specific positive catalysts like the nuclear sector or M&A activity, as indicated by United States Steel, especially as full-year S&P 500 profit growth forecasts have been tempered.
• Evaluate fixed income allocations considering the decline in Treasury yields due to safe-haven demand and potential Fed easing, alongside the ECB's dovish stance which is depressing European yields, while remaining aware of risks from increased US government debt issuance.