Stock market today: S&P 500, Nasdaq turn higher as US-China trade tensions flare up

US stocks closed higher Monday despite escalating trade tensions with China and the EU, with the Nasdaq Composite rising 0.7% while the Dow Jones Industrial Average saw minimal gains. China and the US traded blame over tariff violations, undermining hopes for renewed trade talks after Trump threatened to double tariffs on steel and aluminum. The US dollar fell as markets assessed trade-war risks, while gold futures rose amid demand for safer assets, and investors are now focused on upcoming economic data, particularly the May nonfarm payrolls report.

Analysis

US equities finished higher on Monday, with the Nasdaq Composite (^IXIC) gaining 0.7%, the S&P 500 (^GSPC) rising 0.4%, and the Dow Jones Industrial Average (^DJI) showing a marginal increase of less than 0.1%, as markets appeared to downplay immediate concerns over escalating trade disputes. However, this surface calm belies growing uncertainty, evidenced by a moderately negative overall sentiment score (-0.55). Trade tensions have intensified, with China refuting US claims of violating a tariff truce and President Trump threatening to double tariffs on imported steel and aluminum to 50%, a move also opposed by the EU, thereby undermining prospects for revived trade negotiations. This environment has prompted a flight to safety, reflected in the US dollar (DX-Y.NYB) falling as investors assessed risks of rising inflation and slowing growth, while gold futures (GC=F) saw increased demand. Further compounding concerns, new data from the Institute for Supply Management indicated a continued contraction in US manufacturing activity in May, with imports dropping to their lowest level since 2009. Consequently, significant attention is now directed towards this week's economic data, particularly Friday's May nonfarm payrolls report, which is anticipated to provide crucial insights into the broader economic impact of these trade frictions and evolving interest rate expectations.

Key Decisions for Investors

• Given the divergence between the minor equity market gains and the escalating trade tensions, coupled with contracting US manufacturing activity evidenced by the ISM report showing imports at 2009 lows, investors should exercise caution and closely monitor geopolitical developments.
• The decline in the US dollar (DX-Y.NYB) and the rise in gold (GC=F) suggest heightened risk aversion; these instruments serve as key indicators of market stress and potential safe-haven appeal if trade disputes worsen.
• Investors should place significant emphasis on the upcoming May nonfarm payrolls report, as it will offer critical data on the US economy's resilience amidst current trade headwinds and inform future investment positioning.