(Bloomberg) -- A historic stock-market run came to a halt as President Donald Trump’s latest tariff remarks provided little relief to investors bracing for the impacts of his trade war on the economy and corporate earnings.
Despite data showing a pick-up in growth at US service providers, the S&P 500 halted its longest rally in about 20 years. While Trump suggested some trade deals could come as soon as this week, there was no indication of an imminent accord with China. In late hours, Ford Motor Co. pulled its financial guidance and said auto tariffs will take a toll on profit. Palantir Technologies Inc. sales forecast fell short of Wall Street’s high hopes.
Recent economic data seems to have assuaged market concerns of a recession, but the outcome of Trump’s tariff war has yet to be felt. For several market observers, tariffs will eventually slow the US economy as supply chains are upended and consumer confidence tumbles, with the increases in levies possibly delivering at least a temporary inflation shock.
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Attention will soon shift to Wednesday’s Federal Reserve decision after bond traders dialed back rate-cut bets that had steadily mounted as Trump’s trade war unleashed havoc in financial markets. As long as the economy holds firm, Jerome Powell and his colleagues can more easily justify the standing pat.
“Uncertainty rules amid a trade war and the ever-changing landscape of tariffs, but with the hard data on consumer spending and employment still hanging in there, the Fed will remain firmly planted on the sidelines,” said Greg McBride at Bankrate.
The S&P 500 fell 0.6%. The Nasdaq 100 slid 0.7%. The Dow Jones Industrial Average lost 0.2%. The yield on 10-year Treasuries rose three basis points to 4.34%. The Bloomberg Dollar Spot Index slipped 0.2%.
Oil sank as OPEC+ agreed to an output increase. Taiwan’s dollar jumped on bets authorities might allow it to appreciate to help reach a trade deal with the US.
Treasury Secretary Scott Bessent touted the US as the “premier destination” for global capital and argued that the Trump administration’s policies will solidify that position — countering the so-called sell America theme that materialized last month.
Concerns about the international appeal of dollar-based assets materialized last month during a selloff in stocks in the wake of Trump’s announcement of steep reciprocal tariffs on major trading partners. Contrary to typical practice, US Treasuries also tumbled — failing to play the haven asset role it has in the past.
“Clearly, it really is the uncertainty and the volatility — and so that is how clients are feeling globally, domestically. And as part of that, they’re trying to figure out: Is there opportunity in this market?” Racquel Oden at HSBC said at an event. “We’re seeing all these market swings, each day there’s a new report that may pivot things in the economy.”
After piling into short-term Treasuries, anticipating the Fed would start easing policy soon to contain the fallout, traders reversed course. Two-year yields rose for a third consecutive session - the longest run since December - as traders bet policymakers will remain in wait-and-see mode until there’s more clarity on the impacts of tariffs.
“We believe that the longer policy uncertainty persists, the greater the potential hit to economic activity,” said Invesco’s Global Market Strategy Office.
“Tariff clock is ticking, and the Trump administration has a fairly limited window to make progress on trade deals before the economic damage becomes more pervasive and less reversible,” said Dave Grecsek, managing director at Aspiriant. “The longer trade policy uncertainty lingers, the more economic damage accumulates.”
A trade deal with China would be a prerequisite to spur the S&P 500 to a new all-time high in the near term, according to strategists at Morgan Stanley.
The team led by Michael Wilson says a deal reached in the next few weeks would calm businesses that supply chains will face limited disruption going forward.
While there are many reasons to doubt the recent rebound in US stocks, it has at least one powerful factor on its side: momentum.
The S&P 500 notched its the longest winning stretch since 2004 on Friday, and such streaks have tended to precede further upside. The gauge was a median 20% higher a year after moves of similar magnitude while notching gains in shorter-term periods along the way, according to WisdomTree’s Jeff Weniger, who analyzed data going back to the late 1980s.
“Your gut says ‘Maybe this is too much, maybe take some chips off the table,’” said Weniger, the firm’s head of equities. “But in actuality, this often times tends to beget more in the way of the rally.”
Corporate Highlights:
Berkshire Hathaway Inc. followed Chief Executive Officer Warren Buffett’s recommendation, naming Vice Chairman Greg Abel to replace the billionaire as CEO, effective Jan. 1.
President Trump said he would meet with Hollywood executives after confounding the US film industry over his plan to impose a 100% tariff on movies made overseas.
Less than a year after completing a restructuring that was supposed to turn the troubled pharmacy chain around, Rite Aid Corp. has filed for bankruptcy again.
Tyson Foods Inc. slumped as investors shrugged off stronger-than-expected quarterly earnings to focus on deepening losses at the company’s beef business.
Shell Plc is working with advisers to evaluate a potential acquisition of BP Plc, though it’s waiting for further stock and oil price declines before deciding whether to pursue a bid, according to people familiar with the matter.
Sunoco LP agreed to acquire Parkland Corp. for about $9.1 billion, including debt, offering a premium for a Canadian fuel distributor that’s in the midst of a leadership upheaval and a fight with its largest shareholder.
3G Capital will acquire footwear maker Skechers USA Inc. for $9.4 billion, marking a splashy return to dealmaking for the investment firm after nearly four years.
Some of the main moves in markets:
Stocks
The S&P 500 fell 0.6% as of 4 p.m. New York time
The Nasdaq 100 fell 0.7%
The Dow Jones Industrial Average fell 0.2%
The MSCI World Index fell 0.5%
Bloomberg Magnificent 7 Total Return Index fell 1%
The Russell 2000 Index fell 0.8%
Currencies
The Bloomberg Dollar Spot Index fell 0.2%
The euro rose 0.2% to $1.1317
The British pound rose 0.2% to $1.3295
The Japanese yen rose 0.8% to 143.76 per dollar
Cryptocurrencies
Bitcoin fell 1.5% to $94,342.31
Ether fell 1.1% to $1,816.2
Bonds
The yield on 10-year Treasuries advanced three basis points to 4.34%
Germany’s 10-year yield declined two basis points to 2.52%
Britain’s 10-year yield advanced three basis points to 4.51%
Commodities
West Texas Intermediate crude fell 2.2% to $57.01 a barrel
Spot gold rose 2.8% to $3,330.51 an ounce
--With assistance from Vildana Hajric and Isabelle Lee.
