Wall Street Rattled Anew by US-China Trade Worries: Markets Wrap
(Bloomberg) — Resurgent trade tensions slammed Wall Street anew Tuesday, sending stocks, crypto and oil lower while reinforcing a bid for the safest corners of the market from haven currencies to gold.
Following a brief bounce, the S&P 500 retreated as President Donald Trump said he might stop trade in cooking oil with China, injecting fresh tensions into the relationship between the world’s two largest economies. His remarks also came after the Asian nation sanctioned US units of a South Korean shipping giant, escalating a dispute over maritime dominance.
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“Since the tariff/trade issue is the one issue that has created problems for the stock market his year, we’ll all be watching the developments on this one very, very closely,” said Matt Maley at Miller Tabak.
Despite the slide in the US equity benchmark, shares of crop traders Archer-Daniels-Midland Co. and Bunge Global SA rose. A gauge of big banks jumped after solid results from financial giants – which unofficially kicked off the earnings season.
Earlier in the session, equities rose as Federal Reserve Chair Jerome Powell’s remarks reinforced bets on an October rate cut amid job-market weakness.
Two-year yields hovered near the lowest levels since 2022. Powell also indicated the central bank may stop shrinking its balance sheet in the coming months, a key move to preserve liquidity in overnight funding markets.
To Michael Feroli at JPMorgan Chase & Co., Powell’s remarks were “strong confirmation” of bets on a Fed rate cut at its next meeting. At Evercore, Krishna Guha said Powell’s assessment of the outlook for the dual mandate objectives as largely unchanged confirms the Fed is on track to ease.
To Gennadiy Goldberg and Oscar Munoz at TD Securities, Chair Powell cleared the path for an end to QT over the coming months. “We think the Fed will announce an end to balance sheet runoff at the October FOMC meeting.”
The strategists also said the balance sheet is likely to remain steady for some time, but a high-pressure year-end can change that, leading the Fed to consider resuming active purchases of Treasury bills as soon as 2026.
“Ending QT should be supportive of swap spreads, provide more capacity in funding markets, and lower term premium across the curve,” they noted. “We continue to expect the Fed to cut rates in October and December, and to deliver three more cuts in 2026 for a terminal rate of 3%.”
Swap contracts are pricing in roughly 1.25 percentage points of rate cuts by the end of next year, from the current range of 4%-4.25%.
“As Fed Chair Powell noted, there are no easy paths for the Fed at this point,” said Scott Helfstein at Global X. “Lowering rates risks accelerating inflation. Holding rates higher presents risk to the job market.”
The Fed is still likely to cut rates in October and December, but investors should be prepared for a range of outcomes as Powell is trying to leave all options open, Helfstein noted.
Markets have moved relentlessly higher over the past few months, and a bit of a breather could be a good thing, he said.
“There is a lot to assess across the weakening labor market, trade policy uncertainty, government shutdown, resilient consumers, and strong corporate fundamentals. The backdrop remains favorable, but there are plenty of contradictions for investors to wade through,” he said.
A record share of global fund managers said artificial intelligence stocks are in a bubble following a torrid rally this year, according to a survey by Bank of America Corp.
About 54% of participants in the October poll indicated tech stocks were looking too expensive, an about-turn from last month when nearly half had dismissed those concerns. Fears that global stocks were overvalued also hit a peak in the latest survey.
It’s hard not to see “some frothiness in different sectors,” Citigroup Inc. Chief Financial Officer Mark Mason said on the bank’s third-quarter earnings call in response to a question from a reporter about artificial intelligence.
“I feel good about our business and our ability to cover clients,” he went on. “But it’s hard to look at how equity valuations and multiples sit today and not think there are some sectors that are likely frothy and overvalued. But we’ll see how those play out over time.”
Today marked the unofficial start of earnings season, and Bret Kenwell at eToro noted that markets have a history of beating consensus expectations, so if that’s the case this time around too, it could bring some much-needed reassurance at a time where volatility has resurfaced.
“Earnings helped steady the ship in early April amid heavy volatility, with financials telling a reassuring story about the consumer. Management teams grew even more confident over the summer and investors are now hoping for another positive update,” he said.
Beyond the banks, investors will be keeping a close eye on tech — specifically mega-cap tech and AI-related names.
“They’ll want to know if large tech firms are still spending gobs of money on AI infrastructure, and if recent headlines are any indication, the spending cycle is still firing on all cylinders. Still, with worries of an AI bubble permeating throughout social media, investors want some reassurance that these big capital investments into AI will pay off,” said Kenwell.
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Corporate Highlights:
JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon sounded warnings on the potential for a deterioration in credit quality, a cautionary note that put a damper on the firm’s surge in trading and investment-banking revenue. Goldman Sachs Group Inc. posted record third-quarter revenue boosted by a rapid pace of growth in its investment bank that eclipsed Wall Street rivals. Goldman Sachs told staffers to expect an additional round of job cuts this year as the bank seeks further savings across its businesses and takes advantage of the opportunities presented by artificial intelligence. Citigroup Inc. beat Wall Street revenue estimates across all five of its major business lines, a haul that’s helping the firm manage rising compensation costs and a plan to sell its retail unit in Mexico. Wells Fargo & Co. raised a key profitability metric, giving its first major update about the bank’s next growth target after the removal of regulatory restraints it had operated under for more than seven years. BlackRock Inc. pulled in $205 billion of client money in the third quarter as the world’s largest fund manager expanded its footprint in private credit and alternative assets. Advanced Micro Devices Inc. landed a major order from Oracle Corp. for its forthcoming MI450 chips, a sign it’s making headway in its pursuit of Nvidia Corp. in the booming market for AI processors. Salesforce Inc. said it’s saving about $100 million a year by using artificial intelligence tools in the software company’s customer service operations. Alphabet Inc.’s Google aims to invest about $15 billion building an AI infrastructure hub in southern India over the next five years, making its biggest bet on the fast-growing country. Walmart Inc. is teaming up with OpenAI to enable shoppers to browse and purchase its products on ChatGPT, the retailer’s latest push to incorporate artificial intelligence. Domino’s Pizza Inc. posted better-than-expected quarterly results, fueled by demand for promotions and stuffed crust pizza, though said the fourth quarter is off to a slow start. Johnson & Johnson said it plans to separate its slower-growing orthopedics business from the rest of the company within 18 to 24 months, giving its innovative drug and device operations more breathing room as the Trump administration pressures pharmaceutical companies to lower prices in the US. General Motors Co. is incurring $1.6 billion in charges tied to its pullback from electric vehicles, a stark indication of the damage that US policy changes will inflict on plug-in cars. Boeing Co. delivered 160 aircraft during the third quarter, the most since 2018 and an indicator the planemaker is rebounding from the turmoil that damaged its finances and reputation. Boeing and Airbus SE are suffering “unprecedented” delays in certifying and delivering aircraft, stifling airlines’ growth and plans to decarbonize, customers say. Instagram, which is owned by Meta Platforms Inc., will prohibit users under 18 from seeing content considered inappropriate for a PG-13-rated movie, extending teen protections that were rolled out last year. Freeport McMoRan Inc. plans to break away from the benchmark pricing system underpinning global sales of mined copper ores to protect the profitability of smelters, the company’s top commercial executive said in an interview. ConocoPhillips’ Chief Executive Officer Ryan Lance said that there’s little sign of supply-demand weakness right now to justify bearish sentiment in the oil market. BP Plc said weak oil trading undercut profit while production increased for a second straight quarter, offering investors a mixed snapshot as the energy giant continues efforts to improve performance. Spotify Technology SA’s push into audiobooks appears to be catching on, with more people using the service and publishers giving the streaming company credit for recent growth. Rayonier Inc. agreed to buy PotlatchDeltic Corp. in an all-stock deal valued at about $3.4 billion that would create one of the largest publicly traded timber and wood products companies in North America. LVMH sales unexpectedly returned to growth in the third quarter as shoppers splurged on Moët & Chandon Champagne and Dior perfumes, suggesting a persistent slump in luxury demand is easing. What Bloomberg Strategists say…
“This was Powell’s opportunity to guide markets before the Fed’s upcoming meeting at the end of the month, and his comments provide little reason to think the central bank won’t cut rates.”
—Tatiana Darie, Macro Strategist, Markets Live. For the full analysis, click here.
Some of the main moves in markets:
Stocks
The S&P 500 fell 0.2% as of 4 p.m. New York time The Nasdaq 100 fell 0.7% The Dow Jones Industrial Average rose 0.4% The MSCI World Index fell 0.2% Bloomberg Magnificent 7 Total Return Index fell 1.1% The Russell 2000 Index rose 1.4% KBW Bank Index rose 1.8% Currencies
The Bloomberg Dollar Spot Index fell 0.1% The euro rose 0.3% to $1.1606 The British pound was little changed at $1.3327 The Japanese yen rose 0.4% to 151.71 per dollar Cryptocurrencies
Bitcoin fell 2.6% to $112,792.11 Ether fell 4.1% to $4,115.51 Bonds
The yield on 10-year Treasuries declined one basis point to 4.02% Germany’s 10-year yield declined three basis points to 2.61% Britain’s 10-year yield declined seven basis points to 4.59% The yield on 2-year Treasuries declined three basis points to 3.47% The yield on 30-year Treasuries was little changed at 4.62% Commodities
West Texas Intermediate crude fell 1.7% to $58.47 a barrel Spot gold rose 0.8% to $4,144.45 an ounce ©2025 Bloomberg L.P.
