U.S. stock markets closed lower on Monday amid renewed trade tensions sparked by former President Donald Trump’s tariff threats and concerns ahead of the upcoming earnings season. The S&P 500 and Nasdaq 100 both dropped by -0.79%, while the Dow Jones declined by -0.94%.
Key Drivers of the Decline
The main source of pressure came from Donald Trump’s announcement of new unilateral tariffs targeting dozens of countries, including Japan, South Korea, Laos, South Africa, Myanmar, and Malaysia. These new tariffs, ranging from 25% to 40%, are set to take effect on August 1. Countries supporting the BRICS bloc were specifically warned. These measures sparked fears of rising inflation and reduced the likelihood of a rate cut by the Federal Reserve.
Bond Market Reacts with Rising Yields
The bond market also responded to macroeconomic signals, as the yield on 10-year U.S. Treasuries surged by 3.9 basis points to 4.385%. This reflected both inflationary expectations and increased budget deficits. Trump’s recently signed fiscal plan is expected to add $3.4 trillion to the national debt over the next decade, according to the CBO, necessitating more Treasury debt issuance.
Corporate Sector: Tesla and Tech Under Pressure
Tesla shares fell over 6% after Trump criticized Elon Musk’s attempt to form a new political party, raising concerns about the impact on Musk-led companies. This also weighed on the broader tech sector.
Semiconductors faced strong selling: shares of ARM, Marvell, AMD, Qualcomm, and others fell by -1% to -5%, driven by geopolitical risks and profit-taking.
Earnings Season Worries
Investors are beginning to adjust expectations. According to Bloomberg, S&P 500 earnings are expected to grow by only +2.8% year-over-year in Q2—the weakest in two years. Furthermore, just 6 of 11 sectors are projected to report positive earnings growth, the lowest since Q1 2023.
Global Macroeconomic Background
Global markets were mixed. Euro Stoxx 50 rose by +1.00%, the Shanghai Composite added +0.02%, while Japan’s Nikkei fell by -0.56%.
European bond yields also rose: German 10-year bonds hit 2.643%, and U.K. bonds reached 4.586%. The Sentix Investor Confidence Index in the eurozone rose to 4.5 in July—a 3.5-year high—despite a 0.7% MoM drop in retail sales in May.
Key Events This Week
Investors are watching for:
FOMC minutes release on Wednesday,
Weekly jobless claims on Thursday,
Speeches from Fed officials,
Trade agreement deadline with the U.S. on Wednesday.
Futures now assign only a 5% probability of a 25bps rate cut at the July 29–30 FOMC meeting.
Notable Stock Movers
Webull dropped over 10% after announcing a $1B share issuance deal at a discount.
Stellantis fell 4% following a downgrade from BofA and a recall investigation.
WNS Holdings soared 15% after Capgemini announced a $3.3B acquisition deal.
XPeng launched a new AI-powered SUV, aiming to rival Tesla's Model Y.
Foxconn reported record revenue despite geopolitical challenges.
Enovix and Mustang Bio rallied after upbeat earnings and FDA approval news.
Wolfspeed surged 40% after appointing a new CFO and announcing restructuring.
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