U.S. stocks experienced a downturn on Friday as escalating tensions between President Trump and China intensified fears regarding tariffs. The Dow Jones Industrial Average fell by 0.6%, while the S&P 500 dipped 0.8%. The Nasdaq Composite, particularly sensitive to technology stocks, experienced the most significant decline of over 1%.
The day began with Trump unleashing sharp criticism towards China and its leader, Xi Jinping, through a lengthy post on the social media platform Truth Social. His remarks came in the wake of China’s actions to heighten trade tensions with the U.S., which included imposing new port fees on American ships and initiating an antitrust investigation targeting Qualcomm. Additionally, China has tightened export controls on rare earth minerals and halted soybean purchases from the U.S.
In his post, Trump remarked on the “strange things” happening in China and hinted at a possible cancellation of an upcoming meeting with Xi, emphasizing that there was “no reason to do so.” He also threatened a “massive increase” in tariffs on Chinese goods, assuring that while this could be painful in the short term, it would ultimately benefit the U.S. economy.
The markets have struggled throughout the week, caught in a tug-of-war between optimism regarding artificial intelligence demand and concerns surrounding a potential government shutdown, which entered its tenth day. As a result of Friday’s declines, all major indices are poised for significant losses by the end of the week, following a retreat from recent record highs.
Investor sentiment turned towards private data releases due to delays in official economic data caused by the ongoing government shutdown. The University of Michigan reported that consumer sentiment in October remained low, with the index showing signs that Americans are increasingly worried about economic prospects, inflation, and job stability.
As investors prepare for the upcoming earnings season, which kicks off next week with major banks like JPMorgan and Citigroup leading the reports, analysts are predicting softer performances, particularly due to the anticipated impact of tariffs on revenues.
On a different note, stocks related to rare earth minerals saw a surge following Trump’s remarks about China’s export controls. Shares of MP Materials and USA Rare Earth both jumped by 15% as tensions escalated.
In terms of consumer sentiment, the University of Michigan’s preliminary survey indicated a stable but pessimistic outlook among Americans. The sentiment index was recorded at 55, slightly above economists’ predictions but significantly lower than the reading from a year ago. Concerns about inflation and job prospects remain at the forefront of consumers’ minds, while long-term inflation expectations have remained stable.
Despite the overall market decline, some stocks experienced upward momentum in premarket trading. Intel’s shares rose nearly 2%, buoyed by the release of its new Core Ultra series 3 processor. Meanwhile, Applied Digital saw a significant jump of approximately 25% after surpassing revenue expectations and announcing a deal with cloud company CoreWeave.
Conversely, Qualcomm faced a substantial hit with a more than 3% drop in its stock following reports of an antitrust investigation by China into the company’s recent acquisition plans.
Overall, the combination of dwindling consumer sentiment, ongoing trade tensions, and the impending earnings season is creating a complex environment that investors are closely monitoring.
