Mixed week for US equity markets amid tariff uncertainty
United States (US) equity markets closed lower on Friday, weighed down by a Financial Times report that President Trump is calling for a minimum 15 to 20% tariff on imports from the European Union (EU), suggesting a harder stance is being taken. For the week, the US Tech 100 (Nasdaq 100) gained 1.25%, the US 500 (S&P 500) added 0.59%, and Wall Street (Dow Jones) fell 29 points (−0.07%).
If President Trump’s tariffs announced in recent weeks come into effect, they will see the average US tariff rate rise to around 20 to 22% from approximately 14 to 15%. This would inevitably be a hit to growth and consumer and business confidence and boost inflation. Offsetting these concerns, the current 1 August deadline could be extended again, and additional trade deals may be announced.
Federal Reserve officials remain divided on rate policy
Ahead of the upcoming Federal Open Market Committee (FOMC) meeting next week, Federal Reserve (Fed) Governor Christopher Waller continues to fight a lonely dovish fight as he again pressed for a rate cut later this month, citing a slowdown in private sector hiring. However, apart from Michelle Bowman, he appears to be outnumbered by those led by Fed Chair Powell, who remain firm in a wait-and-see mode. Fed speakers are now in the blackout period ahead of the Fed’s next interest rate meeting on 30 July.
On a more positive note, reports have emerged over the weekend that Treasury Secretary Scott Bessent urged President Trump not to fire Fed Chair Jerome Powell. Multiple sources indicated Bessent cautioned Trump about the potential economic, political, and legal consequences, stressing that such a move could destabilise financial markets.
Mixed earnings results from major companies
In stock news, Netflix shares fell 5.1% to $120.24 on Friday despite beating revenue and earnings estimates, while Charles Schwab rose 2.90% to $95.80 amid strong results. Tesla gained 3.21% to $329.65 ahead of its earnings report this week, previewed here. Tesla will be joined by approximately 119 other companies reporting this week, including General Motors, Alphabet, IBM, American Airlines, and Intel.
On the data front, and apart from new tariff headlines, there will be interest this week in the Flash purchasing managers’ index (PMI), home sales, and durable goods orders. The US rates market starts the week pricing in 16 basis points (bp) of Fed rate cuts for the September FOMC meeting and a cumulative 43 bp of cuts priced between now and the end of the year.