Fast-Changing Trade News Roils Markets as White House Signals Tariffs
Amidst rapidly evolving trade news, markets experienced significant volatility on Friday, shattering the previous calm brought on by easing concerns over the tech sector.
White House Announces Tariff Plans
A statement from the White House indicating President Donald Trump's plans to impose tariffs on China, Mexico, and Canada over the weekend sent the dollar surging while stocks declined. The S&P 500 erased an earlier rally that had approached 1%, while the greenback hovered near session highs.
Tech Sector Jitters
Earlier in the day, the market briefly erased losses driven by concerns over a low-cost AI model developed by Chinese startup DeepSeek, which raised questions about the valuations of booming technology companies. However, the market barely reacted to the release of the Federal Reserve's preferred inflation gauge, which met expectations but remained well above the central bank's 2% target.
Earnings Season Implications
Investors are eagerly awaiting the earnings reports of major technology companies amid concerns over the impact of DeepSeek's entry into the market. The ramifications could be significant, as hundreds of billions of dollars in capital spending have been deployed in the AI sector with profits still elusive.
Analysis and Market Outlook
Experts suggest that the stock market may need to adjust to the idea that while the AI phenomenon could remain a positive factor, its impact may not be as significant as previously priced in. Slowing demand for AI chips and the emergence of DeepSeek will also be closely monitored.
Despite the volatility, demand for cloud services is expected to continue supporting the results of Google and Amazon. DeepSeek's debut has generated excitement but investors believe its impact on the performance of tech behemoths will be minimal.
According to a Bloomberg Markets Live Pulse survey, 88% of respondents believe that DeepSeek's latest model will have little to no impact on tech stocks in the coming weeks. Retail traders continue to invest heavily in US stocks, with inflows reaching their highest levels in two years.
Longer-term, UBS Global Wealth Management anticipates a rise in the S&P 500 to 6,600 by the end of 2025, supported by increased economic productivity and robust fundamentals.