U.S. Stocks Fall Amid Fears of Trade War
New York, January 31, 2025 - U.S. stocks experienced losses on Friday after the White House announced that tariffs on Mexico, Canada, and China will be implemented on Saturday. This news reignited concerns about a potential trade war with the nation's closest trading partners.
According to White House Press Secretary Karoline Leavitt, the president will impose 25% tariffs on goods from Mexico and Canada, and a 10% tariff on Chinese goods.
Major Indices Decline
All three major stock indices closed in the red on Friday. The S&P 500 (^GSPC) lost 0.5% at the closing bell, while the Dow Jones Industrial Average (^DJI) shed 0.8%. The tech-heavy Nasdaq Composite (^IXIC) gave up 0.3%.
Earlier Optimism Dampened
The dramatic tariff news overshadowed more positive updates from earlier in the day, which had boosted stocks. Solid earnings from Apple (AAPL) and an inflation reading that matched expectations had lifted market sentiment for much of the day.
Impact on Trade Partners
The looming Saturday tariff deadline has revived worries about the impact on the U.S. economy from restrictions on its largest trading partners.
Dollar Strengthens
The uncertainty over tariffs has left Federal Reserve Chair Jerome Powell in a wait-and-see mode, with the potential for tariffs to exacerbate inflation being a major concern.
Inflation Monitor Matches Expectations
The latest reading of the Fed's preferred inflation gauge, the Personal Consumption Expenditures index, showed a 2.8% year-over-year increase in December, meeting economist estimates.
Market Outlook
Traders continue to believe that the Fed's first rate cut of the year will not come until June, according to the CME FedWatch tool.
Other Notable News
- Google parent Alphabet (GOOG) and Amazon (AMZN) are set to report quarterly earnings next week.
- The U.S. dollar (DX-Y.NYB) is on track for its best week since November on anticipation of tariffs.
- Goldman Sachs advises investors to invest in gold amid tariff uncertainty.
- President Trump will meet with Nvidia CEO Jensen Huang to discuss AI competitiveness.
- Apple stock has risen as investors reward the iPhone maker's AI approach.
- Deckers Outdoor (DECK) stock has tumbled as sales projections fall short of expectations.