Stocks wavered on Friday as markets reacted to the latest flare-up in trade tensions between the United States and China.
While a key U.S. inflation gauge cooled in April, President Donald Trumpâs claims that China had violated the two nationsâ trade agreement spooked investors.Â
The Dow Jones Industrial Average dropped more than 120 points, and the benchmark S&P 500 shed 0.6%. The tariffs debacle, which saw fresh drama on Thursday as a federal court paused the block on Trumpâs tariffs, also stalled the Nasdaq Composite, it opened 0.4% down after closing green on Thursday amid gains for global chip giant Nvidia.
On Friday, data showed Aprilâs core Personal Consumption Expenditures index, a closely watched inflation gauge by the Federal Reserve, rose 2.5% annually in April, the lowest reading since March 2021. The PCE index met economistsâ expectations of 2.5% and was lower than the 2.7% recorded in March.
Overall, PCE rose 2.1% on a yearly basis, down from economistsâ expectations of 2.2%.Meanwhile, core prices rose 0.1%, aligning with figures seen in March.
While a softer inflation reading means good news for risk assets, including stocks and cryptocurrencies, investor sentiment is weighed down by the fresh tariffs uncertainty.
This follows president Trumpâs claim that China had âtotally violatedâ its trade agreement with the U.S. Treasury Secretary Scott Bessent had earlier told Fox News that the U.S.-China trade talks were âa bit stalled.â
âI made a FAST DEAL with China in order to save them from what I thought was going to be a very bad situation, and I didnât want to see that happen,â Trump wrote on Truth Social. âBecause of this deal, everything quickly stabilized and China got back to business as usual. Everybody was happy! That is the good news!!! The bad news is that China, perhaps not surprisingly to some, HAS TOTALLY VIOLATED ITS AGREEMENT WITH US. So much for being Mr. NICE GUY!â
More tariff drama is expected after the U.S. appeals court paused the Court of International Tradeâs ruling on Trumpâs global tariffs. The White House has also indicated its ready to head to the Supreme Court, with experts warning that the court order blocking most of the tariffs threatens a $2 trillion hole in Trumpâs fiscal plan.
Despite the tariff uncertainty, U.S. stocks are eyeing a green monthly close. Nasdaq is poised for a 10% spike over the month and the S&P 500 is on track for a 6% monthly jump. Meanwhile, the Dow could end May 4% higher.