Stock Market Slips as U.S.–China Trade Tensions Rise

Trade Tensions Pressure the Markets

On Tuesday, U.S. stock indexes ended mixed: the S&P 500 fell 0.16%, the Nasdaq dropped 0.69%, while the Dow Jones gained 0.44%. Volatility increased after another escalation in the U.S.–China trade dispute. Beijing imposed sanctions on five U.S. units of South Korea’s Hanwha Ocean, retaliating against Washington’s recent restrictions. Both countries have introduced special port fees on each other’s ships, threatening global trade, which depends on maritime transport for more than 80% of its volume.

Fed Policy Softens the Blow

Mid-session, stocks pared losses as Treasury yields declined following dovish comments from Fed Chair Jerome Powell. He noted that labor market conditions continue to weaken and hinted that the Fed may soon end balance sheet reduction, reinforcing expectations of a rate cut at the October 28–29 FOMC meeting. The 10-year Treasury yield dropped to 4.02%.

AI Optimism Lifts Select Stocks

Walmart gained more than 4% after announcing a partnership with OpenAI, which will allow customers to browse and purchase products directly through ChatGPT. The move boosted sentiment in both retail and artificial intelligence sectors.

Flight to Safe-Haven Assets

As trade tensions escalated, investors sought safety in gold and bonds. Gold and silver prices surged to record highs, while global bond yields fell to multi-week lows. Germany’s 10-year Bund yield dropped to 2.58%, and the U.S. 10-year Treasury yield touched 4.0%.

Macroeconomic Uncertainty and Government Shutdown

The NFIB Small Business Optimism Index fell to 98.8, signaling weakening sentiment among small firms. Meanwhile, the ongoing U.S. government shutdown continues to weigh on markets, delaying key economic reports. Bloomberg estimates that around 640,000 federal employees have been furloughed, potentially pushing the unemployment rate up to 4.7%.

Earnings Season Begins

Investors are now turning their attention to Q3 corporate earnings. According to Bloomberg Intelligence, 22% of S&P 500 companies expect results above analyst forecasts. However, overall profit growth is projected at just 7.2% — the smallest increase in two years — with revenue growth slowing from 6.4% in Q2 to 5.9%.

European and Asian Markets Weaken

European markets closed lower, with the Euro Stoxx 50 down 0.29%. Asian markets also declined — China’s Shanghai Composite fell 0.62%, and Japan’s Nikkei 225 tumbled 2.58%, reaching a one-week low.

Sector Winners and Losers

Chipmakers and mega-cap tech stocks led the decline. Nvidia, Intel, Broadcom, Dell, and Marvell dropped between 3% and 5%. In contrast, Wells Fargo and Walmart were among the day’s biggest gainers, up 7% and 4%, respectively. Other notable movers included Navitas Semiconductor (+26%) after unveiling new GaN and SiC chips for Nvidia’s AI factories, and Polaris Inc. (+14%) after announcing the spin-off of its Indian Motorcycle brand.

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