Markets mixed as tariff threats, tech crackdowns, and geopolitical uncertainty weigh on investor sentiment.
Markets Open Lower, Then Rebound
Stocks opened the week on shaky ground Monday as renewed U.S.-China trade friction jolted markets early. The Dow Jones Industrial Average slipped by around 150 points, while the broader S&P 500 wobbled near the flatline. But by the final hour of trading, the S&P 500 ETF (SPY) had clawed back losses and was up 0.4%, with the tech-heavy Nasdaq notching a modest 0.3% gain.
The tepid start to June followed a blockbuster May, where the S&P 500 climbed more than 6% — its strongest May in 34 years — largely driven by mega-cap tech stocks. But Monday’s gains were more cautious as investors grappled with a renewed trade spat between Washington and Beijing.
Trump’s Tariff Threats Reignite Old Tensions
At the center of the volatility: a fresh escalation in rhetoric between the world’s two largest economies. President Trump accused China of violating a recent trade pact, threatening to double tariffs on steel and aluminum to 50% from their current 25%. The Chinese Ministry of Commerce fired back, denying the allegation and blaming the U.S. for introducing “discriminatory” restrictions, including curbs on AI chip exports and student visas.
“If the U.S. insists on its own way... China will take resolute and forceful measures,” the ministry warned.
While some tariffs were temporarily blocked by a federal court last week, a higher court reinstated them a day later, keeping uncertainty elevated. Analysts say the legal back-and-forth has only added to Wall Street’s unease.
Rare Earths, AI Chips, and the New Front in Trade Wars
Beyond traditional trade barriers, the latest standoff is increasingly focused on technology and critical materials. U.S. officials say China is dragging its feet on lifting restrictions on exports of rare earth minerals — essential for manufacturing semiconductors and electric vehicles. In response, Washington has introduced new export controls targeting Chinese access to advanced AI chip technology.
Tensions in this high-stakes arena have sharpened investor focus on companies heavily exposed to global supply chains, particularly in semiconductors and hardware. Meanwhile, safe-haven assets gained ground: gold prices edged higher and the U.S. dollar weakened as traders assessed rising inflation risk and broader economic fallout.
Adding to the geopolitical anxiety: a fresh wave of drone attacks in Russia over the weekend, drawing investor attention to Eastern Europe and further fueling demand for defensive assets.
What Comes Next: Economic Data, Fed Signals, and Leadership Calls
With the trade détente struck in Geneva now looking fragile, all eyes are on whether Trump and Chinese President Xi Jinping will speak this week to prevent further deterioration. Reports suggest such a conversation could be imminent, though neither side has confirmed.
Markets are also bracing for a pivotal U.S. jobs report Friday, expected to offer fresh clues on economic resilience and the Federal Reserve’s rate trajectory. Fed Governor Christopher Waller hinted Monday that any inflationary impact from new tariffs may be short-lived — potentially opening the door to rate cuts later this year.
Meanwhile, the “Magnificent Seven” tech stocks — led by Nvidia (NVDA), Tesla (TSLA) and Microsoft (MSFT) — continue to dominate gains, accounting for the majority of the S&P 500’s May rally. But even their momentum may be tested if the U.S.-China clash escalates into a full-blown technology cold war.
For now, markets appear to be walking a tightrope — buoyed by tech optimism but shadowed by uncertainty from Washington to Beijing.
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