Stock Market Today: Stocks Dip as US-China Tensions Rise and Inflation Cools

US stocks slipped on Friday as the market dealt with rising trade tensions between the US and China, while inflation showed signs of cooling. The S&P 500 (GSPC) fell 1.05%, the tech-heavy Nasdaq Composite (IXIC) dropped 1.63%, and the Dow Jones Industrial Average (DJI) dipped by 0.58%. This pullback follows a month of strong gains, with the S&P 500 on track for a 6% rise, the Dow up about 4%, and the Nasdaq surging nearly 10%, largely driven by a rebound in tech stocks.

The current market retreat is partly due to escalating trade tensions, with President Trump accusing China of violating its trade agreement, fueling investor concerns over future tariff hikes. Additionally, a fresh reading of inflation showed cooling pressures, particularly in the core Personal Consumption Expenditures (PCE) index, which is closely watched by the Federal Reserve.

Market Movers

• Nvidia (NVDA): -2.2%: Nvidia’s stock dropped as part of the broader weakness in the semiconductor sector. The company, which has significant exposure to the Chinese market, faced increased uncertainty following President Trump’s accusations against China. Investors are concerned that further trade disruptions could hurt the chip industry, and Nvidia was hit particularly hard.
• Regeneron Pharmaceuticals (REGN): -19.2%: Regeneron experienced a significant selloff after its experimental drug for smoker's lung failed a late-stage trial. Despite success in an earlier-phase trial, the disappointing results led to an 18% drop in the stock price. Investors were left uncertain about the future prospects of the drug, which had been expected to be a key growth driver.
• Micron Technology (MU): -2.4%: Like Nvidia, Micron's stock was impacted by broader concerns in the semiconductor sector. The company’s reliance on China for both production and sales made it particularly vulnerable to the ongoing trade tensions. A drop in investor confidence in the tech sector contributed to Micron’s decline today.
• Intel (INTC): -2.5%: Intel shares fell in line with other semiconductor stocks, as the company continues to face challenges in a highly competitive market. Intel, which has struggled to maintain its leadership in chip manufacturing, also felt the pressure of the trade uncertainty, particularly around its exposure to the Chinese market.

Inflation Data: PCE Shows Cooling Price Pressures

The latest inflation data showed some relief, with the core Personal Consumption Expenditures (PCE) index rising by 2.5% on an annual basis in April, in line with expectations. This is a slight slowdown from the 2.7% year-over-year increase recorded in March. The PCE index, which excludes food and energy prices, is closely watched by the Federal Reserve as a measure of inflationary pressures in the economy.

The monthly change in the core PCE index was just 0.1%, matching expectations and showing no acceleration in inflationary trends. While inflation remains above the Fed’s 2% target, the cooling in April’s numbers is likely to influence the central bank’s decision to hold interest rates steady in the near term. Despite this, analysts are wary that the ongoing trade war and tariff uncertainty could push inflation higher later in the year, potentially complicating the Fed’s outlook.

Trade Tensions and US-China Relations

Trade tensions between the US and China have reignited as President Trump accused China of violating the trade agreement made earlier this month. This has rattled investors, especially in sectors like technology and semiconductors, which rely heavily on the Chinese market. Trump's comments followed news of stalled trade talks, which were meant to resolve disputes over tariffs on tech goods, particularly semiconductors.

The uncertainty surrounding the future of US-China trade relations is keeping investors on edge. Just yesterday, a US appeals court paused a ruling that had blocked Trump's tariffs, leaving the door open for further escalation in trade policy. The implications for the global economy and supply chains are weighing heavily on investor sentiment.

Looking Ahead

As May comes to a close, the stock market faces several factors that could shape the direction of the market in June. While inflation data has cooled slightly, geopolitical concerns, particularly related to US-China relations, continue to cloud the economic outlook. The next few weeks could see increased volatility as investors react to further developments in trade negotiations and the potential for more tariff actions.

The Federal Reserve will also be a key focal point, as markets await its next decision on interest rates, likely influenced by both inflation data and broader economic conditions. With the cooling of inflation not yet sufficient to shift the Fed’s cautious stance, the market will likely remain sensitive to any further policy adjustments or economic shifts.