Tariff talk trips up market

Despite logging more records, the US stock market took a step back last week as the détente in US-China trade relations gave way to renewed hostilities.

The S&P 500 (SPX) set all-time closing highs on Monday and Wednesday, but the market gave back the week’s gain on Friday after President Trump proposed “massive” new tariffs on China, and appeared to cancel his upcoming meeting with Chinese President Xi Jinping. Friday turned out to the SPX’s biggest down day since April:

The headline: Bulls back off amid latest tariff talk.

The fine print: The White House said it proposed the tariff increase in response to new controls China placed on its exports of so-called “rare earths”—a group of obscure elements, some of which are essential for modern electronics, including the production of the magnets used in computer hard drives and smartphones. The rare earths industry has long been dominated by China. President Trump appeared to temper his stance over the weekend, though. 

The moves: Two US-based based companies in the rare earths space, MP Materials (MP) and USA Rare Earth (USAR), both rallied more than 15% intraday and hit record highs on Friday. Both also pared their gains by the close.

The scorecard: Last week was shaping up to be a solid one for tech, with the OpenAI-Advanced Micro Devices (AMD) deal announced on Monday getting the sector off to a strong start. The Nasdaq 100 (NDX) lost ground last week, but it fell less than any other major index:

Sector returns: The strongest S&P 500 sectors last week were utilities (+1.8%), consumer staples (+0.9%), and health care (-1.6%). The weakest sectors were energy (-3.6%), real estate (-3%), and consumer discretionary (-2.8%).

Stock moves: Diginex (DGNX) +28% to $30.99 on Wednesday, Protagonist Therapeutics (PTGX) +30% to $87 on Friday. On the downside, USANA Health Sciences (USNA) -23% to $20.26 and Diginex (DGNX) -21% to $24.93, both on Friday.

Yields and the dollar: The 10-year US Treasury yield fell 0.06% to 4.06%. The US Dollar Index (DXY) rose 1.26 to 98.98.

Futures: Gold closed above $4,000 for the first time last week, and December gold futures (GCZ5) ended the week up $91.50 at $4,004.40. Crude oil reacted to Friday’s tariff news, with November WTI crude oil (CLX5) tumbling more than 4% to end the week $2.40 lower at $59.48. Biggest rallies: December palladium (PAZ5) +14.4%, November VIX (VXX5) +9.4%. Biggest declines: November orange juice (OJX5) -12.7%, October ether (ETHV5) -11.6%.

This would have been “inflation week,” featuring the last consumer price index (CPI) and producer price index (PPI) readings, but the government shutdown has delayed that data. For reference, regularly scheduled numbers that won’t be released are italicized below. The US Bureau of Labor Statistics announced the CPI will be released on Friday, October 24:

●Tuesday: NFIB Business Optimism Index, Fed Chair Powell speech
●Wednesday: Empire State Manufacturing Index, Fed Beige Book, Consumer Price Index (CPI)
●Thursday: Philadelphia Fed Manufacturing Index, NAHB Housing Market Index, Producer Price Index (PPI), retail sales
●Friday: industrial production and capacity utilization, housing starts and building permits

Earnings season begins—in earnest—this week with numbers from big banks:

●Monday: Fastenal (FAST)
●Tuesday: Blackrock (BLK), Citigroup (C), Discover Financial (DFS), Johnson & Johnson (JPM), Wells Fargo (WFC)
●Wednesday: Abbott Laboratories (ABT), Bank of America (BAC), J.B. Hunt Transport (JBHT), Morgan Stanley (MS), United Airlines (UAL)
●Thursday: Bank Of New York Mellon (BK), CSX (CSX), FNB (FNB), KeyCorp (KEY), US Bancorp (USB)
●Friday: ASML (ASML), American Express (AXP), Fifth Third Bancorp (FITB), Schlumberger (SLB)

Check the Active Trader Commentary each morning for an updated list of earnings announcements, IPOs, economic reports, and other market events.

While markets have, so far, more or less shrugged off the government shutdown, investors may start to “rethink their optimism” if it drags on too long, according to Morgan Stanley & Co. analysts.¹ The longer the closure lasts, they argue, the more risks to the economic outlook that will accumulate. Three factors they’re watching that could impact investor sentiment:

• Last Friday market the first day of missed (or downsized) paychecks for furloughed federal workers. The analysts note that spending among affected workers can drop 2%-4% during a shutdown—not huge hit to GDP, but a sign the shutdown is having effects beyond Washington, DC.

• Potential layoffs could mean “things are different this time.” The administration has suggested federal agencies may permanently cut staff, which has never occurred in previous shutdowns. Those actions, or even growing uncertainty about them, “could raise the economic stakes.”

• Real disruptions to economic activity resulting from the shutdown, such as more significant flight delays or ground halts (because of a lack of air traffic controllers) that impede economic activity, could negatively impact sentiment.

On a related note, Ellen Zentner, Chief Economic Strategist & Global Head of Thematic Investing for Morgan Stanley Wealth Management, noted on Friday that despite the delay of government economic numbers (including next week’s CPI release), the private data that has come out hasn’t suggested the labor market is falling off a cliff or inflation is surging. Given that landscape, she expects the Fed to cut interest rates another 0.25% on October 29.²

Click here to log on to your account or learn more about E*TRADE's trading platforms, or follow the Company on X (Twitter), @ETRADE, for useful trading and investing insights.

¹ MorganStanley.com. When Will the Shutdown Affect Market? 10/8/25.
² MorganStanley.com. Macro Update. 10/10/25.