Profit Insights

**Financial Markets Rattled by Renewed Trade War Fears on Friday, May 23, 2025**

Financial markets experienced a downturn on Friday, May 23, 2025, as concerns over a potential resurgence in trade wars were reignited by new tariff threats from former U.S. President Donald Trump. These concerns overshadowed other market factors and led to a negative close for major U.S. stock indices, which also posted losses for the week.

**Key Market Movements:**

* **U.S. Stocks Declined:** The Dow Jones Industrial Average fell by 0.6%, the S&P 500 dropped 0.7%, and the Nasdaq Composite saw a 1% decrease. This marked the S&P 500's worst week in seven. For the week, the S&P 500 was down 2.6%, the Dow lost 2.5%, and the Nasdaq also fell 2.5%. Year-to-date, the S&P 500 is down 1.3%, the Dow is off 2.2%, and the Nasdaq has declined 3%.
* **Tariff Threats Impact Specific Stocks:** Apple (AAPL) shares dropped after Trump threatened a 25% tariff on iPhones manufactured outside the U.S. Several other mega-cap technology stocks, including Microsoft (MSFT), Nvidia (NVDA), Amazon (AMZN), Alphabet (GOOG), and Meta Platforms (META), also declined.
* **European Markets Hit Harder:** European stock markets reacted more sharply to Trump's suggestion of a 50% tariff on EU goods, with the Euro Stoxx 50 initially dropping 2.5% before finishing the session 1% lower. Export-sensitive sectors like automakers and luxury goods were particularly affected. However, some analysts noted that European economic sentiment hasn't collapsed and that first-quarter earnings for European companies were robust.
* **Safe Havens Gained:** Gold futures rose 1.9% to $3,360 an ounce as investors sought safety amidst the equity downturn.
* **Bond Yields Fell:** The yield on the 10-year U.S. Treasury note, a key benchmark for borrowing costs, decreased to 4.51%.
* **Dollar Weakened:** The U.S. dollar index fell 0.9% to its lowest level of the month. The British pound showed resilience, driven more by a faltering U.S. dollar than sterling strength. Asian currencies generally found support in a weaker U.S. dollar.
* **Indian Markets Rebounded:** In contrast to global trends, Indian benchmark indices, the Sensex and Nifty, rallied nearly 1%, buoyed by strong buying in heavyweight stocks like Reliance Industries and HDFC Bank. The Indian rupee also rebounded against the U.S. dollar.

**Company Earnings and Corporate News:**

* A number of companies reported quarterly results. Shares of Deckers Outdoor (DECK) and Ross Stores (ROST) fell after they opted not to provide full-year guidance, citing tariff uncertainties.
* Intuit (INTU) shares surged after the company reported strong earnings and a positive outlook.
* Workday (WDAY) shares declined despite exceeding analysts' estimates in its quarterly results.
* United States Steel (X) shares jumped significantly after former President Trump voiced approval for a "partnership" with Japan's Nippon Steel.
* Several Indian companies, including JSW Steel and Glenmark Pharmaceuticals, were scheduled to announce their Q4 financial results.
* Booz Allen Hamilton Holding Corporation (BAH) and Frontline Plc (FRO) were expected to report earnings prior to market open.
* Analysts are generally forecasting a slowdown in earnings growth for both Canadian and U.S. companies for the rest of the year due to ongoing uncertainties. For the first quarter of 2025, S&P 500 earnings were expected to be up 14.0% year-over-year (16.0% excluding the energy sector), with 76.1% of companies that had reported so far beating analyst estimates.

**Economic Indicators:**

* **U.S. Economic Data:**
* The Conference Board's Leading Economic Index (LEI) fell sharply by 1.0% in April, its largest monthly decline in over two years.
* New single-family home sales rose by 10.9% in April to their highest pace in three years, while existing home sales continued to decline.
* The S&P Global US Composite PMI rose in May, indicating modest growth, but business optimism remained subdued due to tariff concerns.
* U.S. initial jobless claims decreased slightly for the week ending May 17.
* The U.S. economy contracted at an annualized rate of 0.3% in the first quarter of 2025, partly due to a surge in imports ahead of anticipated tariff hikes.
* Gallup's U.S. Economic Confidence Index remained negative in May at -18, though it reflected a gradual recovery from a sharp drop in 2022.
* **German GDP:** Germany's gross domestic product (GDP) rose by 0.4% in the first quarter of 2025 compared to the previous quarter (price, seasonally, and calendar adjusted). This was a slight upward revision from the initial estimate, attributed to surprisingly good economic development in March, particularly in manufacturing output and exports.
* **Japanese Inflation:** Japan's core consumer price index (CPI) rose to 3.5% year-over-year in April, its fastest annual pace in over two years, increasing expectations for a Bank of Japan rate hike.
* **UK Retail Sales:** UK retail sales were stronger than expected.
* **Canadian Economic Outlook:** GDP growth forecasts for Canada in 2025 have been trimmed. Statistics Canada reported a 0.8% rise in retail sales for March.

**Financial Trends and Analysis:**

* The renewed tariff threats revived concerns about the unpredictable nature of trade policy and its potential impact on economic growth and corporate profits.
* Analysts noted that while tariff and trade-related risks have diminished somewhat with recent agreements (like a U.S.-China tariff reduction), they have not disappeared, and the unpredictability of U.S. trade policy continues to weigh on business confidence.
* There are concerns that rising U.S. fiscal deficits, potentially exacerbated by new tax bills, could continue to affect bond markets.
* Some market commentary suggested that despite tariff concerns, there might be reasons to be cautiously optimistic about European stocks, citing robust Q1 earnings and the possibility that tariffs could impact the U.S. more than Europe.

**Commodities:**

* Gold prices increased, acting as a safe-haven asset.
* Platinum and palladium prices also saw gains during the week.
* Crude oil prices were reported with mixed movements across different sources, with some indicating a slight decrease.
* In agricultural commodities, wheat and corn contracts saw gains, while the soybean complex showed mixed results.

**Looking Ahead:**

Investors will be closely watching for further developments in trade policy and the release of upcoming economic data, including revised U.S. GDP figures, PCE inflation data, and NBS PMI from mainland China. The minutes from the U.S. Federal Open Market Committee (FOMC) will also be scrutinized for insights into potential future interest rate decisions.