Stocks Down Sharply After Tariff Threats to China; Bonds Gain
Good morning! All politics aside, I just wanted to express how delighted I am to see the Israeli hostages released after 2 years of captivity. I am happy for those families but saddened for those whose loved one perished.
The Dow (-2.7%), NASDAQ (-2.5%), and S&P 500 (-2.4%) all fell sharply for the week. Meanwhile taxable bonds and tax-free municipal bonds each gained about 0.3%. The 10-year Treasury yield fell 0.06% to finish the week at 4.06%.
All things were going fine until midday Friday when the markets tanked about 3% after President Trump threatened massive tariffs on China, to the tune of an additional 100% on certain items shipped to the US. That was in response to a feud between China and the US regarding China’s restrictions on the distribution of rare earth minerals. Rare earth minerals are important components for chips, phones, weapons, and many other important products used in the U.S.
As for economic data, there was none reported last week because of the government shutdown. However, the Fed meeting minutes (from their late September meeting) were released and demonstrated that most committee members were in favor of two additional rate cuts through the end of 2025. As for the government shutdown, it is now entering its third week, with no sign of a budget deal being reached in Congress. However, President Trump was able to “find” funding for the military personnel in time for their October 15 paychecks.
We are now set to begin corporate earnings season this week which will start with the big banks. All eyes will be on corporate earnings to see if and how much tariffs have impacted corporate earnings. See below for a chart reflecting the incredible earnings growth of the tech sector compared to other sectors of the economy. More importantly, investors and economists will also be listening closely to corporations’ outlook for consumer spending in the coming quarter, which represents the holiday shopping season.
Please note that we just filmed two episodes of our Podcast / YouTube videos regarding the economy with Brad Sorensen, CFA, and they will be airing this Wednesday and next Wednesday. Those videos can be found on our website, as well as iTunes, Spotify, and YouTube. Search for the title, “Financial Planning: Explained”.
Have a great day and terrific week!
Source: Yahoo Finance
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The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. Government bonds and Treasury bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.
