Major US stock indices came under pressure on Friday after President Donald Trump accused China of breaching a trade agreement, raising fresh tensions in the long-standing economic dispute between the world’s two largest economies.
In a post on his Truth Social platform, Trump stated that Beijing had violated a bilateral commitment to roll back tariffs and restrictions concerning critical minerals. While he did not elaborate on the nature of the alleged breach, the message was interpreted by markets as a signal of a more confrontational stance from the White House.
The remarks weighed on investor sentiment, overshadowing otherwise favourable economic data and capping a volatile yet positive month for equities.
At mid-morning trading in New York (11:27 a.m. ET), the S&P 500 was down 8.94 points (0.15%) at 5,903.23, while the Nasdaq Composite slipped 68.34 points (0.36%) to 19,107.53. The Dow Jones Industrial Average remained broadly flat, up just 4.66 points (0.01%) to 42,220.39.
The retreat follows a series of erratic policy signals from the Trump administration throughout May. While recent weeks had seen a more conciliatory approach on tariffs, investors remain wary of sudden shifts in tone. “The predominant theme today is Trump’s Truth Social post,” said Robert Pavlik, senior portfolio manager at Dakota Wealth. “Investors are pleased with the PCE data, but it’s not really the driving force or factor behind today’s trade.”
Indeed, figures released on Friday showed US consumer spending increased only marginally in April. The personal consumption expenditures (PCE) price index rose by 2.1% on an annual basis, slightly down from 2.3% in March. The reading remains broadly aligned with the Federal Reserve’s 2% inflation target.
Despite the day’s pullback, all three major indices are on track to close the month with gains. Both the Nasdaq and S&P 500 are heading for their strongest monthly performance since November 2023, while the Dow is set to post its first monthly gain since January.
Nevertheless, investor anxiety has been heightened by uncertainty surrounding the future of US-China trade relations. Hopes for a durable resolution were dented further by the president’s statement, which included a veiled threat of renewed tariffs, although no concrete policy changes were announced.
The equities sell-off was broad-based. Seven of the S&P 500’s eleven main industry sectors traded lower, with energy and information technology registering the largest declines. High-profile technology stocks retreated, including Nvidia, which fell 2.5% after a strong rally the previous day driven by robust earnings.
A separate legal development also contributed to the market’s choppiness. On Wednesday, the US Court of International Trade blocked a majority of tariffs imposed since January. However, this was swiftly countered on Thursday when a federal appeals court reinstated most of them on a temporary basis, pending further submissions from involved parties due in early June.
Among individual stock moves, Ulta Beauty rose 11.5% after the company raised its annual profit outlook, buoyed by better-than-expected quarterly earnings. In contrast, shares in pharmaceutical group Regeneron declined nearly 20%. A late-stage trial for its experimental drug targeting chronic obstructive pulmonary disease (COPD), known informally as “smoker’s lung”, failed to meet its primary objective, although success was reported in a parallel study.
Market breadth data reflected the general bearish tone. Declining issues outnumbered advancers by a ratio of 1.36 to 1 on the NYSE and 1.47 to 1 on the Nasdaq. The S&P 500 recorded 11 new 52-week highs and two new lows, while the Nasdaq registered 35 new highs and 60 new lows.
Investor expectations for Federal Reserve policy have remained broadly steady. Despite the geopolitical noise, traders continue to anticipate a potential interest rate cut in September, especially in light of contained inflation and moderate consumer spending.
For now, attention will likely remain on developments in Washington and Beijing, with markets sensitive to any clarification or escalation from the Trump administration regarding its trade policy intentions.
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