Wall Street ended the week with a more cautious note, with actions and bonds fluctuating while the two largest economies in the world are preparing to start their commercial negotiations.
Investors refrained from carrying out risky bets on the speculation that, although conversations between Chinese and American officials They could represent a diplomatic inflection point, an integral commitment would only be completed after several rounds of negotiations.
After a rapid increase of US $ 6 billion in the S&P 500 after being at the edge of a bearish market, the activity has been more moderate in recent days. The indicator closed practically unchanged on Friday.
Merchants from around the world have been eager to see any indication of relief in the tariff war that has shaken the markets and increased the risk of a global economic recession. President Donald Trump proposed an 80% tariff to China before the negotiations that will begin on Saturday, urging the country to intensify the opening of their markets to American products.
“The events of this weekend will probably be binary for markets, but do not expect a rapid resolution of commercial tensions between the US and China for now,” said José Torres de Interactive Brokers. “I anticipate many ups and downs in the future, since Washington and Beijing try to reach an agreement, while seeking to ensure their own economic interests.”
The Trump team has established a list of approximately 20 partners as the focus of the first negotiations, according to sources close to the matter. The group includes countries such as Japan, South Korea and Vietnam, all important sources of American imports, and Trump seeks to reduce the commercial deficit. It also includes relatively minor partners such as Fiyi, Lesoto and Mauricio.
“The markets continue to react to the holders on the market,” Mark Hackett of Nationwide affirmed. “We are probably in a period of lateral volatility until we start to obtain tangible and calculable results. No one knows the final result, so it is time to stay informed and alert, but not reactive or emotional”
The Nasdaq 100 recorded few changes. The industrial average Dow Jones fell 0.3%. On the other side of the Atlantic, the Dax index of Germany became the first important European indicator to overcome its maximum of March, thus recovering all the falls caused by Trump’s commercial war.
The 10 -year Treasury bond performance was practically unchanged at 4.38%. The Bloomberg Dollar Spot index lost 0.2%, registering its best week since March.
Billionaire Barry Sternlicht said the economy will probably weaken despite the fact that the stock market has recovered from the important tariff announcement of Trump in early April.
“The markets have been recovered, surprisingly, to maximum prior to the day of liberation, but that does not seem good to me,” said Sternicht Friday at a telephone conference on Starwood Property Trust results, where he is president and executive director. “Aspects such as trips are clearly outdated.”
With the conversations between the United States and China about to begin, billions of dollars hang from a thread for US companies. The average S&P 500 member obtained 6.1% of its income from the sale of products in China or Chinese companies in 2024, According to an analysis by Gina Martin Adams and Gillian Wolff by Bloomberg Intelligence.
“The conclusion is that if the United States has to be completely disconnected from China, The result would be a significant decrease in the profits of the companies of the S&P 500 that no longer sell products to Chinese consumers ”, Torsten Slok, Apollo chief economist, wrote.
Meanwhile, a stock market indicator has entered a phase historically associated with the worst return prospects for S&P 500 after commercial fears seized financial markets and tarnished the growth prospects for the profits of US companies.
The Action Market Regime model, a Bloomberg Intelligence model that tracks the reference stock market indicator and groups the periods in three phases: accelerated growth (green), moderate growth (yellow) and decline (red), stood in the red caution zone in March and April, according to data collected by ADAMS and Wolff of Bi. The previous seven cases have been associated with an average drop of 5.6% in the S&P 500 in the next 12 months.
The discussions between bullish and bassists are still intense, with rational arguments on both sides, according to Nationwide Hackett.
Optimists argue that maximum uncertainty has already been left behind in the market, which is corroborated by the improvement of commercial dynamics, the solid prices action and profits better than expected. The bearish scenario highlights the obstacles facing the economic impulse and profits in the next quarters, with the downward earnings estimates.
In the absence of relevant economic data on Friday, investors analyzed a series of comments from the Central Bank officials.
The governor of the Federal Reserve, Adriana Kugler, said that the authorities should maintain interest rates for now, in a stable economy context and tariff uncertainty. His colleague, Michael Barr, warned that commercial policies could put the Fed in a difficult situation by generating inflationary pressures and greater unemployment. The president of the Richmond Federal Reserve Bank, Tom Barkin, said that not all companies can raise prices due to tariffs.
