Weekend Update #250
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Equities were set for another weekly gain until President Trump’s Friday commentary on a trade war with China sparked a broad equity selloff. Friday’s down move erased weekly gains across major indices as investors took profits on winning positions and fear around a pullback took hold. President Trump’s Truth Social post called out China for becoming “very hostile” and stated the U.S. was preparing for a “massive increase of Tariffs on Chinese products”. Given the hostility, the president announced that he was canceling a scheduled meeting for negotiations with Chinese President Xi, adding, “There are many other countermeasures that are likewise, under serious consideration.” While the initial announcement left the tariff rate unspecified, after market close on Friday, President Trump stated the U.S. would implement an additional 100% tariff rate on China and implement export controls on critical software. This news caused an additional 60 basis point slide in the S&P 500 in after-hours trading and sets up markets for more losses on Monday morning.
In economic data for the week, the New York Fed’s Survey of Consumer Expectations showed 1-year inflation expectations rising to 3.38%, the highest since April 2025. The meeting minutes released from the FOMC’s September meeting showed committee members viewed increased risks to both inflation and the labor market, reflecting split views over the correct monetary policy action. The University of Michigan’s October Consumer Sentiment report showed no improvement from September in index levels. Buying conditions for durables dropped to the most unfavorable levels since November 2022 and consumers expecting personal job loss rose to the second-highest since July 2020, while improvements in business expectations and inflation views helped offset the index. On Friday, the Bureau of Labor Statistics announced it would publish September CPI data on October 24th, in a rare exception, while stating all other government data releases would be delayed until the end of the government shutdown.
In stock-specific news, AMD was the best weekly performer in the S&P 500, rising 30.5% after the company announced a multi-year partnership on the deployment of 6 gigawatts of AMD GPUs with OpenAI. As a part of the agreement, OpenAI can acquire 160 million shares of AMD, which is around 10% of AMD’s shares outstanding. Nvidia CEO Jensen Huang remarked on the deal, “It’s imaginative, it’s unique, and surprising.” A Wednesday report by The Information that Oracle was making a smaller gross margin on its cloud business than estimated sent ORCL shares down as much as 7.1%, adding some jitters to trading even before the China tariff news. Another important announcement came as the U.S. government entered its 10th day of the shutdown on Friday. The Director of the U.S. Office of Management and Budget, Russell Vought, announced that government layoffs had begun, leaving the number of workers to be affected by the reduction in force unspecified.
Friday’s Close (Weekly Performance)
S&P 500 6,552.51 (-2.43%)
Nasdaq 22,204.43 (-2.53%)
Dow Jones 45,479.60 (-2.73%)
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