Stock Market Sees Turbulence Amid Tariff Concerns

Market Update: The S&P 500 closed down 0.76% amid trade tensions. President Trump announced new tariffs heightening recession fears, but a delay on Mexican tariffs provided some recovery. Earnings reports indicate solid growth expectations. Investors remain cautious.

Date: 04-02-2025

AI Rating: 5

The report outlines several critical factors impacting the stock market. One major influence is the announcement of new tariffs by President Trump, which could significantly impact corporate earnings.

Impact of Tariffs on Earnings
Goldman Sachs warns of a potential 5% slump in US stocks due to reduced corporate earnings linked to the tariffs imposed on Canada, Mexico, and China. RBC Capital Markets estimates stock declines of 5% to 10%, which indicates that there could be a notable negative reaction in the markets as the implications of these tariffs unfold.

Economic Indicators
On a more positive note, the report highlights stronger economic indicators, with the ISM manufacturing index rising by 1.7 to 50.9, surpassing expectations. Additionally, the construction spending report showed a 0.5% month-over-month growth, also stronger than predicted. These indicators may provide some support to the market amidst the tariff concerns.

Earnings Season
As earnings season progresses, companies within the S&P 500 are expected to report a 7.5% year-over-year earnings growth for Q4, the second-highest pre-season forecast in the last three years. This growth could mitigate some of the negative sentiment resulting from the tariff announcements.

Conclusion
The mixed sentiments from the economic indicators, coupled with the negative outlook from tariffs, suggest volatility in the markets. However, the anticipated earnings growth may provide a cushion against sharp declines.

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