Stocks Halt Rally Amid Lingering Trade-War Risks: Markets Wrap

Stocks

Economic

Summary:

U.S. stocks paused their rally as Trump’s tariff threats reignited trade-war fears. Despite strong services data, markets slipped, while investors eye the Fed’s decision and corporate earnings for direction.

A historic stock-market run came to a halt as President Donald Trump’s latest tariff remarks provided little relief to investors bracing for the impacts of his trade war on the economy and corporate earnings.

Not even data showing a pick-up in growth at US service providers was able to buoy sentiment, with the S&P 500 halting its longest advance in about 20 years. While Trump suggested some trade deals could come as soon as this week, he signaled no imminent accord with China. As the president extended his restrictive policies on US imports to the entertainment sector, shares of companies like Netflix Inc. and Walt Disney Co. fell.

Recent economic data seems to have assuaged market concerns of a recession, but the outcome of Trump’s tariff war has yet to be felt. For several market observers, tariffs will eventually slow the US economy as supply chains are upended and consumer confidence tumbles, with the increases in levies possibly delivering at least a temporary inflation shock.

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“The S&P 500 erased the tariff selloff with one of its strongest bursts of short-term momentum of the past 20 years, but it remains to be seen whether that can translate into a fresh bull market,” said Chris Larkin at E*Trade from Morgan Stanley.

Attention will soon shift to this week’s Federal Reserve decision after bond traders dialed back rate-cut bets that had steadily mounted as Trump’s trade war unleashed havoc in financial markets.

As long as the labor market holds firm, the central bank can more easily justify the standing pat. While Jerome Powell and his colleagues would typically welcome the latest inflation cooling, higher US duties on imports risk upending the progress on that front.

The S&P 500 fell 0.7%. The Nasdaq 100 slid 0.9%. The Dow Jones Industrial Average slipped 0.2%. The yield on 10-year Treasuries rose four basis points to 4.35%. The Bloomberg Dollar Spot Index fell 0.3%.

Oil slipped as OPEC+ agreed to a bumper output increase. Taiwan’s dollar surged the most since 1988 on bets authorities might allow it to appreciate to help reach a trade deal with the US.

Corporate Highlights:

Palantir Technologies Inc. investors have been betting that the results coming after the markets close on Monday will be another blowout, but the recent run up has given the stock a high bar to clear.

Berkshire Hathaway Inc. followed Chief Executive Officer Warren Buffett’s recommendation, naming Vice Chairman Greg Abel to replace the billionaire as CEO, effective Jan. 1.

Tyson Foods Inc.’s earnings jumped more than expected as increased profits from chicken sales outweighed another quarter of losses at the company’s beef business.

Shell Plc is working with advisers to evaluate a potential acquisition of BP Plc, though it’s waiting for further stock and oil price declines before deciding whether to pursue a bid, according to people familiar with the matter.

Sunoco LP agreed to acquire Parkland Corp., one of the largest owners of gas stations in Canada, for about $9.1 billion including debt.

Investment firm 3G Capital will acquire footwear maker Skechers USA Inc. for $9.4 billion.

Some of the main moves in markets:

Stocks

The S&P 500 fell 0.7% as of 10:36 a.m. New York time

The Nasdaq 100 fell 0.9%

The Dow Jones Industrial Average fell 0.2%

The Stoxx Europe 600 rose 0.2%

The MSCI World Index fell 0.5%

Bloomberg Magnificent 7 Total Return Index fell 1.5%

The Russell 2000 Index fell 0.5%

Currencies

The Bloomberg Dollar Spot Index fell 0.3%

The euro rose 0.3% to $1.1333

The British pound rose 0.2% to $1.3303

The Japanese yen rose 0.8% to 143.83 per dollar

Cryptocurrencies

Bitcoin fell 2.1% to $93,761.67

Ether fell 2% to $1,800.23

Bonds

The yield on 10-year Treasuries advanced four basis points to 4.35%

Germany’s 10-year yield was little changed at 2.53%

Britain’s 10-year yield advanced three basis points to 4.51%

Commodities

West Texas Intermediate crude fell 2.6% to $56.78 a barrel

Spot gold rose 2.3% to $3,313.54 an ounce

Source: Bloomberg

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Damon

Economic

The ISM Services increased 0.8 points to 51.6 in April, beating expectations of a small decline. Eleven of eighteen industries reported growth in April, up from ten in March, though still below the 14 reporting expansion in January and February.

Business activity declined, falling 2.2 points to 53.7. New orders increased to 52.3, ending a streak of monthly declines and reversing a particularly weak reading (50.4) last month. The imports index registered a large decline (-8.3), falling to 44.3 and sending the sub-index into contractionary territory.

The employment index increased to 49.0 but remains in contractionary territory, suggesting services payrolls continued to decline in April. However, the employment index has signaled contraction several times since early 2024, while the labor market continued to expand.

The prices paid sub-component jumped up to 65.1 from 60.9 April, suggesting price pressures are heating up in the service sector.

Key Implications

The service sector expanded in April, but the details are less encouraging. While the overall index improved, business activity declined and it looks as though the service sector is feeling the effects of tariffs coming into place in April, cutting activity and imports at the same time.

Most respondents in this survey reported challenges to their operations and pricing from tariffs. The combination of areas which registered gains (new export orders, inventories, and prices) is indicative of businesses trying to get ahead of retaliatory tariffs or other policy changes and could foreshadow a deeper decline in the coming months. More importantly, the sharp increase in prices, coupled with the decline in activity, suggests the service sector could also be moving towards stagflation, something we have already seen in manufacturing.

Source: ACTIONFOREX

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Risk Warnings and Disclaimers

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Warren Takunda

Cryptocurrency

Key takeaways:

XRP forms a bearish descending triangle on the daily chart, risking a 45% drop to $1.20.

Declining daily active addresses signal reduced transaction activity and liquidity.

A breakout above $2.18 could invalidate the bearish pattern.

The XRP price flashes warning signs as a bearish technical pattern emerges on its daily chart, coinciding with declining network activity.

XRP descending triangle hints at 45% price drop

The XRP price chart has been forming a descending triangle pattern on its daily chart since its late 2024 rally, characterized by a flat support level and a downward-sloping resistance line.

A descending triangle chart pattern that forms after a strong uptrend is seen as a bearish reversal indicator. As a rule, the setup resolves when the price breaks below the flat support level and falls by as much as the triangle’s maximum height. XRP Price Risks 45% Decline to $1.20 — Here’s Why_1

XRP Price Risks 45% Decline to $1.20 — Here’s Why_1

XRP/USD daily chart. Source: Cointelegraph/TradingView

The bulls are struggling to keep XRP above the 50-day simple moving average (SMA), currently at $2.18, signaling a lack of strength.

If this trend continues, a close below the moving averages, namely the 50-day SMA and the 100-day SMA at $2.06, could sink the XRP/USDT pair to the psychological support level at $2.00.

If this support fails, XRP price could tumble toward the downside target at around $1.20 by the end of May, down 45% from current price levels.

XRP’s descending triangle target echoes an earlier analysis that warned of a possible decline to as low as $1.61 if key support levels didn’t hold.

Conversely, a clear breakout above the triangle’s resistance line at $2.18 would invalidate the bearish structure, putting XRP in a good position to rally toward the $3.00 psychological level.

Declining XRP network activity

The XRP Ledger has experienced a significant drop in network activity compared to Q1 2025. Onchain data from Glassnode shows that the network’s daily active addresses (DAAs) are now far below March’s peak.

On March 19, the ledger recorded a robust 608,000 DAAs, reflecting high user engagement and transaction activity. However, this metric crashed in April and early May, as shown in the chart below.

With only around 30,000 daily active addresses, user transactions have decreased, possibly signaling reduced interest or a lack of confidence in XRP’s near-term outlook. XRP Price Risks 45% Decline to $1.20 — Here’s Why_2

XRP Price Risks 45% Decline to $1.20 — Here’s Why_2

XRP Daily Active Addresses. Source: Glassnode

Historically, declines in network activity typically signal upcoming price stagnation or drops, as lower transaction volume reduces liquidity and buying pressure.

Meanwhile, XRP’s 1.17% drop over the last 24 hours is accompanied by a 30% increase in daily trading volume to $2 billion. Trading volume increases amid a price decline can be interpreted as profit-taking or repositioning by crypto traders as they wait for XRP’s next move.

Analyst Dom commented on the increased selling volume, pointing out that “a large amount of market selling over the last week” is why XRP failed to sustain upward moves. XRP Price Risks 45% Decline to $1.20 — Here’s Why_3

XRP Price Risks 45% Decline to $1.20 — Here’s Why_3

Source: Dom

Source: Cointelegraph

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Blue River

Technical Analysis

AUDUSD technicals

The AUDUSD is surging higher today and has convincingly broken above its 200-day moving average at 0.6461—a key technical milestone. On Friday, the pair briefly traded above this level for the first time since November 8, 2024, but bullish momentum faded, and the price settled back into a familiar swing area between 0.6427 and 0.6441. The Friday close landed near the upper end of that zone at 0.6441.

In early Asian trading today, the low dipped to 0.64337, within that same swing zone, before buyers stepped back in. The price reclaimed the 200-day MA, briefly pulled back to retest it, then based and pushed to a fresh session high at 0.6493.

With the pair now holding above the 200-day MA for a sustained period, 0.6461 becomes a key bias-defining support level. As long as the price remains above, the upside bias stays intact. Sellers gain no technical traction unless price breaks back below that level.

On the daily chart, the next upside target lies at the November 29 swing high of 0.65277, followed by the 61.8% retracement and high from November 25 at 0.6549 (see the chart below).

AUDUSD technicals

Source: ForexLive

Risk Warnings and Disclaimers

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Michelle

Political

Israel may seize the Gaza Strip and control aid in an expanded offensive against Palestinian militant group Hamas that was approved by Prime Minister Benjamin Netanyahu's security cabinet on Monday, officials said.

An Israeli defence official said it would not be launched before U.S. President Donald Trump concludes his visit next week to the Middle East.

The decision, after weeks of faltering efforts to agree a ceasefire with Hamas, underlines the threat that a war heaping international pressure on Israel amid dwindling public support at home could continue with no end in sight.

A government spokesman told journalists online that reserve soldiers were being called up to expand operations in Gaza, not to occupy it.

A report by Israel's public broadcaster Kan, citing officials with knowledge of the details, said the new plan was gradual and would take months, with forces focusing first on one area of the battered enclave.

Israeli troops have already taken over an area amounting to around a third of the Gaza Strip, displacing the population and building watchtowers and surveillance posts on cleared ground the military has described as security zones, but the new plan would go further.

One Israeli government official said the newly approved offensive would seize the entire territory of the Gaza Strip, move its civilian population southward and keep humanitarian aid from falling into Hamas hands.

The defence official said aid distribution, which has been handled by international aid groups and U.N. organizations, would be transferred to private companies and handed out in the southern area of Rafah once the offensive begins.

The Israeli military, which throughout the war has shown little appetite for occupying Gaza, declined to comment on the remarks by government officials and politicians.

Israel resumed its offensive in March after the collapse of a U.S.-backed ceasefire that had halted fighting for two months. It has since imposed a blockade of aid into the enclave, drawing warnings from the United Nations and international organizations that the 2.3 million population faces imminent famine.

The Israeli defence official said that Israel would hold on to security zones seized along the Gaza perimeter because they were vital for protecting Israeli communities around the enclave.

But he said there was a "window of opportunity" for a ceasefire and hostage release deal during a visit by Trump to the region next week.

"If there is no hostage deal, Operation "Gideon Chariots" will begin with great intensity and will not stop until all its goals are achieved," he said.

Hamas official Mahmoud Mardawi rejected what he called "pressure and blackmail".

"No deal except a comprehensive one, which includes a complete ceasefire, full withdrawal from Gaza, reconstruction of the Gaza Strip, and the release of all prisoners from both sides," he said.

'OCCUPATION'

Israel has yet to present a clear vision for post-war Gaza after a campaign that has displaced most of Gaza's population and left it depending on aid supplies that have been dwindling rapidly since the blockade.

Ministers have said that aid distribution cannot be left to international organizations which it accuses of allowing Hamas to seize supplies intended for the civilian population.

Instead, officials have looked at plans for private contractors to handle distribution, through what the United Nations has described as Israeli hubs.

On Monday, Jan Egeland, Secretary-General of the Norwegian Refugee Council, said on X that Israel was demanding that the U.N. and non-governmental organisations shut down their aid distribution system in Gaza.

However, the decision to expand the operation was immediately hailed by Israeli government hardliners who have long pressed for a full takeover of the Gaza Strip by Israel and a permanent displacement of the population, along the line of the "Riviera" plans outlined by Trump in February.

"We are finally going to conquer Gaza. We are no longer afraid of the word 'occupation'," Finance Minister Bezalel Smotrich told a pro-settler conference in an online discussion.

However, with Israel facing threats from the Iranian-backed Houthis in Yemen, who on Sunday fired a missile that hit close to Ben Gurion Airport, an unstable Syria next door and a volatile situation in the occupied West Bank, the capacity for prolonged military operations faces constraints.

Israel's Chief of Staff Lieutenant General Eyal Zamir said on Sunday that the military has already begun issuing tens of thousands of call-up orders for its reserve forces, looking to expand the Gaza campaign.

Zamir, who took office in March, has pushed back against calls by government hardliners who want to choke off aid entirely and has told ministers aid must be let in soon, according to Kan.

The war was triggered by the Hamas October 7, 2023 attack on Israel that killed 1,200 people, mostly civilians, according to Israeli tallies, and saw 251 taken hostage into Gaza in the deadliest day for Israel in its history.

Israel's ground and air campaign in Gaza has since killed more than 52,000 Palestinians, most of them civilians according to local health authorities, and left much of Gaza in ruins.

Up to 24 of the 59 hostages still held in Gaza are believed to be alive. Families fear that the fighting will endanger their loved ones while critics say Israel risks being drawn into a long guerrilla war with limited gains and no clear strategy.

Successive surveys have shown dwindling public support for the war among Israelis, many of whom prefer to see a ceasefire deal reached and more hostages released.

Source: Reuters

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Warren Takunda

Economic

The Federal Reserve will likely keep its key short-term interest rate unchanged on Wednesday, despite weeks of harsh criticism and demands from President Donald Trump that the Fed reduce borrowing costs.

After causing a sharp drop in financial markets two weeks ago by saying he could fire Fed Chair Jerome Powell, Trump subsequently backed off and said he had no intention of doing so. Still, he and Treasury Secretary Scott Bessent have said the Fed should cut rates.

They argue that inflation has steadily cooled and high borrowing costs are no longer needed to restrain price increases. The Fed sharply ramped up its short-term rate in 2022 and 2023 as pandemic-era inflation spiked.

Separately, Elon Musk, the head of Trump’s Department of Government Efficiency, last Wednesday suggested that DOGE should look more closely at the Fed’s spending on its facilities.

The heightened scrutiny shows that even as the Trump administration backs off its threats to fire Powell, the Fed is still subject to unusually sharp political pressures, despite its status as an independent agency.

Even so, the Fed will almost certainly leave its key rate unchanged at about 4.3% when it meets Tuesday and Wednesday. Powell and many of the other 18 officials that sit on the Fed’s rate-setting committee have said they want to see how Trump’s tariffs affect the economy before making any moves.

Trump, however, on Friday said on the social media platform Truth Social that there is “NO INFLATION” and claimed that grocery and egg prices have fallen, and that gas has dropped to $1.98 a gallon.

That’s not entirely true: Grocery prices have jumped 0.5% in two of the past three months and are up 2.4% from a year ago. Gas and oil prices have declined — gas costs are down 10% from a year ago — continuing a longer-running trend that has continued in part because of fears the economy will weaken. Still, AAA says gas prices nationwide average $3.18 a gallon.

Inflation did drop noticeably in March, an encouraging sign, though in the first three months of the year it was 3.6%, according to the Fed’s preferred gauge, well above its 2% target.

Without tariffs, economists say it’s possible the Fed would soon reduce its benchmark rate, because it is currently at a level intended to slow borrowing and spending and cool inflation. Yet the Fed can’t now cut rates with Trump’s broad tariffs likely to raise prices in the coming months.

Vincent Reinhart, chief economist at BNY, said that the Fed is “scarred” by what happened in 2021, when prices rose amid supply snarls and Powell and other Fed officials said the increase would likely be “transitory.” Instead, inflation soared to a peak of 9.1% in June 2022.

This time they will be more cautious, he said.

“That’s a Fed that is going to have to wait for evidence and be slow to adjust on that evidence,” Reinhart said.

Plus, Trump’s badgering of Powell makes it harder for the Fed chair to cut rates because doing so anytime soon would be seen as knuckling under to the White House, said Preston Mui, an economist at Employ America.

“You could imagine a world where there isn’t pressure from the Trump administration and they cut rates ... sooner, because they feel comfortable making the argument that they’re doing so because of the data,” he said.

For his part, Powell said last month that tariffs would likely push up inflation and slow the economy, a tricky combination for the Fed. The central bank would typically raise rates — or at least keep them elevated — to fight inflation, while it would cut them to spur the economy if unemployment rose.

Powell has said that the impact of the tariffs on inflation could be temporary — a one-time price increase — but most recently said it “could also be more persistent.” That suggests that Powell will want to wait, potentially for months, to ensure tariffs don’t sustainably raise inflation before considering a rate cut.

Some economists forecast the Fed won’t cut rates until its September meeting, or even later.

Yet Fed officials could move sooner if the tariffs hit the economy hard enough to cause layoffs and push up unemployment. Wall Street investors appear to expect such an outcome — they project that the first cut will occur in July, according to futures pricing.

Separately, Musk criticized the Fed Wednesday for spending $2.5 billion on an extensive renovation of two of its buildings in Washington, D.C.

“Since at the end of the day, this is all taxpayer money, we should certainly look to see if indeed the Federal Reserve is spending $2.5 billion on their interior designer,” Musk said. “That’s an eyebrow raiser.”

Fed officials acknowledge that the cost of the renovations have risen as prices for building materials and labor have spiked amid the post-pandemic inflation. And former Fed officials, speaking on background, say that local regulations forced the Fed to do more of the expansion underground, rather than making the buildings taller, which added to the cost.

Meanwhile, Kevin Warsh, a former Fed governor and a potential candidate to replace Powell as chair when Powell’s term expires next year, said recently that the Fed has attracted greater scrutiny because of its failure to keep prices in check.

“The Fed’s current wounds are largely self-inflicted,” he said in a speech during an International Monetary Fund conference in late April, in which he also slammed the Fed for participating in a global forum on climate change. “A strategic reset is necessary to mitigate losses of credibility, changes in standing, and most important, worse economic outcomes for our fellow citizens.”

Powell, for his part, said last month that “Fed independence is very widely understood and supported in Washington, in Congress, where it really matters.”

Source: AP

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Natalie Gordon

Economic

Forex

The Institute of Supply Management (ISM) Non-Manufacturing Purchasing Managers’ Index (PMI) reported an unexpected rise in the non-manufacturing sector, indicating an expansion in the economy. The actual index value was reported at 51.6, surpassing forecasted and previous values.

The actual PMI figure of 51.6 outperformed the forecasted figure of 50.2. This indicates a more robust expansion in the non-manufacturing sector than analysts had predicted. The index, a composite measure of business activity, new orders, employment, and supplier deliveries, reflects the overall health of the non-manufacturing sector. A reading above 50 suggests expansion, while a figure below 50 indicates contraction.

In comparison to the previous month, the current ISM Non-Manufacturing PMI also shows an improvement. The previous month’s index was reported at 50.8, meaning that the non-manufacturing sector has seen a stronger expansion this month. This improvement is a positive sign for the U.S. economy, as the non-manufacturing sector represents a significant portion of the country’s GDP.

The data for the ISM Non-Manufacturing PMI is compiled from monthly responses to questions asked of more than 370 purchasing and supply executives in over 62 different industries. These industries span nine divisions from the Standard Industrial Classification (SIC) categories, providing a comprehensive view of the non-manufacturing sector’s performance.

The unexpected rise in the ISM Non-Manufacturing PMI is a positive sign for the USD. Higher than expected readings are generally taken as bullish for the USD, as they suggest a stronger economy. Conversely, lower than expected readings are seen as bearish for the USD, indicating a weaker economy. This month’s higher than expected PMI figure suggests that the non-manufacturing sector, and by extension the U.S. economy, is in a stronger position than previously thought.