Floundering Stocks as Trump Tariffs Threaten to Cap Gains

U.S. stock futures lost momentum after President Donald Trump criticized Federal Reserve Chair Jerome Powell for not acting quickly enough on interest rate cuts.

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S&P 500 futures, which had been gaining earlier, were only up 0.5%, retreating from their peak as investor sentiment soured, especially due to a sharp decline in health insurance stocks. Nasdaq 100 futures fared better, climbing 0.9%, largely thanks to an encouraging sales forecast from Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest contract chipmaker.

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Futures were initially lifted by encouraging signals from the early stages of U.S.-Japan trade negotiations, which raised hopes that further tariffs on American trade partners could be avoided.

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However, that optimism was partially offset by Trump’s latest outburst aimed at Powell. The president took to Truth Social to express his frustration, saying Powell “can’t be terminated fast enough” and labeling the Fed chair as “always TOO LATE AND WRONG” for not already lowering interest rates this year.

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Meanwhile, in the bond market, U.S. Treasuries cut earlier losses after a batch of mixed economic data. Weekly jobless claims fell to their lowest point in two months, indicating a still-resilient labor market. But the Philadelphia Fed Index, a key regional manufacturing gauge, posted a steep drop and came in below all economist forecasts — a possible sign of deeper weakness in the industrial sector. As investors digested this mixed data, the U.S. dollar edged up slightly.

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Since the shock of earlier announcements about sweeping U.S. tariffs, market watchers have shifted focus toward more specific trade talks, particularly those involving major economies like China and Japan. On Wednesday, China outlined several conditions it wants met before resuming discussions with the Trump administration, adding another layer of uncertainty to the global trade landscape.

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Across the Atlantic, the European Central Bank (ECB) moved in line with expectations, lowering its deposit rate by a quarter-point to 2.25%. This marked the seventh rate cut since June of the previous year, as European policymakers attempt to cushion their economy from the effects of global trade tensions.

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Following the decision, short-term German bonds trimmed earlier losses after the ECB dropped the word “restrictive” from its policy statement, signaling a potentially more accommodative stance moving forward. The euro, however, remained under pressure.

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On the previous day, Powell indicated a more cautious stance regarding trade developments, particularly tariffs. He pushed back on the notion that the Fed would rush into rate cuts to calm the markets. His more measured tone and concerns about the tech sector’s vulnerability to trade issues helped bring an end to a short-lived rally in equities.

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Enguerrand Artaz, a fund manager at La Financière de l’Echiquier, explained that the Fed is unlikely to intervene unless there's a clear risk of financial instability. “Markets going down is not a sufficient reason to act, especially when valuations are still high,” he noted.

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In corporate news, UnitedHealth Group Inc. took a massive hit in premarket trading, plummeting 21% after reporting disappointing first-quarter earnings and revising its full-year profit forecast downward. The news dragged other health insurance stocks lower, compounding the sector’s woes and dampening overall market enthusiasm.

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On a brighter note, TSMC’s shares rose after the chipmaker — a key supplier for Nvidia and Apple — projected stronger-than-expected sales for the second quarter. The company also reaffirmed its growth forecast for 2025, citing expectations that revenue from artificial intelligence applications will double.

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Eli Lilly & Co. also provided a lift to the healthcare sector, with shares surging on promising data from a study of a new weight-loss pill, suggesting potential future growth in that product category.

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On the trade front, the U.S. and Japan began formal negotiations, aiming to finalize a deal soon. Japan’s top negotiator, Ryosei Akazawa, confirmed preparations for a second round of talks later in the month.

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Many countries are now racing to reach trade agreements with the U.S. to avoid new import tariffs. Trump had temporarily suspended sweeping levies on about 60 trading partners — including a 24% tariff on Japanese imports — though existing duties remain in place, including 10% on a range of goods and 25% on cars, steel, and aluminum.

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Rajeev De Mello, a global macro manager at Gama Asset Management, noted that the outcome of U.S.-Japan trade talks could serve as a model for future American negotiations with other allies.

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In the commodities market, gold initially hit a new record high as demand for safe-haven assets surged, but prices later pulled back as market sentiment improved. Oil extended its gains for a second straight day after the U.S. reaffirmed its push to reduce Iran’s energy exports to zero.

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