Stock Market Meltdown: Is it Already Over or Just Getting Started?
Stock Market Meltdown: Is it Already Over or Just Getting Started?
By:Ilya Spivak
The markets melted down, then came roaring back as the US and China sparred on trade. Now what?
- Global markets swung wildly as the US-China trade war took the spotlight
- A speech from Chair Powell is eyed as traders and the Fed clash on rate cuts
- Financial names are in focus as the Q3 earnings reporting season heats up
Another head-spinning reversal sent US stock markets lower Friday after a push to record highs a mere 24 hours earlier. The bellwether S&P 500 plunged 2.71% while the tech-tilted Nasdaq 100 lost 3.53%. These moves amounted to the biggest one-day losses for the two leading Wall Street benchmarks in six months.
The bloodletting pulled down Treasury yields as bonds roared higher, seemingly reclaiming their appeal as a haven in troubled times. Crude oil prices also fell, although it is difficult to unpick how much of that move owed to broader risk aversion, and how much reflected easing supply disruption fears after Israel and Hamas agreed to a ceasefire.
Stocks seesaw as the US-China trade war leaps back into the headlines
The selloff followed after US President Donald Trump appeared to signal escalation of the trade war with China. He slammed Beijing’s move to deploy export controls on rare earth minerals, threatening to impose an additional 100% tariff on Chinese imports and seemingly cancelling an upcoming meeting with President Xi Jinping in South Korea.
Sentiment seesawed again as markets reopened this week. Stocks roared higher, erasing more than half of Friday’s losses. That followed a somewhat softer tone from Mr. Trump over the weekend. “Don’t worry about China, it will all be fine,” he urged in a Truth Social post, adding that “highly respected” President Xi just had a “bad moment”.
US Treasury Secretary Scott Bessent tried to help calm the markets’ nerves. He said that new tariffs against China will not go into effect until November 1, leaving room for a direct resolution between Trump and Xi later this month. “I believe [their meeting during the Asia-Pacific Economic Cooperation forum] will still be on,” he said.
Fed Chair Powell speech, Q3 earnings calendar in focus amid government shutdown
This leaves traders without much to go on in the meantime. The ongoing US government shutdown has stripped the calendar of top-tier economic data releases. That puts the spotlight on a speech from Federal Reserve Chair Jerome Powell, as well as the start of the third quarter corporate earnings reporting season.
Mr. Powell is due to give an update on outlook for the economy and monetary policy at the National Association for Business Economics (NABE). A familiar cautious tone seems likely, echoing Fed officials’ September call for just one 25-basis-point (bps) rate cut next year, following three cuts in 2025.
For their part, financial markets appear to be broadly aligned with what the central bank has on the menu for this year but see officials delivering 69bps in cuts in 2026. That dovish disconnect means they are unlikely to be happy if Powell is seen pulling in the opposite direction.
On the earnings front, this week’s offering is dominated by major financial names including JPMorgan (JPM), Goldman Sachs (GS), Citigroup (C), BlackRock (BLK), and Wells Fargo (WFC). Healthcare giant Johnson & Johnson (JNJ) and railway operator CSX Corp. (CSX) are also due to report and may act as barometers of economic vigor.
Ilya Spivak, tastylive head of global macro, has 15 years of experience in trading strategy, and he specializes in identifying thematic moves in currencies, commodities, interest rates and equities. He hosts Macro Money and co-hosts Overtime, Monday-Thursday. @Ilyaspivak
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