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US stocks headed lower on Friday as investors absorbed a fresh wave of tariff uncertainty and a cooldown in inflation pressures, according to the Federal Reserve's preferred price gauge.
The benchmark S&P 500 (^GSPC) fell 0.4%. The tech-heavy Nasdaq Composite (^IXIC) slipped roughly 0.7%, while the blue-chip Dow Jones Industrial Average (^DJI) fell 0.2% after the major gauges ended Thursday in the green.
President Trump on Friday ratcheted up tensions with China, claiming it has "totally violated its agreement with us" less than three weeks after the world's two largest economies reached a tariff detente.
Trade talks between the US and China are "a bit stalled," Scott Bessent told Fox News on Thursday. The Treasury Secretary said a call between Trump and President Xi is needed to reach a deal, as the two countries continue to clash over chip curbs and visas on the sidelines.
The China escalations came after the tariffs faced a bout of legal drama — a new source of uncertainty. On Thursday, a US appeals court on Thursday paused a trade court block on Trump's global tariffs, giving the White House until next Monday to file a challenge to the ruling. At the same time, his team is exploring other ways to issue the tariffs.
Read more: The latest on Trump's tariffs
Meanwhile, inflation continued cooling in April, according to the latest reading of the Personal Consumption Expenditures (PCE) index. The "core" PCE index, closely watched by the Fed, rose in line with expectations on a monthly and annual basis.
Though May has been filled with trade-war switchbacks, US stocks are on track to close the month out on Friday with hefty gains. The S&P 500 is eyeing a jump of over 6%, the Dow, a rise of about 4%. The Nasdaq Composite is headed for a surge of almost 10% as tech stocks revive. The gauges are set for a winning week too.
LIVE 14 updates
Stocks drop after report on new China tech curbs
US markets took another leg lower on Friday after Bloomberg reported the Trump administration plans to expand tech restrictions on China by targeting subsidiaries of already-sanctioned firms.
The proposed rule would require US government licenses for transactions involving companies majority-owned by firms on the so-called "Entity List," aiming to close loopholes used to bypass existing curbs.
The measure, which could affect major Chinese chipmakers such as Huawei and Yangtze Memory Technologies, is expected to further heighten tensions between Washington and Beijing amid ongoing disputes over semiconductors and critical mineral exports.
The report comes on the heels of earlier comments from President Trump, who lashed out at China in a Truth Social post, accusing the country of having "violated" its trade deal with the US. While he did not provide specifics, the comments echoed earlier rhetoric from his administration suggesting that negotiations with Beijing had "stalled."
In afternoon trade, the Nasdaq (^IXIC) dropped approximately 1.6% while the benchmark S&P 500 (^GSPC) fell 1%, and the Dow (^DJI) slipped 0.6%.
Chips lead stocks lower
The Nasdaq Composite (^IXIC) sank to its lows of the day just before noon on Friday, falling about 0.6%. The chip sector led the decline with several key names under pressure after President Trump said China has "violated" its trade agreement with the US.
Nvidia (NVDA), AMD (AMD), Micron (MU) and Intel (INTC) were all of down 2% or more.
Fed expected to keep rates on hold despite cool inflation reading
Yahoo Finance's Jennifer Schonberger reports:
A cooler inflation reading from the month when President Trump's tariffs went full blast likely won't shake the Federal Reserve's stance of holding interest rates steady, with policymakers still seeing a risk that duties push prices higher as the year progresses.
"We’ll have to wait until next month to get a real sense of how tariffs are affecting the economy,” said Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management. "The question isn’t whether tariffs will have an impact, it’s a question of how big that impact will be.”
The "core" Personal Consumption Expenditures (PCE) index — which strips out food and energy costs and is closely watched by the central bank— rose 2.5% on an annual basis in April. The Fed's goal is to get this number down to 2%.
The new reading was in line with expectations and cooler than the 2.7% annualized change recorded in March. Core prices also rose 0.1% in April from the prior month, in line with expectations for a 0.1% increase and the monthly increase seen in March.
Regeneron stock tanks 17% on mixed trial for smoker's lung drug
Regeneron (REGN) stock fell more than 18% in early trading after the company's experimental drug for smoker's lung failed a late-stage trial.
The drug did, however, pass a separate earlier-stage trial.
Consumer sentiment steadies in May on positive China trade news
Consumer sentiment steadied in May as Americans grew more optimistic about the US economy following developments in President Trump’s trade policy.
According to the final May reading of the University of Michigan consumer sentiment survey released Friday, headline sentiment remained unchanged from the previous month, halting a four-month streak of sharp declines.
While sentiment dipped in the preliminary May reading, it rebounded later in the month, buoyed by a temporary pause on certain tariffs on Chinese goods that helped improve the economic outlook.
"Expected business conditions improved after mid-month, likely a consequence of the trade policy announcement," Joanne Hsu, director of consumer surveys at the University of Michigan, said in the release.
Long-run inflation expectations, which reflect the outlook over the next five to ten years, eased to 4.2% in May from 4.4% in April, marking the first decline since December 2024 and ending an unprecedented four-month streak of increases.
Meanwhile, year-ahead inflation expectations held relatively steady at 6.6%, up slightly from 6.5% in April. This modest uptick is the smallest since the election and signals a break in the four-month trend of sharp increases in short-run inflation expectations.
Still, the improvement in inflation expectations wasn’t enough to outweigh other areas of weakness, leaving consumers' overall mood subdued.
"These positive changes were offset by declines in current personal finances stemming from stagnating incomes throughout May," Hsu said. "Overall, consumers see the outlook for the economy as no worse than last month, but they remained quite worried about the future."
Stocks slip lower at the open
US stocks slid on Friday as investors absorbed a fresh wave of tariffs uncertainty and a cooldown in inflation pressures, according to the Federal Reserve's preferred price gauge.
The benchmark S&P 500 (^GSPC) fell about 0.3% while the tech-heavy Nasdaq Composite (^IXIC) Dow Jones Industrial Average (^DJI) also slipped roughly 0.3%, after the major gauges ended Thursday in the green.
Fed's preferred inflation gauge shows price increases cooled in April
The latest reading of the Federal Reserve's preferred inflation gauge showed price increases slowed in April as inflation remained above the Fed's 2% target. The release comes as investors have been closely watching data releases for signs of how President Trump's tariff policy is impacting the economy.
The "core" Personal Consumption Expenditures (PCE) index, which strips out food and energy costs and is closely watched by the central bank, rose 2.5% on an annual basis, in line with expectations and lower than the 2.7% seen in March. Core prices rose 0.1% in April from the prior month, in line with expectations and the monthly increase seen in March.
On a yearly basis, PCE increased by 2.1%, below the 2.2% economists had expected.
US Treasurys set for first monthly loss of 2025 on deficit woes
From Bloomberg:
Costco stock slips below the flat line after earnings
Costco (COST) stock was roughly flat in premarket trading after the company reported mixed earnings on Thursday.
The wholesale retailer's adjusted earnings per share were $4.28, above estimates for $4.24, while revenue of $63.21 billion slightly missed expectations.
Yahoo Finance's Brooke DiPalma reports:
Good morning. Here's what's happening today.
Nvidia's $8B setback in China is a trade-war bargaining chip
Yahoo Finance's Hamza Shaban reports:
Read more here from today's Morning Brief.
Gap stock tumbles after it flags up to $300M in tariff costs
Gap's (GAP) shares sank after the retailer laid out the multimillion-dollar hit to 2025 operating income it expects from President Trump's tariffs, but kept its 2025 forecast unchanged.
The stock dropped over 14% despite the retailer posting better-than-expected sales and profit in its first quarter results late on Thursday.
Gap said it expects added tariff-related costs of $250 million to $300 million. But the company said it has strategies to halve that amount, without providing full details. It projects a hit of up to $150 million to its full-year operating income, mainly in the second half.
Reuters reported:
Asia-Pacific markets slide as Trump tariffs reinstated
Markets across the Asia-Pacific saw pullbacks Friday after yesterday's boost following the temporary reinstatement of Trump's "unlawful" tariffs.
Japan’s benchmark Nikkei 225 (^N225) declined 1.1% with investors eyeing growing inflation.
In South Korea, the Kospi (^KS11) dropped 0.9% as markets remain rattled ahead of a presidential election in a tough political climate.
Hong Kong's Hang Seng Index (^HSI) sank 1.5% as China’s CSI 300 (3188.HK) sli0.3%
Australia's S&P/ASX 200 (^AXJO) hovered around the baseline, with a gain of less than 0.1%
Trending tickers in after-hours trading
Newsmax (NMAX)
Shares in conservative media group Newsmax dropped 10.4% after hours Thursday resulting in a drop of over 75% since the company went public in March. Despite growing viewership Newsmax has faced a number of problems and is currently still engaged in a lawsuit with Dominion Voting Systems over "false claims" spread by the news source after the 2020 election. An overly ambitious IPO valuation combined with weak financial returns have continued to crater stock value.
Ulta Beauty (ULTA)
Ulta Beauty stock jumped up 8.3% in extended trading after the company beat analyst expectations for Q1. A 4.5% increase in net sales leading to $2.8b in revenue allowed Ulta to issue better-than-expected guidance for Q2. Earnings were reported at $6.70 per share.
The Gap (GAP)
Stock in apparel company The Gap nosedived 14.8% after-hours despite a solid earnings report as investors eye a potential a $300m hit to the bottom line from Trump's tariffs. The Gap reported revenue of $3.46 billion, well over analyst expectations of $3.42, while earnings per share came in at $0.51.
