Linh Tran
The S&P 500 declined by 0.67% in the final trading session of last week, marking a corrective week after an extended rally. This pullback not only reflects technical weakness following a period of market exuberance but also signals a cautious sentiment returning as fears of a renewed trade war under the Trump administration resurface.
Specifically, on May 23, U.S. President Donald Trump proposed imposing a 50% tariff on imports from the European Union (EU) and a 25% tariff on iPhones not manufactured in the United States. The proposal triggered a negative reaction across global financial markets. Technology stocks such as Apple, Nvidia, and Amazon came under heavy pressure, dragging down major indices including the S&P 500 and Nasdaq. Concerns about global supply chain disruptions, higher production costs, and potential retaliatory measures from the EU stoked risk-off sentiment, prompting investors to adopt a more defensive posture.
However, on May 25, the White House unexpectedly sent a conciliatory signal when President Trump announced a delay of the proposed 50% tariffs on EU goods until July 9, allowing more time for further trade negotiations. This move followed a phone call with European Commission President Ursula von der Leyen and suggested that Washington remains open to dialogue, rather than rushing into aggressive tariff enforcement as previously proposed.
This development may serve as a significant “cooling factor,” helping to partially restore market sentiment in early trading this week, especially among technology stocks, which are highly sensitive to tariffs and global supply chain risks.
Nevertheless, the geopolitical front presents another challenge for investors. On May 24, Russia launched its largest airstrike since the beginning of the war with Ukraine, deploying more than 360 drones and missiles targeting major cities, including Kyiv. This attack not only caused considerable human and material losses but also undermined hopes for an imminent ceasefire—something investors had hoped would bring stability to Eastern Europe and reduce risks in global commodities and energy markets.
Rising tensions could continue to pressure investor sentiment, especially if the U.S. or Europe becomes further entangled in new military or diplomatic escalations.
In the face of mixed signals from both economic and geopolitical developments, the S&P 500 is likely to trade cautiously or potentially enter a short-term correction. Investors are expected to refrain from making strong directional bets until there is greater clarity on trade policy direction and the prospects for de-escalation in Europe.
A key highlight this week is the upcoming Q1 2025 earnings report from Nvidia (NVDA), set to be released on Wednesday. As a leading name in the AI boom, Nvidia’s performance will serve as a bellwether for the broader tech sector following its explosive growth in 2023–2024.
If Nvidia reports better-than-expected results and offers a strong outlook for the second half of the year, it could provide a significant psychological boost to the market and support a continuation of the S&P 500’s recovery. Conversely, if the recent tariff measures—reminiscent of the previous U.S.-China trade war—have weighed on Nvidia’s Q1 revenue and profits, it could trigger a deeper pullback in the tech sector, thereby dragging the S&P 500 to lower levels.
Tran is a Market Analyst at XS.com
