US Weekly Report: Markets slide as trade breakthrough remains elusive and Fed independence questioned

Markets slide as trade breakthrough remains elusive and Fed independence questioned

Major US indices tumbled over 2% to start the week, as optimism around trade resolution fades, with markets seemingly beginning to price in a more protracted back-and-forth. Tough rhetoric from key US trading partners—particularly Japan—has highlighted the complexity of reaching a consensus, casting doubt on whether meaningful progress can be achieved.

Compounding the unease were fresh concerns over the Federal Reserve (Fed)’s independence, after President Trump publicly doubled down on his pressure campaign on Fed Chairman Jerome Powell. This sparked fears of political interference in monetary policy, prompting a broad sell-off in US assets and a dip in the dollar. US Treasury yields rose sharply in response, with the 10-year climbing 8.4 basis points (bp) and the 30-year adding 10 bp.

What to watch this week: PMI flash readings amid tariff uncertainties

Flash global Purchasing Managers’ Index (PMI) data will take centre stage this week as investors assess the fallout from US tariff uncertainties. Signs of softening are expected across both manufacturing and services sectors in major economies. In the US, manufacturing PMI is projected to dip into contraction territory at 49.3, down from 50.2, while the services sector PMI may moderate to 52.9 from 54.5.

A similar pattern played out during the last US-China tariff standoff in 2018, when global manufacturing PMIs broadly slipped below the 50-mark, and export-heavy economies suffered prolonged weakness. This time, the impact could be even more pronounced, given the broader scope of tariffs. The outlook may hinge on whether markets view the tariffs as temporary, though current sentiment suggests that is an optimistic assumption.

Company earnings this week, notably from Tesla and Alphabet, could also shed light on the micro-level effects. Tesla could be particularly vulnerable, given its global manufacturing and supply chain exposure, along with operational risks in China. Meanwhile, Alphabet may offer a glimpse into the more indirect effects of tariffs—namely, whether macro softness begins to weigh on ad spending.

US 500: Formation of new lower high

The US 500 has previously broken down from its broad rising channel that guided price action through late 2023 till early 2025. The move below both the lower channel boundary and the 200-day moving average confirms a shift in trend, with successive lower highs (LH) and lower lows (LL) reinforcing an ongoing downtrend. A recent rebound has lifted the index off the 4,800 support level, but price remains below the cloud and its 200-day moving average (MA), with key resistance at around the 5,500 level now acting as a likely ceiling.

The daily relative strength index (RSI) has struggled to reclaim its midpoint thus far, with the continued drift below 50 suggesting tepid bullish momentum. A break below the 5,100 level would potentially open the door to a retest of the April 2025 low at the 4,800 level. To negate the bearish bias, the index must first clear the 5,500 hurdle and re-establish above the cloud and the 200-day MA. Until then, the prevailing trend leans bearish with rallies likely to be sold into.

Key levels:

• R2: 5,687
• R1: 5,500
• S1: 5,100
• S2: 4,800

US 500 Cash chart:

Source: IG charts

Sector performance

Sector performance over the past week reflected a broad risk-off tone, with the S&P 500 falling 5.2%. Defensive positioning was evident, with the real estate (+1.0%) and consumer staples (+0.5%) sectors managing to eke out gains, while growth sectors extended their decline amid continued weakness in the “Magnificent Seven” stocks. Notably, NVIDIA dropped 12.6%, while Meta, Tesla, and Amazon each fell more than 9%. Microsoft declined 7%, and Alphabet was down 6%. Valuations remain under scrutiny, as persistent US tariffs pose risks to growth conditions and undermine investors’ confidence in the corporate earnings growth outlook. Year-to-date, consumer staples (+3.5%) remains the only sector in positive territory.

Source: Refinitiv

Source: Refinitiv

Source: Refinitiv
*Note: The data is from 15th – 21st April 2025.

Source: Refinitiv
*Note: The data is from 15th – 21st April 2025.

Source: Refinitiv
*Note: The data is from 15th – 21st April 2025.