US stocks dip amid trade tensions despite strong bank earnings

[UNITED STATES] US stocks closed slightly down on Tuesday as trade uncertainty persisted and shares of consumer and healthcare sectors fell, while strong bank results provided some support. Bank of America and Citigroup's shares soared following their results. Nonetheless, bank executives warned that the instability caused by President Donald Trump's trade policy poses significant dangers to US consumer spending.

Market analysts note that the ongoing trade tensions have particularly rattled sectors reliant on global supply chains, including technology and industrials. The White House's aggressive stance on tariffs has left many companies scrambling to reassess their sourcing strategies, with some considering price hikes to offset higher import costs. This could further squeeze consumer wallets at a time when inflation concerns are already simmering.

Boeing was among the Dow's biggest weights. The stock dipped 2.4% after Bloomberg reported, citing people familiar with the subject, that China had ordered its airlines not to accept new Boeing jet deliveries in response to the US decision to levy 145% tariffs on Chinese imports.

The aviation sector’s woes highlight the broader risks of retaliatory measures in a trade dispute. Boeing, a key exporter to China, now faces potential order cancellations or delays, which could ripple through its supply chain and hurt smaller aerospace suppliers. The company’s troubles also underscore how geopolitical tensions can swiftly translate into financial pain for multinational corporations.

According to Federal Register papers on Monday, the Trump administration is also investigating pharmaceutical and semiconductor imports in order to slap tariffs on those sectors.

The market was thrown into upheaval after Trump announced hefty tariffs on April 2, fueling fears of a global trade war and a possible recession. Trading has been more quiet this week, but investors have been unable to concentrate on anything else.

Meanwhile, the International Monetary Fund (IMF) trimmed its global growth forecast for 2024, citing trade tensions as a key downside risk. The IMF’s warning adds to a chorus of concerns from economists who argue that prolonged tariff battles could dampen business investment and slow economic momentum worldwide. This sentiment has kept many investors on edge, even as corporate earnings show resilience.

"Earnings have been pretty good, but this is a market that's just beset by tariff and trade uncertainty, and those are really the only catalysts that matter at this point," said Ross Mayfield, investment strategist at Baird in Louisville, Kentucky. "On a day where you're bereft of those (catalysts), it's kind of a wayward market, and we're seeing that today."

Johnson & Johnson's stock fell 0.5% after the company missed medical device sales targets despite exceeding Wall Street expectations for first-quarter revenue and profit. Barclays downgraded the US auto and transportation sectors on Tuesday, citing concerns that Trump's tariffs will have a negative impact on automaker earnings. Ford stock closed down 2.7%, General Motors down 1.3%, and the S&P consumer discretionary index fell 0.8%.

Auto industry insiders warn that tariffs on steel and aluminum, combined with potential levies on imported vehicles, could raise production costs significantly. This comes at a delicate time for the sector, which is already grappling with slowing demand and the costly transition to electric vehicles. Some analysts fear that higher prices could further dent consumer interest in big-ticket purchases.

The Dow Jones Industrial Average slid 155.83 points, or 0.38%, to 40,368.96; the S&P 500 sank 9.34 points, or 0.17%, to 5,396.63; and the Nasdaq Composite fell 8.32 points, or 0.05%, to 16,823.17. Merck & Co shares fell 1% in the healthcare sector as well. Bank of America's first-quarter profit above expectations as interest income increased, and its shares rose 3.6%.

S&P 500 firms have only begun to report results for the quarter ending March 31, but changes in US trade policy are clouding the future, and executives may be hesitant to provide earnings predictions.

"As far as the results from Q1, those basically occurred in a world that doesn't really exist anymore," Mayfield said. "It's going to be about guidance, and I expect a lot of companies to just kind of punt and rescind their guidance."

JThe CEO of Johnson & Johnson stated that tariffs on pharmaceuticals can cause supply-chain disruptions and that favorable tax policies would be a more effective instrument for increasing US manufacturing capacity for both drugs and medical equipment. Strategists are also paying particular attention to their technical charts after the S&P 500's 50-day moving average fell below the 200-day moving average on Monday, forming a "death cross" pattern that signals a short-term correction may morph into a longer-term downturn.

The S&P 500 is still down 12.2% from its record-high finish on February 19, and is down around 8% year to date. On the NYSE, advancing issues outweighed decliners 1.29-to-1. The NYSE recorded 49 new highs and 67 new lows.

On the Nasdaq, 2,399 stocks gained and 2,003 fell, with advance issues outnumbering decliners by a 1.2-to-1 ratio. The S&P 500 set two new 52-week highs and one new low, while the Nasdaq Composite set 27 new highs and 95 new lows. Volume on US exchanges was 15 billion shares, compared to the nearly 19 billion average for the entire session over the prior 20 trading days.s.