The US stock market ended slightly lower on Tuesday, as continuous trade uncertainty put pressure on consumer and healthcare stocks, offsetting gains in the banking sector. Although Bank of America and Citigroup released better-than-expected earnings reports that lifted some market confidence, the overall trend remained overshadowed by the Trump administration's tariff policies.
Bank of America reported first-quarter profits that significantly surpassed market expectations, thanks to increased interest income, with its stock rising 3.6%. Citigroup also benefited from a strong quarterly performance. Despite short-term boosts in the banking sector, bank executives warned that continued market volatility triggered by trade policies could heavily impact consumer spending, thereby affecting the economic fundamentals.
The latest disclosure in the Federal Register reveals that the government will initiate investigations into drug and semiconductor imports, with related tax measures potentially expanding further. Since Trump announced full-scale tariff increases on April 2, the market has been highly volatile, with investors worried about a global trade war escalation and the potential for an ensuing recession.
Baird's investment strategist Ross Mayfield noted that while corporate earnings are impressive, the market is currently almost entirely driven by trade uncertainty. "In days without a clear driving force, the market can easily lose direction, which is the current reality," he said.
Despite Johnson & Johnson exceeding revenue and profit expectations, its stock fell 0.5% due to weak medical device sales. Meanwhile, Barclays downgraded its rating on the US automotive and mobility sector, predicting tariffs would hit manufacturers' profitability, with Ford falling 2.7% and GM down 1.3%. The consumer discretionary sector as a whole fell 0.8%.
All three major indices closed lower, with the Dow Jones Industrial Average dropping 0.38% to 40,368.96 points, the S&P 500 down 0.17% to 5,396.63 points, and the Nasdaq Composite slipping 0.05% to 16,823.17 points.
Technical charts also signal risk. On Monday, the S&P 500's 50-day moving average crossed below its 200-day moving average, forming a "death cross," typically seen as a potential indicator of a transition from a short-term correction to a long-term downtrend. The S&P 500 has fallen 12.2% since hitting a high in early February and is down 8% for the year.
Despite the earnings season having begun, many corporate executives are likely to avoid issuing guidance or might even retract existing forecasts due to the unpredictable direction of trade policies. Mayfield concluded, "Most of these earnings reports reflect a market environment that has already changed. In the coming weeks, whether companies are willing to directly address market shifts will be a key focus for investors."
