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Trump’s Tariff Plan Pulls Wall Street Down at Market Close

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Wall Street dragged lower at close by Trump's plan to enact tariffs on Saturday.

Wall Street ended the trading day lower on Friday, following announcements from the White House about imposing 25% tariffs on goods from Mexico and Canada and a 10% tariff on Chinese imports starting Saturday.

The comprehensive S&P 500 index fell by 0.5%, losing 30.64 points to settle at 6,040.53; the Dow Jones Industrial Average dropped 0.37%, or 337.47 points, closing at 44,544.66; and the technology-focused Nasdaq Composite decreased by 0.28%, shedding 54.31 points to finish at 19,627.44. Despite the dip on Friday, all three major indices closed the month in positive territory. The benchmark 10-year Treasury yield climbed to 4.553%.

“The tariffs are a response to the illicit fentanyl that these countries have produced and allowed to enter our nation,” stated Karoline Leavitt, the White House press secretary.

According to the Wall Street Journal, some officials are scrambling to negotiate a deal at the eleventh hour to prevent the tariffs from being implemented.

Concerns Over AI Impact Intensify

On Monday, the stock market plunged after reports that Chinese company DeepSeek had developed an artificial intelligence system comparable to those of OpenAI and ChatGPT, but at a significantly lower cost. This development raised concerns about the vast amounts of money being poured into AI development in the U.S., prompting the White House to consider restricting sales of Nvidia chips to China. Nvidia’s CEO Jensen Huang is slated to meet with President Donald Trump on Friday to discuss AI policies.

The market experienced a mild recovery midweek after Microsoft and Meta, the parent company of Facebook, confirmed their commitment to their AI investment plans, alleviating fears of a reduction in AI funding.

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Looking ahead, Alphabet, the parent company of Google, and e-commerce behemoth Amazon are scheduled to release their earnings next week.

Gold Reaches New Heights

Gold prices soared to an all-time high, registering the best monthly performance since August 2011, though they retreated slightly by the close of the day. The surge in gold prices is attributed to investors seeking refuge in the metal amid economic and global uncertainties, particularly concerning how Trump’s tariff threats might unfold.

While the imposition of 25% tariffs on goods from Canada and Mexico and 10% on Chinese goods is expected this weekend, it remains unclear whether these will be applied universally or if certain exemptions will exist. If applied broadly, tariffs on just Canada and Mexico could disrupt nearly $1.6 trillion of annual trade. Together, China, Mexico, and Canada make up just over 42% of all U.S. imports, noted James Knightley, chief international economist at ING.

Moreover, these tariffs could further inflate U.S. inflation rates, which have been stubbornly high instead of falling to the Federal Reserve’s preferred rate of 2%.

The U.S. personal consumption expenditures (PCE) price index rose by 0.3% last month, following a steady 0.1% increase in November, aligning with economists’ predictions. However, the core PCE, which excludes food and energy prices, remained at 2.8%, noted Lauren Saidel-Baker, an economist at ITR Economics. “Today’s data does not overturn the current trend towards lower inflation, but it does show that inflation continues to exceed the Fed’s 2% goal,” she said. If Trump’s tariffs contribute to inflation this year, “it may restrict the Fed’s ability to continue lowering interest rates into 2025. There’s even a possibility of rate hikes before year’s end,” she added.

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Returning to the topic of AI, Mark Dowding, chief investment officer at RBC Global Asset Management’s BlueBay, remarked, “If AI becomes cheaper and more widely available, it will benefit productivity, curb inflation, and bolster economic growth. The downside is for those investors who might have bet heavily on certain stocks.”

Gold prices closed the day down approximately half a percent at $2,830.50 per ounce.

Corporate Developments

As investors anticipate the effects of Trump’s policies, they are keenly watching corporate news to gauge stock market movements. Key highlights from today include:

  • Apple Inc., after announcing late Thursday that it had surpassed quarterly earnings expectations and achieved record gross margins, saw its shares fall by 0.67% by the close.
  • AbbVie’s stock climbed 4.7% following the pharmaceutical company’s earnings beat for the last quarter and positive sales forecast for its immune-disease medications Skyrizi and Rinvoq.
  • Vertex Pharmaceuticals saw a 5.31% increase in its shares after receiving FDA approval for Journavx, the first new non-opioid painkiller in decades.
  • Shares of Walgreens fell 10.3%, marking its worst day since June, after the pharmacy chain announced it was halting its dividend to conserve cash.
  • Chevron’s shares declined by 4.56% after it missed its quarterly earnings estimates.
  • Consumer goods maker Colgate-Palmolive’s quarterly sales fell short of Wall Street expectations, leading to a 4.66% drop in its shares.

Bitcoin’s Volatility Continues

Bitcoin retracted some of its gains made after Federal Reserve Chairman Jerome Powell commented on cryptocurrencies following the central bank’s policy meeting late Wednesday.

In response to a journalist’s question about the risks associated with digital assets, Powell stated that banks are “fully capable of serving cryptocurrency clients as long as they understand and manage the associated risks,” and emphasized that “a more comprehensive regulatory framework for cryptocurrencies from Congress would be very beneficial.”

These remarks followed Trump’s positive stance on bitcoin, where he proposed the creation of a national strategic bitcoin reserve. Under Trump, the Securities and Exchange Commission is also expected to adopt a more cryptocurrency-friendly approach.

Bitcoin was last seen trading down 2.71% at $101,886.50.

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