Stocks Ease From Highs Amid Trade Jitters and Key Data Ahead
U.S. stocks edged lower on Monday following a recent rally to record highs, as investors prepared for a pivotal week filled with fresh inflation data and corporate earnings reports. The market’s recent resilience in the face of President Trump’s escalating tariff threats has shown signs of strain, with the S&P 500 dipping 0.33% on Friday and poised for further losses amid renewed trade uncertainty.
Trump’s weekend announcement of a 30% tariff on imports from the European Union and Mexico — effective August 1 unless a deal is reached — came just days after new levies on Canadian goods. However, investors have largely absorbed the impact of tariff policy shifts, anticipating a cycle of political volatility. The EU has paused retaliatory measures through early August, keeping negotiations alive.
Inflation in Focus as Fed Rate Decision Looms
The week’s headline economic release arrives Tuesday morning with the June Consumer Price Index (CPI). Economists expect core inflation — excluding food and energy — to rise 2.9% year-over-year and 0.3% month-over-month, in line with slow progress toward the Federal Reserve’s 2% inflation target.
Oxford Economics believes the data will support the Fed staying on hold through the summer, citing dissipating disinflationary benefits from lower oil prices and growing uncertainty from tariff impacts. CME Group data as of Friday showed traders assigning just a 4.7% chance of a rate cut in July, down from 20% a month ago.
Trump, meanwhile, has continued to pressure Fed Chair Jerome Powell to lower rates, arguing this week that Powell should resign. But economists warn that new tariffs raise effective rates on trade, complicating monetary policy. Bank of America estimates tariffs could lift the effective import duty rate to nearly 14%, up from the 10% baseline in recent quarters.
Second Quarter Earnings: A Crucial Test
Earnings season kicks off this week with results from major banks, including JPMorgan, Wells Fargo, and Citigroup, alongside asset managers like BlackRock and State Street. Investors will also hear from tech and AI-adjacent giants such as Netflix, ASML, and Taiwan Semiconductor.
Analysts expect S&P 500 earnings to rise 5% in Q2 — the slowest growth since late 2023 — but forecast stronger gains of 7.3% in Q3 and 9% for the full year. In 2026, earnings growth is expected to accelerate to nearly 14%. Communication Services and Technology sectors are projected to lead Q2 results with earnings increases of 29.5% and 16.6%, respectively.
According to Goldman Sachs, large-cap companies entered Q2 with healthy inventory buffers and will likely rely on cost-cutting, supplier changes, and pricing strategies to absorb tariff-related shocks. Their analysis suggests a gradual digestion of trade disruptions, supported by strong fundamentals among top-performing firms.
Strategists Lift S&P 500 Targets on Corporate Strength
Amid market volatility, leading strategists at Goldman Sachs and Bank of America raised their year-end targets for the S&P 500. Goldman now projects a close of 6,600, while BofA forecasts 6,300 — up from previous targets of 6,100 and 5,600, respectively. The index closed Friday at 6,259.
Bank of America’s Savita Subramanian cited “Corporate America Exceptionalism” for the revision, pointing to resilient earnings from sectors less sensitive to economic cycles. The dominance of the “Magnificent Seven” tech names and AI-driven utility demand has helped buffer the broader index from tariff shocks and macro uncertainty.
As the market enters a pivotal week, inflation data and corporate earnings will drive sentiment. While tariff risks and political tension remain elevated, strong fundamentals among leading sectors and upgraded forecasts suggest investor confidence is holding. Whether this momentum can persist depends on how inflation trends evolve — and how well companies navigate an increasingly complex policy landscape.
