S&P 500 Drops as US-China Tariff War Reignites

The trading week ending on Friday, 10 October 2025 saw the S&P 500 (Index: SPX) drop over 2.4% from its previous week’s close. The index closed the week at 6,552.50.

All of that loss came on Friday, 10 October 2025, which fully qualified as interesting after President Trump indicated he was considering breaking of a meeting with China’s premier and was considering new, large tariffs on China. The announcement followed China’s action earlier in the week to expand its export controls on rare earths and other materials that are vital to several industries in the United States.

The S&P 500 lost 2.71% of its value from the previous day’s close following President Trump’s comments, while the tech-heavy NASDAQ Composite (Index: COMP) lost 3.56%. By contrast, the price-weighted Dow Jones Industrial Average (Index: DJI) which has lesser exposure to the tech sector, lost 1.9%.

The latest update of the alternative futures chart finds the trajectory of the S&P 500 is still tracking along with the dividend futures-based model‘s projection associated with investors focusing their forward-looking attention on 2026-Q2, but went from a little below the middle to the low end of that expected range.

We’ll be paying attention in the upcoming weeks to the market-moving headlines to determine whether the reignition of 2025′s US-China tariff war represents a regime change for the market. The potential is there given what happened earlier this year. Through Friday, 10 October 2025 however, it’s too early to make that determination as we cannot yet reject the hypothesis its a noise event and investors remain focused on 2026-Q2 whose projections are defined by the market regime that took hold on and after 28 April 2025.

Here are the market-moving headlines for the trading week ending on 10 October 2025.

Monday, 6 October 2025

• Signs and portents for the U.S. economy:

• US holiday sales growth to be muted this year, forecasts show
• Oil rises after OPEC+ hikes output less than expected

• OPEC+ opts for modest oil output hike as glut fears mount

US regional bank mergers gain momentum under Trump administration

US unemployment claims rise moderately amid labor market freeze

Trump bailout for trade-hit US farmers expected this week

Fed minion says US interest rates are perfectly set:

• Fed’s Schmid says rates are ‘appropriately calibrated’

BOJ minions wondering if they should proceed with rate hikes since Japan’s government has a new boss:

• Japan’s stocks zoom, yen slumps as Takaichi win dims BOJ hike bets
• BOJ keeps cautiously upbeat economic view, warns of wage uncertainty

• Japan’s wage outlook key to BOJ rate-hike timing, ex-c.bank economist says

Growth signs developing in Eurozone:

• German unemployment expected to fall as economy gains pace, source says

U.S. stocks race to record closes as AMD jumps on deal with OpenAI

• S&P 500, Nasdaq reach all-time closing highs on AI dealmaking boost

• Advanced Micro Devices, Inc. (AMD) Announcement of Strategic Partnership between AMD and OpenAI

Tuesday, 7 October 2025

• Signs and portents for the U.S. economy:

• Oil rises as oversupply fear eases after OPEC+ restrains output increase

• As oil glut fears mount, OPEC+ restrains output rises for now
• Oil price fall turns up the heat on Big Oil’s bloated payouts

White House says no shutdown-related layoffs yet, but warns they could come

• Trump Gives Democrats Deadline For When Permanent Government Firings Will Begin

Former Fed minion says go slow on rate cuts, current minion worries that AI is pushing up inflation:

• Fmr. Dallas Fed President Robert Kaplan warns against aggressive rate cuts amid shutdown
• Fed’s Kashkari says he’s skeptical AI is replacing workers, but it may push up rates
• Fed’s Miran says calm bond market shows support for rate cuts

Bigger doomsday prepping developing in China:

• China accelerates oil reserve site build amid stockpiling drive

BOJ minions getting inflation data to support plans to hike Japan’s interest rates:

• Japan’s real wages fall for eighth month in August

ECB minions wants more Euros in Eurozone:

• ECB’s Lagarde renews calls for beefed up role for euro
• Euro zone ministers to look at how to boost euro stablecoin issuance

S&P 500 ends week-long winning streak amid government shutdown, gold nears $4K

• What major banks forecast as gold breaches $4,000/oz level
• Gold’s rush to record heights propelled by global anxieties

Wednesday, 8 October 2025

• Signs and portents for the U.S. economy:

• Oil up over 1% on OPEC+ output increase restraint
• Brazil’s soybean exports to hit record as US out of market, Chinese demand strong

Fed minions starting to worry more about job market than inflation:

• Fed last month saw rising risks to job market, but remained wary on inflation
• Fed’s view of neutral, reshuffled by Miran, a key to inflation concerns

Bigger global supply chain trouble, stimulus developing in China:

• China expands rare earth restrictions, targets defence, semiconductor users

• China’s new restrictions on rare earth exports send a stark warning to the West
• Explainer: How China’s new rare earth export controls work

China’s September bank lending seen more than doubling from previous month

BOJ minions warned by Japan’s new prime minister to avoid hiking interest rates as minions’ independence called into question:

• BOJ should be wary of more rate hikes, adviser to Japan’s likely next PM says

• BOJ will find another rate hike this year difficult, says ex-deputy governor

Japan Takaichi says BOJ rate decisions must align with govt goal

• Takaichi’s jab at BOJ independence may face political reality check

ECB minion says Eurozone interest rates are just where they need to be:

• ECB’s Escriva says interest rates at ‘appropriate’ level

Nasdaq and S&P 500 notched record highs while gold topped $4,000

• S&P 500, Nasdaq end higher as tech strength outweighs Fed concerns

• Wall Street’s bull market nears three years old; history shows it may still have life
• Gold shatters $4,000 milestone, silver belts record high as investors rush to safety

Thursday, 9 October 2025

• Signs and portents for the U.S. economy:

• Oil settles 1.6% lower after Gaza ceasefire
• US 30-year fixed mortgage rate falls; prospective buyers stay on the sidelines
• US companies’ profit growth seen softer, spotlight on AI spending

Fed minions getting worried about sluggish US labor market:

• Fed’s Williams backs more rate cuts this year due to labor market slowdown risks, he tells NYT
• Fed’s Daly: labor market is at a ‘worrisome’ point

ECB minions thinking their interest rate policy is perfect for Eurozone:

• ECB rate level robust enough to manage shocks, meeting accounts show

Wall Street closes lower, pausing record-setting rally as earnings approach

• Wall Street slides as government shutdown lingers, tech stocks struggle
• Gold’s rush above $4,000/oz cements status as global bellwether

Friday, 10 October 2025

• Signs and portents for the U.S. economy:

• Trump says no reason to meet China’s Xi, threatens tariffs in new rift

• VIEW Trump threatens ‘massive increase’ in China tariffs
• After the bell: US will impose additional 100% tariff on Chinese imports from November, Trump says

Oil prices fall as risk premium fades after Gaza deal

• Oil Tumbles To 5-Month Lows As Gaza Ceasefire Holds

US to publish September CPI report this month despite government shutdown

• Bureau of Labor Statistics recalls workers to get September inflation data ready — report

Trump Fires Federal Workers Amid Shutdown Fight With Democrats

• And on Day 10, there were RIFs
• RIFs vs layoffs: Explaining Trump admin’s latest move amid govt shutdown. What does it mean?

Fed minion says they will be cautious in setting US interest rates, potential new Chief Minion says regular size rate cuts will help US job market:

• Fed should ‘tread with caution’ on rate cuts, Musalem says
• Fed can address job market weakness with normal-sized rate cuts, Waller tells CNBC

Bigger trouble developing in China:

• China hits back on US port fees with retaliatory levies

BOJ minions get data that goes against their plans to hike Japan’s interest rates, Japan’s new prime minister sees her political coalition break down:

• Japan wholesale inflation holds steady, yen falls add pressure on BOJ
• Political Chaos In Japan: LDP Partner Exits Ruling Coalition In Shock Blow To Takaichi, What Happens Next

ECB minions wonder if their plan for digital Euro will cause a Eurozone bank runs:

• Digital euro could drain up to 700 billion euros of deposits in bank run, ECB says

Wall Street suffers worst day since April tariff shock

• Tech stocks tumble after Trump mulls ‘massive increase’ in tariffs on Chinese imports
• Wall Street ends sharply lower as Trump renews China tariff threats over rare earth dispute

The CME Group’s FedWatch Tool projects a greater than 97% probability of two more quarter point cuts in 2025, coming on 29 October (2025-Q4) and 10 December (2025-Q4). In 2026, the FedWatch tool now forecasts a slower pace for additional rate cuts, with a 95% probability for a quarter point rate cut on 18 March (2026-Q1) and an 80% probability of another quarter point rate cut on 17 June (2026-Q2).

The Atlanta Fed’s GDPNow tool projection of real GDP growth in the U.S. during the current quarter of 2025-Q3 held steady +3.8% with data reports on hold because of the Senate Democrats’ ongoing refusal to fund government operations. That refusal led to the announcement of mass firings on Day 10 of the shutdown that resulted from their actions.

We’ve probably given it more electronic ink than it deserves, but the government shutdown once again failed to have any real market-moving impact. We are however tracking it because the announcement of mass firings of nonessential U.S. government employees on Friday, 10 October 2025 would affect U.S. employment data, which in turn, would influence how the Federal Reserve sets its monetary policies.

On a final note, sharp-eyed readers will recognize we’ve reused our editorial cartoon from 7 April 2025. It’s one of our favorites and is, once again, timely!

Image credit: Microsoft Copilot Designer. Prompt: “An editorial cartoon of a frightened Wall Street bull and a very excited Wall Street bear reacting to a news ticker that says ‘TARIFF WAR’”.