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
- 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:
- BOJ minions wondering if they should proceed with rate hikes since Japan's government has a new boss:
- Growth signs developing in Eurozone:
- U.S. stocks race to record closes as AMD jumps on deal with OpenAI
Tuesday, 7 October 2025
- Signs and portents for the U.S. economy:
- Former Fed minion says go slow on rate cuts, current minion worries that AI is pushing up inflation:
- Bigger doomsday prepping developing in China:
- BOJ minions getting inflation data to support plans to hike Japan's interest rates:
- ECB minions wants more Euros in Eurozone:
- S&P 500 ends week-long winning streak amid government shutdown, gold nears $4K
Wednesday, 8 October 2025
- Signs and portents for the U.S. economy:
- Fed minions starting to worry more about job market than inflation:
- Bigger global supply chain trouble, stimulus developing in China:
- BOJ minions warned by Japan's new prime minister to avoid hiking interest rates as minions' independence called into question:
- ECB minion says Eurozone interest rates are just where they need to be:
- Nasdaq and S&P 500 notched record highs while gold topped $4,000
Thursday, 9 October 2025
- Signs and portents for the U.S. economy:
- Fed minions getting worried about sluggish US labor market:
- ECB minions thinking their interest rate policy is perfect for Eurozone:
- Wall Street closes lower, pausing record-setting rally as earnings approach
Friday, 10 October 2025
- Signs and portents for the U.S. economy:
- 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:
- Bigger trouble developing in China:
- 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:
- ECB minions wonder if their plan for digital Euro will cause a Eurozone bank runs:
- Wall Street suffers worst day since April tariff shock
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!
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