Markets Tumble as Trade Tensions Flare

U.S. stocks suffered their steepest decline in months after President Trump reignited trade tensions with China, sparking a broad selloff that erased the week’s gains and rattled investor sentiment.

The S&P 500 (-2.7%) posted its worst single-day loss since April, while the Nasdaq Composite (-3.6%) and Dow Jones Industrial Average (-1.9%) also endured heavy declines. Smaller benchmarks fared no better—the Russell 2000 (-3.0%) and S&P Mid Cap 400 (-2.8%) both underperformed as investors rotated out of risk assets.

Markets opened on an upbeat note as traders attempted to buy the prior session’s dip, but sentiment reversed swiftly after President Trump posted on Truth Social that China was “becoming very hostile,” said he saw “no reason” to meet with President Xi at the upcoming APEC Summit, and hinted at a “massive increase” in tariffs on Chinese imports. The remarks, coming shortly after Beijing tightened export controls on rare earth materials, triggered a wave of selling that persisted through the afternoon.

Losses spread across nearly every sector. The information technology (-4.0%), consumer discretionary (-3.3%), and communication services (-2.3%) sectors led the retreat as investors unloaded tariff-sensitive and high-beta names. The Vanguard Mega Cap Growth ETF slid 3.3%, underscoring the pressure on the market’s largest stocks.

Semiconductors were hit especially hard: the PHLX Semiconductor Index plunged 6.3% after reports that the Senate had passed legislation limiting AI-chip exports to China. NVIDIA (NVDA 183.04, −9.52, −4.95%) and AMD (214.76, −18.13, −7.78%) led the losses.

Energy stocks also stumbled as WTI crude oil fell $2.48 (−4.0%) to $58.94 per barrel, weighed down by renewed global growth concerns.

There were a few bright spots. Domestic rare-earth producers rallied on expectations that Washington would counter China’s export restrictions—MP Materials (MP 78.51, +6.22, +8.60%) led the group higher. The consumer staples sector (+0.3%) was the lone S&P 500 gainer, buoyed by defensive buying and a strong performance from PepsiCo (PEP 150.08, +5.37, +3.71%), which continued to benefit from post-earnings momentum.

After weeks of calm trading and relentless dip-buying, markets were finally jolted by a macro shock. President Trump’s remarks revived long-dormant trade fears, prompting broad profit-taking across nearly all sectors. Decliners outpaced advancers by roughly 5-to-1 on both the NYSE and Nasdaq, sending the major averages sharply lower and erasing the week’s earlier gains.

Our FTInvest 11 model portfolio suffered a sharp weekly pullback, falling 2.18% on Friday to close at 825.21, bringing its weekly decline to 4.05%. The downturn outpaced the broader market, as the S&P 500 slid 2.43% for the week amid renewed trade tensions between the U.S. and China that rattled global risk sentiment.

Even after the setback, FTInvest 11 remains ahead of the benchmark on a year-to-date basis, up 13.33% compared with the S&P 500’s 11.41% gain.

This week’s decline snapped FTInvest 11’s recent upward momentum, reminding investors of the market’s sensitivity to geopolitical headlines after months of steady gains. Despite the short-term setback, the index retains a solid year-to-date lead, though sustaining that advantage may depend on upcoming earnings results and any easing of trade-related uncertainty.

Next week’s focus will likely shift toward early corporate reports and commentary on demand conditions, which could help determine whether this week’s pullback marks the start of a broader correction or simply a pause in an otherwise resilient uptrend.