U.S. stock futures dropped sharply on Monday after U.S. President Donald Trump imposed tariffs on three of its major trade partners, Canada, China, and Mexico.
The new tariffs will begin Tuesday, with a 10% levy on China and a 25% levy on a few Canadian and Mexican imports, each. The U.S. Chamber of Commerce warns of supply chain disruptions and higher family costs, citing concerns over trade with Mexico worth $46 billion in agricultural products, and Canada valued at $97 billion in energy supplied.
The U.S. dollar index strengthened over 1% following this announcement.
All major index futures were down, with the Russell 2000 falling more than 2%. This drop comes after the indices had posted gains for three consecutive weeks.
Companies reporting earnings this week include Amazon.com Inc. AMZN, Google parent Alphabet Inc. GOOGL GOOG, Palantir Technologies Inc. PLTR, and Fortinet Inc. FTNT.
The 10-year Treasury yield stood at 4.54%, while the two-year yield was at 4.27%. According to the CME Group's FedWatch tool, there is an 86.5% chance that the Federal Reserve will keep interest rates unchanged for the March meeting.
| Futures | Change (+/-) |
| Nasdaq 100 | -1.78% |
| S&P 500 | -1.57% |
| Dow Jones | -1.38% |
| Russell 2000 | -2.14% |
The SPDR S&P 500 ETF Trust SPY and Invesco QQQ Trust ETF QQQ both experienced negative premarket trading on Monday. SPY fell 1.51% to $592.76, and QQQ plunged 1.72% to $513.33, according to Benzinga Pro data.
Cues From The Last Session
Energy, IT, and materials stocks led the decline on Friday as the U.S. markets reacted to new tariffs on the country's three largest suppliers – Canada, Mexico, and China.
Communication services and consumer discretionary stocks were exceptions. The news overshadowed strong earnings from Exxon Mobil Corp. XOM.
On the economic front, the U.S. personal income rose 0.4% in December (up from 0.3% in November), while personal spending climbed 0.7% to an annualized rate of $20.387 trillion. The core PCE price index increased 0.2%.
| Index | Performance (+/-) | Value |
| Nasdaq Composite | -0.28% | 19,627.44 |
| S&P 500 | -0.50% | 6,040.53 |
| Dow Jones | -0.75% | 44,544.66 |
| Russell 2000 | -0.86% | 2,287.69 |
Insights From Analysts
The newly issued tariffs as highlighted by Treasury Secretary Scott Bessent will be used to bring manufacturing back to the U.S. It will also be used to raise revenues to help pay for extending Trump’s 2017 tax cuts and as a lever to negotiate with other countries as an alternative to sanctions.
However, Ed Yardeni and Eric Wallerstein in their QuickTakes note mentioned that “During Trump 1.0, tariff hikes by the U.S. seem to have depressed merchandise imports in 2018 and 2019. But they also depressed U.S. exports because global economic growth was weakened by trade tensions.”
Ryan Detrick, the chief market strategist at Carson Research highlighted in an X post that February is historically the worst month during a post-election year.
Furthermore, Detrick pointed out that “the first quarter of a post-election year usually isn’t all that strong.”
He added that the S&P 500 has been up eight of the past nine quarters. “One of these days it’ll fall and that is perfectly normal.”
According to Ivan Martchev, investment strategist at Navellier & Associates, “Seasonality is not a promise.”
Martchev highlighted that December was supposed to be strong, but it turned out to be weak. He added that since 1928, September has been the weakest seasonal month, but last year only the first week was down while the rest of the month was strong.
“So as we approach February which is weak over the long term, we must remember that seasonality is a guideline, but it can deviate widely each year,” he added.
See Also: How to Trade Futures
Upcoming Economic Data
Here’s what investors will keep an eye on for the week:
- On Monday, January’s S&P final U.S. manufacturing PMI will be released at 9:45 a.m., ET.
- December’s construction spending data and January’s ISM manufacturing data will be announced at 10:00 a.m., ET.
- Atlanta Fed President Raphael Bostic will speak at noon, and auto sales data for January will also be released on Monday.
- On Tuesday, December’s job openings and factory orders data will be out at 10:00 a.m., ET
- Atlanta Fed President Raphael Bostic will speak again at 11:00 a.m., ET on Tuesday, on the topic of housing.
- San Francisco Fed President Daly will speak at 2:00 p.m., ET and Federal Reserve Vice Chairman Philip Jefferson will speak at 7:30 p.m., ET.
- On Wednesday, January’s ADP employment data will be out at 8:15 a.m., and December’s U.S. trade deficit data will be released at 8:30 a.m., ET.
- Richmond Fed President Tom Barkin will speak at 9:00 a.m., ET.
- January’s S&P final U.S. services PMI will be announced at 9:45 a.m. and ISM services data will be out by 10:00 a.m., ET.
- Chicago Fed President Goolsbee will speak at 1:00 p.m., Fed Governor Michelle Bowman will speak at 3:00 p.m., and Fed Vice Chairman Philip Jefferson will speak again at 7:30 p.m., ET.
- On Thursday, initial jobless claims till Feb. 1 and the U.S. productivity data for the fourth quarter will be out at 8:30 a.m., ET.
- Fed Governor Christopher Waller will speak at 2:30 p.m. and Dallas Fed President Lorie Logan will speak at 5:10 p.m., ET.
- On Friday, the U.S. employment, unemployment, and hourly wages report for January will be out at 8:30 a.m., ET.
- Fed Governor Michelle Bowman will speak again at 9:25 a.m., ET.
- December’s wholesale inventory data will be announced at 10:00 a.m., ET.
- January’s preliminary consumer sentiment data will be out at 10:00 a.m., ET.
- December’s consumer credit will be released at 3:00 p.m., ET.
Stocks In Focus:
- Palantir Technologies Inc. PLTR was down 2.68% in the premarket on Monday as it is expected to report its fourth-quarter earnings after market hours. According to Benzinga's consensus estimates, the company is expected to report earnings of $0.11 per share on revenue of $775.91 million.
- Super Micro Computer Inc. SMCI declined 3.26% as it is expected to report its earnings after having missed filing reports since March 31 quarterly results in May 2024.
- MicroStrategy Inc. MSTR slipped 5.73% as Bitcoin BTC/USD fell over 4% to $95,403.03 per coin.
- Tyson Foods Inc. TSN was up 1.56% ahead of its earnings before the opening bell. Analysts expect it to report quarterly earnings of 88 cents per share on revenue of $13.44 billion.
- Clorox Co. CLX was down 0.20% as Wall Street expects it to report quarterly earnings of $1.41 per share on revenue of $1.63 billion after the closing bell.
- Fabrinet FN declined 2.87% ahead of its earnings after the closing bell. Analysts expect it to report quarterly earnings of $2.50 per share on revenue of $814.33 million.
- NXP Semiconductors NV NXPI dropped 2.56% as Wall Street expects it to report quarterly earnings of $3.14 per share on revenue of $3.10 billion after the closing bell.
- Territorial Bancorp Inc. TBNK was down 7.52% after it reported a net loss of $1.72 million, or 20 cents per share, for the fourth quarter.
Commodities, Gold And Global Equity Markets:
Crude oil futures were trading higher in the early New York session by 2.29% to hover around $74.19 per barrel.
The gold spot index was down by 0.16% to $2,796.63 per ounce. The Dollar Index was up 1.09% at 109.554 level.
Asian markets fell sharply on Monday as Hong Kong's Hang Seng, Australia's ASX 200, South Korea's Kospi, China's CSI 300, and Japan's Nikkei 225 index declined. European markets were also lower in trade.
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