President Donald Trump sent markets lower Friday with a tariff warning for China. By Sunday night, the president reversed course and stocks are soaring on Monday. A market expert breaks down what the warning means for the markets.
Trump's Threat Panics Market
On Friday, Trump threatening higher tariffs on China sent U.S. stocks lower during the day and caused a significant drop off in the after-hours market.
Freedom Capital Markets Chief Market Strategist Jay Woods said the latest social media posts from Trump follow a pattern of "headline turmoil" and stocks hitting record highs. This time, stocks couldn't hold up their records despite negative headlines.
"President Trump's social media post on Friday rained on the parade causing the market to reverse in a big way," Woods said in a weekly newsletter.
Woods said the new tariff threat from Trump creates "another level of uncertainty" heading into earnings season.
"While we continue to see earnings growth it has been the guidance in the face of tariffs that has become the focus on earnings calls."
Woods said Trump's threats against China could throw "cold water on the rally" while creating another negative item to monitor during the government shutdown.
Friday's decline marked the most volatile day for the stock market dating back to April, according to Woods.
The market expert said Trump's post had two key points, one being a potential cancelation of a meeting with Chinese President Xi Jinping and the second being the potential increased tariffs on China.
"A cancelled meeting and ‘massive increase' in tariffs may have been another negotiating tactic used by this administration to yield better results for the longer term. If so, the knee-jerk reaction lower should be another buying opportunity."
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Where Do Markets Go From Here?
The SPDR S&P 500 ETF Trust (NYSE:SPY), which tracks the S&P 500, is up 1.3% to $661.26 on Monday.
The gains and reversal from Friday come after Trump took to social media Sunday with another message about China that may have eased investors' fears.
"Don't worry about China, it will all be fine! Highly respected President Xi just had a bad moment. He doesn't want Depression for his country, and neither do I," Trump posted.
Woods said the key level to watch is $6,667 for the S&P 500 as investors look to see if Trump's latest social media post can reverse the losses from Friday.
"It may be a major challenge where that former level of support could act as a new area of resistance."
The market expert said Trump's social media feeds will likely be closely monitored over the next two weeks ahead of a planned meeting between Trump and Xi in South Korea.
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