S&P 500: -2.43% DOW: -2.73% NASDAQ: -2.53% 10-YR Yield: 4.06%
What Happened?
After months of record highs and “buy-the-dip” confidence, the market finally blinked. All major indexes all pulled back for the week, snapping a long streak of gains as fresh trade tensions between the U.S. and China sparked a broad selloff on Friday. What started as another AI-fueled climb – led by AMD’s new OpenAI partnership and big moves from NVIDIA, Microsoft, and Dell – ended with investors heading for safety.
Defensive sectors like utilities and consumer staples were the only bright spots last week, while energy, consumer discretionary, and materials took the brunt of the damage. Treasuries caught a bid as yields fell, displaying a classic flight to safety. The 10-year is back to approaching its September lows.
Trump threatens ‘massive’ tariff hike on China over rare earths dispute
- President Donald Trump threatened to slap a “massive increase of Tariffs” on Chinese products imported into the United States.
- Trump cited export controls that China imposed on rare earths from that country.
- Markets fell sharply on the news
The key takeaway – The backstory: China controls around 70% of the world’s rare earth minerals, which are essential for tech, defense, and semiconductors. On Thursday, Beijing dropped a potential new rule saying foreign companies now need a license to export anything that contains even 0.1% of Chinese rare earths or uses Chinese extraction or magnet-making tech. Basically, if China touched it, they control it.
The response: Donald Trump fired back Friday morning. On social media, he threatened to slap an additional 100% tariff on Chinese goods and impose export controls on critical software starting November 1. Markets didn’t take it well as the S&P 500 dropped nearly 3%, its worst single day slide since April.
Why this matters: This is the sharpest flare-up in U.S.–China tensions since the tariff fueled spring sell-off. Investors are worried this could further fracture global trade between the world’s two largest economies, especially in high-tech and defense supply chains. These escalations could well be ways to get more leverage in upcoming negotiations. There’s a small silver lining as Trump said that if China eases off its rare earth restrictions, he might reconsider the tariffs and even meet with Xi later this month.
Divided Fed officials saw another two interest rate cuts by the end of 2025, minutes show
- Fed officials in September were strongly inclined to lower rates.
- Only dispute seemed to be over how many cuts were coming
Slim majority (10-9) expects 2 more cuts by year end. - Officials grew concerned with state of the labor market.
The key takeaway – he Fed released minutes from its September 16–17 meeting, which provide a detailed look at what policymakers discussed and how they’re thinking about future rate moves. The minutes show that officials generally agree rates should come down further by year end, but there’s still debate over whether that means 1 or 2 more cuts. Some members pointed out that “by several measures, financial conditions suggested that monetary policy may not be particularly restrictive,” which they said warrants a cautious approach.
Officials are increasingly worried about a weakening labor market even as inflation remains above target, though they still expect it to move back toward 2%. With the government shutdown delaying key data releases, including the monthly jobs report, the Fed could be making decisions without a full picture of the economy. If the next jobs report shows continued material weakness, two more cuts by year end look likely.
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