[New York Stock Market] Indexes Fall on Tariff Concerns... FOMC Rate Decision in Focus Tomorrow

Trump Says "No Need to Sign a Deal"
Trade Agreement Hopes Dampened... Pharmaceutical Tariffs Loom
Fed Expected to Hold Rates on the 7th... All Eyes on Powell

All three major indexes on the New York Stock Exchange fell simultaneously on the 6th (local time). Ongoing uncertainty over President Donald Trump's tariff policies heightened risk aversion in the market. Investors are awaiting the U.S. Federal Reserve's decision on its benchmark interest rate, which is scheduled for the following day.

AFP Yonhap News

On this day, the Dow Jones Industrial Average, which focuses on blue-chip stocks, closed at 40,829, down 389.83 points (0.95%) from the previous trading day. The S&P 500 Index, representing large-cap stocks, fell by 43.47 points (0.77%) to close at 5,606.91, while the tech-heavy Nasdaq Index dropped 154.58 points (0.87%) to finish at 17,689.66.

President Trump's unstable remarks on tariffs dampened investor sentiment. During a meeting at the White House with Canadian Prime Minister Mark Carney, he stated, "We don't have to sign a deal," emphasizing that trading partners must comply with U.S. terms to avoid high tariffs. This stance contrasted sharply with statements from U.S. Treasury Secretary Scott Besant, who had suggested that a trade agreement could be reached as early as this week. In an interview with CNBC the previous day, Secretary Besant said, "We are very close to some agreements." He also told Congress that "97 to 98 percent of our trade deficit comes from trade with 15 countries, and 18 percent of that is with major trading partners," adding, "It would be surprising if we don't complete 80 to 90 percent (of the negotiations) by the end of the year. It will probably be completed much sooner."

President Trump also announced the previous day that tariffs on pharmaceuticals would be "announced within the next two weeks." As the imposition of U.S. tariffs on pharmaceuticals becomes more likely, the market is closely watching for signs that the tariff war may escalate again.

Michael Brown, an analyst at Pepperstone, commented, "With continued trade uncertainty and significant downside economic risks, the upward momentum in the stock market is weakening."

However, there are also reports that a trade agreement between the United States and other countries is imminent. The Financial Times (FT) reported that the United States and the United Kingdom are expected to sign a trade agreement this week. It is reported that the agreement will include provisions for the United States to apply low-tariff quotas on imports of British steel and automobiles. Previously, President Trump imposed a 25% tariff on all imported steel, aluminum, and automobiles entering the United States.

Investors are also paying close attention to the Fed's benchmark interest rate decision scheduled for the following day. Although there are concerns about a tariff-induced economic downturn, the market widely expects the Fed to keep rates unchanged at this month's Federal Open Market Committee (FOMC) meeting. According to CME FedWatch, the interest rate futures market estimates a 96.8% probability that the Fed will maintain the rate at 4.25?4.5% per annum this month. The economic outlook to be presented by Fed Chair Jerome Powell at the press conference immediately following the FOMC is a key focus for the market. Previously, Chair Powell noted that the level and scope of tariff increases are exceeding expectations and stated, "The impact on the economy, including higher inflation and slower growth, will be significant." This aligns with market concerns about stagflation?rising prices amid slowing growth.

Steve Rick, chief economist at TruStage, predicted, "Despite external pressure for a rate cut, the Fed is likely to maintain its current rate freeze stance until the main factors affecting the economy become clearer." He added, "As the economy adapts to the impact of tariffs, we expect growth to slow to a pace lower than in recent months."

The U.S. trade deficit for March of this year, announced on this day, reached a record high due to the effects of tariffs. The U.S. Department of Commerce reported that the trade deficit for March increased by 14% from the previous month to $140.5 billion, marking the largest monthly deficit on record. This surge was attributed to companies stockpiling imports in anticipation of the full implementation of President Trump's tariff policies.

By sector, Palantir Technologies fell 12.05% after its first-quarter revenue missed market expectations. Tesla declined by 1.75%, and Microsoft (MS) dropped by 0.66%.

U.S. Treasury yields declined. The 10-year U.S. Treasury yield, a global benchmark, fell by 4 basis points (1bp = 0.01 percentage point) from the previous day to 4.3%. The 2-year U.S. Treasury yield, which is sensitive to monetary policy, dropped by 5 basis points to 3.78%.