[New York Stock Market] Closes Flat Amid Uncertainty Over US-EU Tariff Negotiations

Dow Jones Drops 0.32%
Waller Urges July Rate Cut

The three major stock indexes on the New York Stock Exchange ended mixed following reports that U.S. President Donald Trump is demanding tariffs of at least 15% on the European Union (EU).

On July 18 (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 44,342.19, down 142.30 points (0.32%) from the previous session.

The S&P 500 index, which focuses on large-cap stocks, slipped 0.57 points (0.01%) to 6,296.79, while the Nasdaq Composite rose 10.01 points (0.05%) to close at 20,895.66.

Major foreign media outlets reported that Trump is demanding tariffs of at least 15% to 20% on all negotiating items with the EU. Maros Sefcovic, the EU Commissioner for Trade, was also reported to have informed EU ambassadors that negotiations are difficult. The U.S. government stated that even if both sides reach an agreement, Trump is considering reciprocal tariffs of more than 10%.

Previously, Trump announced that starting August 1, he would impose a 30% tariff on all imports from the EU. While the minimum 15% tariff is lower than this, the market perceives the 30% tariff as a negotiation tactic and still finds the 15% level burdensome.

There were also comments regarding a potential base rate cut. Christopher Waller, a member of the Federal Reserve Board of Governors, publicly urged for a rate cut in July. He argued, "There is no substantial reason to delay a rate cut. It would be reasonable for the Federal Open Market Committee (FOMC) to lower the policy rate by 25 basis points in two weeks." Although a July rate cut is a minority view within the Fed, the futures market responded positively as Waller, who is considered a candidate for the next Fed chair, reiterated his call for an early rate cut.

According to the CME FedWatch Tool, the probability of a 25 basis point rate cut in September in the federal funds futures market was 57.9% at the close of trading. The previous day's closing probability was 50.8%. However, the stock market did not show a significant reaction to Waller's call for a rate cut.

By sector, utilities jumped more than 1%. Energy fell by nearly 1%, while consumer discretionary stocks rose by nearly 1%. Netflix, the world's largest online streaming service provider, saw its stock price fall by more than 5% despite strong second-quarter results. Both second-quarter earnings and revenue exceeded expectations, and the company raised its annual revenue guidance. However, investor sentiment was shaken by the outlook for a lower operating margin in the second half of the year, due to increased content amortization expenses, as well as operating and marketing costs related to large-scale titles scheduled for release in the second half.

American Express, a U.S. credit card company, posted strong second-quarter results, but its stock price fell by more than 2%. This is attributed to an increase in provisions for credit losses to $1.4 billion, compared to $1.3 billion in the same period last year.

Charles Schwab, a U.S. securities brokerage firm, rose 2.9% on the back of a sharp increase in trading revenue in the second quarter, hitting an all-time intraday high. Invesco, a major U.S. asset management firm, surged 15% on news that it plans to convert its popular exchange-traded fund (ETF) product QQQ into an open-ended fund. Among S&P 500 companies, 12% have reported second-quarter results so far, with 83% exceeding expectations.

The University of Michigan Consumer Sentiment Index continued its moderate upward trend in July, reaching its highest level in five months. According to the University of Michigan, the preliminary July Consumer Sentiment Index was 61.8, up 1.1 points from the final June reading of 60.7. The Chicago Board Options Exchange (CBOE) Volatility Index (VIX) fell 0.11 points (0.67%) to 16.41.