By Matt Wirz
The markets started the week with fears of a deficit crisis and ended with renewed angst over tariffs.
President Trump renewed his tariff campaign Friday, threatening to impose a 50% rate on the European Union and warning Apple that foreign-made iPhones could face significant levies. Shares of Apple lost 3%, while broader stock indexes finished the day lower by 0.6% to 1%. The S&P 500 index ended the week down 2.6%; the Dow Jones Industrial Average and the Nasdaq Composite both fell 2.5%.
"I'm not so worried about the stock action," said Amanda Agati, chief investment officer at PNC Asset Management. "A 2% to 3% drop is just normal trading compared to what investors have gotten used to in the last couple of months."
More worrying is the steady rise in Treasury bond yields since Moody's Ratings downgraded the U.S. government and the House of Representatives passed a tax bill that could add to the country's large budget deficit.
The 30-year Treasury bond yield finished the week at 5.036%, its highest level since 2023, while the 10-year yield ended the week at 4.508%, about the same as its high point during the worst of the market turmoil in April. Bond yields rise when prices fall. In contrast, the S&P 500 is still about 16% above its lowest point in April.
Stock investors are relatively sanguine because "they now know that Trump will pivot on trade," said Andrew Slimmon, senior portfolio manager at Morgan Stanley Investment Management, referring to the president's softer stance since late April. Stock prices would have dropped far more dramatically had Trump made his comments about Europe in March, he said. "The market has finally figured out not to overreact to every salvo."
Still, the fresh tariff threats from the White House are aimed at core pillars of global commerce: one of the world's most valuable companies and one of the U.S.'s biggest trading partners. European stocks fell about 0.9% and investors sought shelter in haven currencies such as the Swiss franc and Japanese yen, weighing on the dollar. Gold prices rallied.
Senior U.S. and EU trade officials held a prearranged call on Friday, with neither side changing its position significantly in comments afterward. G-7 finance and central bank chiefs issued a vague statement Thursday that made no mention of levies, and only one mention of "trade, " after a summit that featured both Treasury Secretary Scott Bessent and EU representation.
On Apple, Trump said in a Friday post that he has told Apple CEO Tim Cook "that I expect their iPhone's that will be sold in the United States of America will be manufactured and built in the United States, not India, or anyplace else."
Elevated Treasury bond yields indicate that traders are also worried that diminishing demand for U.S. government bonds will increase the country's borrowing costs. That would bring knock-on effects on large and small businesses by raising the cost of corporate loans and slowing economic activity.
In another cause for concern, the value of the dollar is dropping even as bond-yields rise. That could indicate the U.S. currency is losing some of its appeal as a haven for foreign savers and corporations.
Write to Matt Wirz at matthieu.wirz@wsj.com
(END) Dow Jones Newswires
May 23, 2025 16:41 ET (20:41 GMT)
Copyright (c) 2025 Dow Jones & Company, Inc.
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