Market Rally Faces New Challenges as June Begins 

The best May performance since 1990 has given way to June jitters, with stocks opening lower amid renewed U.S.-China trade tensions. China has accused the U.S. of violating their trade truce, responding to President Trump’s earlier claims, while the administration doubled steel and aluminum tariffs. This comes as investors prepare for Friday’s jobs report, expected to show slowing employment growth to 125,000 new positions. Historical trends add to concerns, with June being the third-worst month for stocks since 2000.

Market strategists note that while tariff news previously caused 1%+ daily swings, reactions have become more muted as investors adapt to ongoing tensions. The market’s bifurcation continues, with mega-cap tech stocks (up 10.3% in May) outperforming small caps that remain vulnerable to tariff impacts. Remarkably, just seven tech giants accounted for 70% of the S&P 500’s Q2 gains, highlighting the rally’s narrow leadership. This concentration raises questions about the sustainability of the market advance.

All eyes turn to Fed Chair Powell’s upcoming remarks following Governor Waller’s suggestion of potential 2024 rate cuts if inflation cools. Economists warn the new tariffs may cause temporary CPI spikes, complicating the Fed’s path. While the labor market remains strong (unemployment at 4.2%), slowing wage growth and potential consumer spending pullbacks could signal trouble ahead. Retail sales data, particularly for discretionary items, will be crucial for gauging consumer health amid rising prices.

Sector Spotlight: Mixed Performance Across Industries 

Tesla shares fell on uneven European sales data, while Moderna gained after FDA approval for its updated COVID vaccine. DraftKings tumbled 5.5% on Illinois’ sports betting tax hike, and Campbell Soup beat estimates as consumers cooked more at home. As the 90-day tariff pause reaches its midpoint, markets face competing forces – resilient corporate earnings versus growing macroeconomic uncertainties. Friday’s jobs report may provide the next significant catalyst for market direction.

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