Weekly Market Recap: Tariffs Test Investor Patience as Stocks Slip Amid Political and Policy Crosscurrents

Market Overview

Stocks ended the week lower as tariff concerns resurfaced and reignited volatility after a stretch of narrow trading. The S&P 500 declined 2.4%, erasing early-week gains sparked by optimism around new artificial intelligence (AI) partnerships. Investor sentiment turned sharply Friday following renewed trade tensions between the U.S. and China, with President Trump’s remarks about potential new levies triggering the S&P 500’s steepest single-day drop since April. The Dow Jones Industrial Average fell 2.7%, while the NASDAQ declined 2.5%.

Sector performance was mixed, with Utilities (+1.4%) and Consumer Staples (+0.6%) providing rare pockets of strength. On the downside, Energy (-4.0%), Consumer Discretionary (-3.3%), and Materials (-2.9%) were the week’s laggards. Despite the pullback, Utilities and Technology remain the top year-to-date gainers, up 21.7% and 20.3%, respectively.

Internationally, markets followed suit. European equities slumped late in the week amid renewed political turmoil in France after Prime Minister Sébastien Lecornu’s resignation, while Asian equities were mixed. Japan rallied early on the surprise election of pro-growth lawmaker Sanae Takaichi but gave back gains after coalition uncertainty resurfaced.

In commodities, crude oil prices fell as a ceasefire in Gaza reduced geopolitical risk premiums. Gold extended its rally above $4,000/oz before easing slightly, while the dollar strengthened against major peers on risk-off flows.

Federal Reserve Insights & Economic Roundup

Federal Reserve meeting minutes showed inflation remains “stubbornly sticky,” with tariff-related price pressures expected to persist into 2026 and inflation unlikely to hit the Fed’s 2% target until late 2027. One Fed governor dissented in favor of a deeper 50-basis-point cut, citing labor market weakness. Futures markets continue to price in two additional rate cuts this year, followed by a likely pause at the January 2026 meeting.

Bond markets saw yields rise early before easing Friday. The U.S. 10-year Treasury yield ended the week near 4.05%, while international yields climbed as France’s political instability and Japan’s expected policy shifts pressured global debt markets. French 10-year yields now exceed Italy’s for the first time since 1999—a striking reversal from the last European debt crisis.

Meanwhile, Fed officials noted resilient foreign demand for U.S. assets despite higher global yields, signaling continued investor confidence in the U.S. as a safe haven.

The Week Ahead

With the government shutdown still ongoing, the release of several key reports may be delayed. Scheduled data includes:

• Tuesday: NFIB Small Business Optimism (Sep)
• Wednesday: CPI (Sep), Real Earnings (Sep), Fed Beige Book
• Thursday: Retail Sales (Sep), PPI (Sep), Jobless Claims (Oct 11), Philly Fed Index (Oct)
• Friday: Housing Starts (Sep), Industrial Production (Sep), Capacity Utilization (Sep), TIC Flows (Aug)

Investors will closely watch September’s CPI and PPI reports for signs of inflation relief—or renewed price pressures that could influence the Fed’s next move.