Stock Index Futures Plunge as China Retaliates in U.S. Trade War, Powell’s Speech and Big Bank Earnings Awaited

December S&P 500 E-Mini futures (ESZ25) are down -1.18%, and December Nasdaq 100 E-Mini futures (NQZ25) are down -1.65% this morning as sentiment weakened after China hit back at the U.S. on shipping.

China on Tuesday imposed sanctions on the U.S. units of South Korean shipping giant Hanwha Ocean and warned of additional retaliatory measures against the industry. Organizations and individuals in China are prohibited from conducting any transactions, cooperation, or related activities with these entities, according to a statement from the Chinese Ministry of Commerce. The move rekindled fears that the U.S.-China trade war could flare up again.

Investors now await a speech from Federal Reserve Chair Jerome Powell and earnings reports from some of the biggest U.S. banks.

In yesterday’s trading session, Wall Street’s main stock indexes ended in the green. The Magnificent Seven stocks advanced, with Tesla (TSLA) climbing over +5% and Alphabet (GOOGL) rising more than +3%. Also, Broadcom (AVGO) surged over +9% after announcing a partnership with OpenAI to design and deploy 10 gigawatts of custom AI accelerators. In addition, Bloom Energy (BE) jumped more than +26% after Brookfield Asset Management agreed to invest up to $5 billion to deploy the company’s fuel cells at new data centers that operate AI. On the bearish side, Fastenal (FAST) slumped over -7% and was the top percentage loser on the S&P 500 and Nasdaq 100 after the fastener maker reported weaker-than-expected Q3 EPS.

“Investors remain eager for exposure, and if this recovery holds, it will reinforce the idea that retail investors can’t be easily shaken and another reminder that buying the dip continues to work,” said Mark Hackett at Nationwide.

Philadelphia Fed President Anna Paulson indicated on Monday that she supports two additional quarter-point rate cuts this year, saying monetary policy should look through the tariff-driven rise in consumer prices. “For me, the bottom line is that I simply don’t see the type of conditions, especially in the labor market, which seem likely to turn tariff-induced price increases into sustained inflation,” Paulson said.

U.S. rate futures have priced in a 97.8% probability of a 25 basis point rate cut and a 2.2% chance of no rate change at the conclusion of the Fed’s October meeting.

Third-quarter corporate earnings season gets underway, with some of the biggest U.S. banks, including JPMorgan Chase (JPM), Wells Fargo (WFC), Goldman Sachs (GS), and Citigroup (C), set to report their quarterly results today. Johnson & Johnson (JNJ) and BlackRock (BLK) are other prominent companies scheduled to deliver their quarterly updates today. According to Bloomberg Intelligence, companies in the S&P 500 are expected to post an average +7.2% increase in quarterly earnings for Q3 compared to the previous year, marking the smallest rise in two years.

Investors will also focus on a speech from Fed Chair Jerome Powell. Mr. Powell is set to speak on the economic outlook and monetary policy at the National Association for Business Economics Annual Meeting later today. Also, Fed Vice Chair for Supervision Michelle Bowman, Fed Governor Christopher Waller, and Boston Fed President Susan Collins will speak today.

Meanwhile, the U.S. government shutdown continues, delaying key economic reports. The shutdown delayed the release of the key U.S. jobs report for September, and the timing of its publication, along with other official economic data, remains unclear. However, the U.S. Bureau of Labor Statistics announced on Friday that it would publish the September inflation report on October 24th, instead of the originally scheduled date of October 15th.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.008%, down -1.21%.

The Euro Stoxx 50 Index is down -0.59% this morning amid renewed concerns over U.S.-China trade tensions. Mining and automobile stocks were among the biggest laggards on Tuesday. Data from the Office for National Statistics released on Tuesday showed that the U.K. labor market weakened slightly in the three months to August, with unemployment edging higher and wage growth cooling, as companies remained cautious about hiring. Economists noted that further labor market weakness in the coming months could prompt the Bank of England to lower interest rates before the end of 2025. Separately, final data confirmed that Germany’s inflation rose slightly in September. In addition, the ZEW economic research institute reported that German investor morale rose less than anticipated in October, as the long-awaited recovery in Europe’s largest economy continues to face setbacks. However, survey respondents remain hopeful for an improvement in the medium term. Meanwhile, Germany’s economy ministry said on Tuesday that economic indicators have yet to signal a third-quarter recovery in Europe’s largest economy, as weakening global momentum and higher U.S. tariffs weigh on exports. In corporate news, Michelin (ML.FP) slid over -8% after the tiremaker cut its full-year guidance. At the same time, Telefonaktiebolaget Lm Ericsson (ERICB.S.DX) surged more than +14% after the telecom equipment maker reported strong quarterly earnings.

U.K. Average Earnings ex Bonus, U.K. Unemployment Rate, Germany’s CPI, Germany’s ZEW Economic Sentiment Index, and Eurozone’s ZEW Economic Sentiment Index were released today.

U.K. Average Earnings ex Bonus stood at 4.7% in the three months to August, in line with expectations.

The U.K. Unemployment Rate was 4.8% in the three months to August, weaker than expectations of 4.7%.

The German September CPI rose +0.2% m/m and +2.4% y/y, in line with expectations.

The German October ZEW Economic Sentiment Index came in at 39.3, weaker than expectations of 41.2.

The Eurozone October ZEW Economic Sentiment Index stood at 22.7, weaker than expectations of 30.2.

Asian stock markets today settled in the red. China’s Shanghai Composite Index (SHCOMP) closed down -0.62%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -2.58%.

China’s Shanghai Composite Index reversed earlier gains and ended lower today as reignited U.S.-China trade tensions dampened sentiment. Technology stocks underperformed on Tuesday. Profit-taking pressure in the tech sector intensified amid worries over technology-security strains after the Dutch government moved to take control of Chinese-owned chipmaker Nexperia. Meanwhile, China imposed restrictions on five U.S. units of Hanwha Ocean in response to American investigations into the Chinese maritime, logistics, and shipbuilding industries, warning of further retaliation. The move marked the latest in a string of tit-for-tat actions as Beijing and Washington position themselves for leverage ahead of anticipated trade talks. Further escalating tensions, Beijing and Washington began charging additional port fees on each other’s vessels, though Beijing exempted those built domestically. Still, U.S. Treasury Secretary Scott Bessent said on Monday that President Donald Trump is on track to meet Chinese leader Xi Jinping in South Korea in late October, while cautioning that all options remain on the table for responding to China’s decision to tighten rare earth exports. Investors now shift their focus to China’s consumer and producer inflation data due Wednesday, which are expected to show that deflation persists in Asia’s largest economy, highlighting the continued fragility of domestic demand despite recent policy support.

Japan’s Nikkei 225 Stock Index closed sharply lower today as trading resumed after a long weekend, with renewed U.S.-China trade tensions and the collapse of Japan’s ruling coalition weighing on sentiment. Technology and healthcare stocks led the declines on Tuesday. Bank stocks also slumped as investors judged that domestic political instability would complicate the Bank of Japan’s path toward raising interest rates. The market was unwinding the so-called “Takaichi trade” after the ruling Liberal Democratic Party lost its coalition partner, Komeito, following Sanae Takaichi’s election as party leader. The withdrawal of Komeito from Japan’s ruling coalition is expected to complicate Sanae Takaichi’s bid to become the nation’s next prime minister. Analysts cautioned that elevated political uncertainty increases the risk of a near-term correction in Japan’s equity market. Sentiment weakened further in the afternoon after China imposed new curbs on some shipping-related companies in retaliation for a U.S. investigation into its maritime industry. Meanwhile, the benchmark index posted its biggest single-day drop since April 11th. In other news, Japanese Finance Minister Katsunobu Kato said on Tuesday that the country must craft a new economic strategy suited to the current environment, where inflation, rather than deflation, has become the main concern, unlike during the era of “Abenomics” stimulus policies. Investors will closely watch political developments in the coming days as the LDP, Komeito, and other parties consider potential alliances and decide whom to back as Japan’s next prime minister. The Nikkei Volatility Index, which takes into account the implied volatility of Nikkei 225 options, closed up +8.97% to 32.81.

Pre-Market U.S. Stock Movers

Chip stocks are moving lower in pre-market trading after China ratcheted up trade tensions with the U.S. Micron Technology (MU) is down over -3%. Also, Marvell Technology (MRVL) and ON Semiconductor (ON) are down more than -2%.

The Magnificent Seven stocks slid in pre-market trading, with Tesla (TSLA) and Nvidia (NVDA) falling over -2%.

Cryptocurrency-exposed stocks are dropping in pre-market trading, with the price of Bitcoin down more than -4%. Strategy (MSTR) is down more than -5%. Also, MARA Holdings (MARA) is down nearly -5%, and Coinbase (COIN) is down more than -4%.

Navitas Semiconductor (NVTS) soared more than +23% in pre-market trading, extending yesterday’s gains after announcing advancements in its high-voltage power architecture designed for advanced infrastructure, including AI factories and data centers.

PotlatchDeltic (PCH) climbed over +5% in pre-market trading after agreeing to merge with Rayonier in an all-stock deal valued at about $8.2 billion, including debt.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Tuesday - October 14th

JPMorgan (JPM), J&J (JNJ), Wells Fargo&Co (WFC), Goldman Sachs (GS), BlackRock (BLK), Citigroup (C), Domino’s Pizza Inc (DPZ), Albertsons (ACI), Hancock Whitney (HWC), FB Financial (FBK), Karooooo (KARO), Equity Bancshares Inc (EQBK), Sono-Tek Corp (SOTK).