U.S. Stock Futures Drop Amid Signs of Damage Caused by the Trade War

U.S. stock futures pointed to a weaker opening on Tuesday, dragged down by a wave of disappointing corporate news and renewed concerns over escalating global trade tensions. Futures tied to the S&P 500 declined by 0.8%, while contracts on the tech-heavy Nasdaq 100 dropped 1.1%.

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These moves followed warnings from both American and European companies that rising tariffs could significantly hurt their bottom lines. Adding to the anxiety, sources familiar with the matter told Bloomberg that the European Union is preparing to impose additional tariffs on roughly €100 billion ($113 billion) worth of U.S. exports if ongoing trade negotiations fail to produce a resolution.

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In premarket activity in New York, Palantir Technologies saw its stock fall by as much as 8% after its quarterly results came in below market expectations. Ford Motor Company also declined, down 2%, after it withdrew its financial forecast due to uncertainty.

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Meanwhile, Tesla Inc. led losses among major tech names, particularly the so-called “Magnificent Seven,” as its vehicle sales in Europe continued to decline.

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These developments suggest that the recent optimism driven by signs of progress in U.S. trade policy may already be waning. The S&P 500 had just ended a nine-day winning streak on Monday—its longest in around two decades—but Tuesday’s trading setup indicates investors are growing more cautious.

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Ford’s cautionary statement served as a stark reminder that the true impact of the ongoing tariff disputes may become clearer in the months ahead. Meanwhile, a stream of strong economic data has reduced expectations that the Federal Reserve will move quickly to cut interest rates.

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Further stoking concern, new data showed the U.S. trade deficit ballooned to a record $140.5 billion in March, raising questions about the broader implications for the U.S. economy. “This isn’t the time to take on more risk,” said Nicolas Sopel, a strategist at Quintet Private Bank.

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Even in a best-case scenario where trade talks between the U.S. and China succeed, he noted, tariffs are still expected to remain significantly higher than they were before former President Donald Trump initiated the trade war. Sopel said he has already scaled back his exposure to U.S. equities, preferring to wait for clearer signs of economic stability.

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European markets were also under pressure. Germany’s DAX index fell by as much as 2.1% after incoming Chancellor Friedrich Merz failed to secure parliamentary approval, a political setback that underlined the fragility of the ruling coalition.

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Although Merz is still expected to be confirmed eventually, the failed vote unsettled investors. Elsewhere in Europe, the Stoxx 600 benchmark ended a 10-session streak of gains with a decline of 0.3%.

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In the currency markets, Bloomberg’s dollar index held steady after two straight sessions of losses. Meanwhile, the euro trimmed earlier gains to trade 0.2% higher, influenced by political uncertainty in Germany and cautious investor sentiment.

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Attention is now turning to the Federal Reserve’s upcoming meeting. While no interest rate changes are expected this week, market participants have increasingly accepted that rate cuts may not arrive as quickly or be as aggressive as once thought.

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Traders have pushed their expectations for the first rate cut to July and now anticipate three reductions by the end of the year, down from four a week earlier.

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“Recent comments from Fed Chair Jerome Powell indicate that the central bank will maintain a wait-and-see approach in the near term,” said Michael Krautzberger, head of fixed income at Allianz Global Investors. He added that the U.S. dollar could face downward pressure and noted that his firm continues to maintain a short position on the dollar across its investment portfolios.

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In the corporate world, DoorDash Inc. announced it will acquire hospitality technology firm SevenRooms Inc. for $1.2 billion. This move comes just hours after confirming plans to purchase Deliveroo Plc for $3.9 billion. However, investors didn’t seem enthusiastic about the company’s expansion spree, as DoorDash shares dropped roughly 5% in premarket trading.

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Overall, investors appear to be shifting back to a more cautious stance amid growing economic and geopolitical uncertainty. The combination of weak earnings, trade tensions, and fading hopes for immediate Fed rate cuts has created a more challenging backdrop for global equities.

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