Set for strong gains after Wall Street bounces, US-China trade tensions simmer
The U.S. economy has so far avoided major impacts from frequently changing tariff policies. This could change if countries return to a cycle of retaliatory tariffs and companies pass on more of the higher costs to consumers.
The U.S. government shutdown also halted the usual economic updates on inflation, consumer spending and employment. This has made it difficult for investors and economists to continue measuring the economic impact of the tariffs. Wall Street is examining the latest round of company earnings and forecasts to better understand the broader economic picture.
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Banks were the first major sector to kick off earnings season, and the results show Wall Street had one of its most profitable quarters ever. Still, executives at major banks expressed varying degrees of caution about markets and the economy. While JPMorgan Chase lost 1.9 percent, Wells Fargo gained 7.2 percent and Citigroup gained 3.9 percent.
Industrial companies and retailers were among the other companies that made the biggest gains. Caterpillar rose 4.5 percent and Walmart rose 5 percent.
A lack of updates on the U.S. economy has also left the Federal Reserve without much of the information it uses to make policy decisions. The central bank cut its benchmark interest rate by a quarter point in September due to concerns that unemployment could worsen. This was the first interest rate cut of the year, and Wall Street expects similar cuts at the Fed’s October and December meetings.
Deficiencies in data on employment and inflation make it difficult for the central bank to balance its duties of keeping prices stable while also helping maintain strong employment. On Tuesday, Fed Chairman Jerome Powell once again signaled that the Fed is a little more worried about the labor market.
While Powell acknowledged that economic activity “followed a slightly more robust course than expected,” he emphasized in his speech in Philadelphia that “downside risks to employment appear to have increased.”
This suggests the central bank will likely pursue additional cuts at its remaining two meetings this year (one in late October and the other in December).
Gold rose 0.8 percent and remains above $4,100 per ounce. The precious metal is up 57 percent in 2025 amid a long list of uncertainties, including tariffs and the economy.
