Stocks Hit Pause, Dollar Slips With China/US Trade Talks in Focus

Markets treaded water on May 10, 2025, as investors braced for pivotal U.S.-China trade talks while parsing mixed signals from policymakers and economic data. The Dow Jones Industrial Average (^DJI) dipped 0.2%, while the S&P 500 (^GSPC) and Nasdaq (^IXIC) hovered near flat, reflecting a wait-and-see stance ahead of weekend negotiations in Geneva.

. Meanwhile, the U.S. Dollar Index (DXY) edged lower to close at 108.32, as traders weighed the possibility of tariff relief against lingering uncertainties.

Trade Talks: A Delicate Balance

President Trump’s social media musings cast a shadow over markets. His suggestion that an 80% tariff rate on Chinese goods “seems right” signaled a potential compromise, contrasting with earlier threats of broader tariffs. Analysts noted this could mark a pivot from confrontation to negotiation, though risks remain. The U.S.-China talks in Geneva were anticipated to address tariff reductions, with China reportedly open to formal discussions—a shift from prior deadlock.

However, the stakes are high. An $300 billion tariff hike looms, threatening to crimp corporate profits and economic growth. Goldman Sachs revised its 2025 U.S. GDP forecast to 1.2%, while the Atlanta Fed projected a meager 1.1% for Q2, citing trade-induced headwinds.

Economic Crosscurrents

The Q1 2025 GDP contraction of 0.3% underscored the trade war’s drag, as imports surged 41.3% ahead of potential tariffs. This “pre-buying” effect widened the trade deficit, a short-term hit to growth. Meanwhile, the labor market showed resilience: 177,000 jobs were added in April, exceeding expectations, though federal employment declined.

Corporate earnings offered a mixed picture. The S&P 500 posted 12% year-over-year earnings growth, with tech and consumer staples leading gains. Yet, CEO sentiment diverged. Chubb’s CEO warned of rising recession risks due to trade uncertainty, while Visa’s CEO highlighted strong consumer spending.

Markets React: From Bitcoin to the Fed

Cryptocurrency markets mirrored shifting sentiment. Bitcoin (BTC-USD) surged to $102,000, benefiting from reduced trade tensions and risk-on flows. Gold rebounded to $3,335/ounce, as traders priced in inflation risks amid prolonged trade uncertainty.

The Federal Reserve, meanwhile, remained on hold. Markets priced in just a 17% chance of a June rate cut, reflecting the Fed’s wait-and-see approach to tariff impacts.

Risks Ahead

Despite optimism around the Geneva talks, the path forward is fraught. The White House’s goal of 90 trade deals in 90 days is ambitious, and any breakdown could reignite volatility. For now, investors are left navigating a narrow corridor between hope and caution.

Conclusion

The market pause on May 10 highlights the precarious balancing act between trade optimism and economic fragility. While tariff reductions could unlock gains——the broader risks remain anchored in unresolved trade tensions. With GDP contracting and growth forecasts pared back, any misstep in negotiations could trigger a sharper selloff. Investors would do well to stay nimble, focusing on sectors insulated from trade shocks—like healthcare or consumer staples—while monitoring geopolitical developments. The stakes are clear: a resolution could reignite momentum, but a stalemate may prolong the pause.