he stock market sold off Friday as President Donald threatened "massive tariffs" vs. China over its tighter rare-earth export rules. Trump followed through, imposing an extra 100% tariff on China after the close. Stocks initially tumbled Friday night but slashed losses as Trump said he might still meet with Chinese President Xi Jinping later this month.
The major indexes suffered sharp weekly losses, with the Dow Jones undercutting its 50-day line. Nvidia chipmaker Taiwan SemiconductorTSM, JPMorgan ChaseJPM, Goldman SachsGS headline stock market earnings this week, while OracleORCL holds its AI World conference.
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Many stocks with AI or China exposure suffered significant weekly losses, including Taiwan Semiconductor and AlibabaBABA. Some pulled back from buy points but held up reasonably well, like Oracle. But the losses were broad.
TeslaTSLA reversed lower on Friday and for the week, but it could be constructive.
Investors probably should have taken some action to cut exposure and prepared to do more.
JPMorgan stock is on IBD Leaderboard, with Tesla stock on the Leaderboard watchlist. NvidiaNVDA and Taiwan Semiconductor stock are on the IBD 50. Nvidia stock is on the IBD Big Cap 20. Oracle was Friday's IBD Stock Of The Day.
Dow Jones Futures Today
Dow Jones futures open at 6 p.m. ET on Sunday, along with S&P 500 futures and Nasdaq 100 futures. That open will likely be closely watched.
The Dow ETF fell 0.2% late Friday while the S&P 500 dipped 0.1% and Nasdaq 100 futures rose 0.1%. All were down around 1% following the China tariff hike until Trump said he wasn't cancelling the upcoming meeting with Xi.
Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
Stock Market Rally
The stock market rally was headed for a mixed week, with the S&P 500 and Nasdaq touching record highs thanks to AI optimism. Then Trump's China threats slammed all the indexes.
The Dow Jones Industrial Average slumped 2.7% in last week's stock market trading. The S&P 500 index fell 2.4%. The Nasdaq composite shed 2.5%, thanks to Friday's 3.6% dive. The small-cap Russell 2000 sank 3.3%. All of these indexes fell below their 21-day lines, while the Dow Jones undercut its 50-day line.
The other indexes were not far behind. Friday night action suggests they could test their 50-day lines on Mondy.
The Invesco S&P 500 Equal Weight ETFRSP tumbled 3.2% for the week to a two-month low, closing below its 50-day line for the first time in five months.
The First Trust Nasdaq 100 Equal Weighted Index ETFQQEW gave up 2.9%, nearly all on Friday, below its 21-day line and almost to its 50-day.
Many leading stocks suffered some hefty losses or reversals on Friday. Rare-earths plays such as MP MaterialsMP were big winners, while some highly speculative growth plays also had a strong Friday.
The 10-year Treasury yield sank 6.5 basis points to 4.05%, thanks to a nine basis-point drop Friday.
U.S. crude oil futures fell 3.25% to $58.90 a barrel for the week, thanks to Friday's 4.2% tumble to a five-month low.
ETFs
Among growth ETFs, the Innovator IBD 50 ETFFFTY edged up 0.8% last week, but tumbled 3.85% on Friday. The iShares Expanded Tech-Software Sector ETFIGV sank 2.4% for the week, with Oracle a top IGV holding. The VanEck Vectors Semiconductor ETFSMH gave up 3.5% thanks to Friday's 5.9% dive, with Nvidia and Taiwan Semi massive components.
ARK Innovation ETFARKK lost 1.4% for the week thanks Friday's 5.4% slide. last week. ARK Genomics ETFARKG gave up 4% Friday but finished the week up 1.1%. Tesla stock is the No. 1 holding across ARK Invest's ETFs.
SPDR S&P Metals & Mining ETFXME popped 3.4% last week. SPDR S&P Homebuilders ETFXHB sold off 7.5%. The Energy Select SPDR ETFXLE shed 4.15% and the Health Care Select Sector SPDR FundXLV retreated 1.9%. The Industrial Select Sector SPDR FundXLI dropped 2.9%.
The Financial Select SPDR ETFXLF fell 2.9%, with JPMorgan stock and Goldman Sachs huge holdings.
Trump Imposes 100% Extra China Tariff
On Friday evening, President Trump announced on Truth Social that he would impose a 100% extra tariff on Chinese goods, above and beyond current tariffs, effective Nov. 1. It's unclear if that will include electronics, such as the AppleAAPL iPhone, that have largely been spared so far. He also said he will impose export controls on "any and all critical software."
However, Trump later said in the Oval Office that he hasn't cancelled a planned meeting with President Xi at the APEC meeting in late October. "I don't know that we're going to have it, but I'm going to be there regardless, so I would assume we might have it."
On Friday morning, President Trump wrote on Truth Social that he was considering "massive" tariffs, saying Beijing is holding the world "captive" with its rare earth restrictions. On Thursday, China imposed much-tighter restrictions on exports of rare earths and technology, affecting EVs, chips and many other industries, as well as important military uses. Beijing also curbed shipments of key EV components.
Early Friday, China announced an antitrust probe of QualcommQCOM, after a similar move vs. Nvidia last month.
It's notable that China initiated this latest round of the trade war. Trump and key aides had been relatively upbeat about U.S.-China trade talks, with the president suggesting recently that Beijing might resume some soybean buys.
Beijing likely views its latest actions as a delayed response to AI chip export curbs that started under the Biden administration as well as Trump's already-big tariffs. China's moves signal that it'll negotiate from a position of strength and ready for the consequences of a wider trade war.
Trump's Nov. 1 tariff deadline, after the APEC meeting, does offer a window to lower tensions
Tesla Stock
Tesla stock tumbled 5.1% to 413.49 on Friday, undercutting the 21-day moving average and recent lows. But TSLA now has a 13%-deep handle with a 470.75 buy point on a very deep base going back to late December.
So this could be constructive action. Ideally, Tesla stock would find its footing and tighten up. But if Tesla gets much closer to the 400 level, recent investors might want to take at least partial profits.
TSLA stock fell to 408 Friday evening.
This past week, Tesla unveiled stripped-down, cheaper Model Y and Model 3 variants. It also released Full Self-Driving V14, but only to influencers and a limited number of users.
Tesla will report Q3 earnings on Oct. 22.
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What To Do Now
The stock market rally suffered a big sell-off Friday.
It's possible that Trump and Xi will quickly reach a new detente, triggering a snapback rally. But tensions could intensify, at least for a while, triggering more-significant market losses.
Investors who have been heavily exposed probably should have taken a step or two back Friday, cutting losers and taking partial profits on winners.
Be ready to do more on Monday. But also look for stocks and sectors that held up relatively well on Friday, including Oracle.
Oracle's AI World conference starts Monday. JPMorgan, Goldman Sachs and Wells FargoWFC earnings are due Tuesday with Taiwan Semiconductor and Interactive BrokersIBKR on Thursday.
The U.S. government shutdown continues, though it hasn't affected financial markets significantly so far.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Hon
.Brian Scavo
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