Both the S&P 500 ETF (SPY) and the Nasdaq 100 ETF (QQQ) closed Thursday’s trading session in negative territory ahead of the August 1 tariff deadline.
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June’s core Personal Consumption Expenditures (PCE) index reading spooked the market with a 2.8% year-over-year jump in June, ahead of the consensus estimate for 2.7%. It rose by 0.3% month-over-month, in line with the estimate. Core PCE is the Fed’s preferred gauge of inflation and excludes volatile food and energy prices. The PCE index, which includes these items, increased by 2.6% year-over-year and 0.3% month-over-month. Economists were expecting 2.5% and 0.3%, respectively.
With inflation still a risk, the odds of a 25-bps rate cut during the September 16-17 Federal Open Market Committee (FOMC) have plummeted. They now stand at 39.2% compared to 46.7% yesterday and 58.4% a week ago, according to CME’s FedWatch tool.
During the afternoon, President Trump announced a 90-day trade deal extension with Mexico in order to provide both sides with more time to continue negotiations. The terms for Mexico include a 25% penalty tariff for fentanyl, a 25% tariff on cars, and a 50% tariff on steel, aluminum, and copper. In addition, Mexico will remove all trade barriers against the U.S.
“The complexities of a Deal with Mexico are somewhat different than other Nations because of both the problems, and assets, of the Border,” said Trump in a Truth Social post.
Trump also issued letters to 17 pharmaceutical powerhouses on his social media platform, warning them of consequences if they don’t lower drug prices within 60 days. Each letter demanded most-favored-nation (MFN) prices for Medicaid patients and newly-released drugs. An MFN drug price refers to a price that is equivalent to or lower than the lowest price paid by another country.
“But if you refuse to step up, we will deploy every tool in our arsenal to protect American families from continued abusive drug pricing practices,” warned Trump.
The S&P 500 (SPX) closed with a 0.37% loss while the Nasdaq 100 (NDX) fell by 0.55%.
