The S&P 500 (SPY) and the Dow Jones Industrial Average (DIA) gained in today’s trading after spending most of the day in the red. However, the Nasdaq 100 (QQQ) closed slightly lower. Interestingly, the energy (XLE) and real estate sectors (XLRE) were the session’s leaders, while the consumer staples sector (XLP) was the laggard. In addition, trading volume was significantly lower than the average, which suggests that investors are waiting for this week’s busy earnings results to come in.
Separately, factory activity in Texas grew slightly in April, according to the Texas Manufacturing Outlook Survey. The state’s production index stayed at 5.1, showing modest growth. However, other signs turned negative, as new orders fell sharply, capacity use dropped, and shipments turned negative for the first time this year. Business confidence also got worse, with more companies worried about the future. In addition, employment showed a slight drop, with more layoffs than hires.
Meanwhile, the cost of raw materials jumped, while wage growth stayed mostly stable. Looking ahead, manufacturers are cautious, with expectations for future growth slipping below average.
At the same time, there are growing concerns about the U.S. economy. Interestingly, President Trump suggested using money from tariffs to lower taxes for middle-income Americans. However, UBS Chief Economist Paul Donovan warned that tariffs can’t replace income taxes. He said that this idea risks hurting confidence in U.S. economic policy and the dollar. Donovan also pointed out that tariffs mainly hurt lower-income households. As a result, financial markets have become more nervous about a possible U.S. recession since Trump’s tariff measures started.
This has also led to signs of strain in the energy markets. In fact, Barclays cut its Brent crude oil forecast by $4 to $70 a barrel for 2025 and expects it to fall further to $62 in 2026. Even though demand from China is strong, Barclays said that the global economy is weakening and trade tensions are rising. In addition, oil supply is expected to outpace demand and create a surplus. Barclays warned that if trade tensions ease, Brent oil could average $75, but if demand falls and supply stays high, prices could drop into the low $50s for a long time.