Huge Week Off to Soft Start on Fresh Tariff Threat

Published as of: July 14, 2025, 9:04 a.m. ET

(Monday market open) Bastille Day dawned with stocks lower following weekend trade fireworks. President Trump threatened 30% tariffs on imports from the European Union and Mexico that would take effect August 1, barring deals between now and then. The announcement followed last week's threats of tariffs on Canada that put the rally on pause, while investors brace for big bank earnings and key inflation data early tomorrow.

Several major banks kick off earnings season tomorrow, and their numbers often come with comments on economic trends from executives closely tuned in to underlying dynamics. "While the economic data has held up relatively well recently, any negative surprises could generate some selling pressure given the impressive rally that stocks have staged off the April lows," said Nathan Peterson, director of derivatives analysis at the Schwab Center for Financial Research. "And while I don't expect earnings from the financial sector to be bad—the earnings bar has been lowered heading into next week—I think the potential for a 'sell on the news' response is elevated given the setup."

Stocks retreated Friday and fell for the week after President Trump threatened a 35% tariff on imports from Canada, 25% on Japan, and 50% on copper. Treasury yields edged up amid concerns that tariffs could raise prices and hinder growth, and are up again this morning, along with market volatility. "We're back to 'Liberation Day' levels of tariffs despite the negotiations and deals that have been in play since then," Schwab's fixed income experts said, referring to Trump's original tariff levels announced April 2 and then delayed. Plans for business investment appear to be softening, and there's been some deterioration in the labor market, they added.

1. CPI preview: Going the wrong way? The June Consumer Price Index (CPI) out tomorrow is seen rising 0.2% month over month for headline CPI and 0.3% for core CPI, which excludes volatile food and energy prices. Both were 0.1% in May, meaning if analysts are right they're headed the opposite way of what the Federal Reserve wants. The year-over-year CPI was 2.4% in May, and any uptick from that could raise concerns, as it's already above the Fed's 2% goal. Analysts expect 2.7%. Recent inflation reports featured benign headlines thanks partly to less growth in shelter costs, while prices rose for items like building materials, hardware, computers, and automobiles. If that continued in June, it could signal a trade impact. "We're in kind of an equilibrium stage here, where inflation is not taking off to the upside, and it's made some improvement, but it's not really where it needs to be for the market to get really comfortable that we're heading to 2%—or the Fed to get comfortable," said Kathy Jones, chief fixed income strategist at Schwab.
    
2. Metrics to monitor as banks report: Things to keep in mind as large U.S. banks report the next two days include investment banking activity after recent signs of life in mergers and initial public offerings (IPO), the impact of net-interest income on bank profits, loan volume and credit quality, and where bank executives see the economy heading. They're likely to get asked their outlooks for inflation, the potential tariff impact on prices, and what they're hearing from clients about any plans to raise prices. The JPMorgan call tomorrow typically draws interest for economic commentary from CEO Jamie Dimon, who has often warned of danger signs in recent quarters. His thoughts on forecasts for U.S. debt to rise more than $3 trillion due to the recent budget bill might be illuminating. In recent quarters, the big banks often got earnings season off to a positive start, with a tendency to beat estimates.
    
3. Fed independence an unheralded bullish element: Rates haven't changed since December but stocks keep posting new highs in a broad rally. This might not be disconnected. In fact, the Fed's unwillingness to lower rates amid political pressure might help explain the rally, though Fed Chairman Jerome Powell has come under increasing fire from Trump for not changing policy. "I think part of the reason why the equity market is doing well is because the Fed isn't cutting here, that they don't have the justification for it, or they're not succumbing to political pressure to do so," said Liz Ann Sonders, chief investment strategist at Schwab in the latest Schwab On Investing podcast. "I think the equity market may be giving essentially a thumbs up to the Fed being in pause mode." Schwab's Jones, in the same podcast, agreed and noted the historic importance of keeping rate policy from being politicized. "The fact that the central bank is pushing back on political pressure is probably a very good thing for the markets, because that is one of the pillars that underpins the markets."

• Bitcoin (/BTC) jumped more than 2.8% early Monday to new all-time highs above $123,000. Stocks related to crypto, including Strategy (MSTR) and Coinbase (COIN) rose 1% to 2%. Favorable crypto policy from the Trump administration and Congress has lifted cryptocurrencies this year.
   
• Tesla (TSLA) climbed more than 1% early Monday, building on last week's gains. Shares are nearing their 200-day moving average near $316 as The Wall Street Journal reported that SpaceX, CEO Elon Musk's rocket company, had invested $2 billion in xAI, Musk's AI company.
   
• Kraft Heinz (KHC) edged up around 0.7%. Shares climbed 1.6% Friday as The Wall Street Journal reported the company might split in two, spinning off part of its grocery operation.
   
• Boeing (BA) climbed 1.5% ahead of the open. An initial report on Air India Flight 171, which crashed June 12, didn't suggest mechanical failure.
   
• Best Buy (BBY) fell nearly 2% after getting downgraded by Piper Sandler to Neutral from Overweight, citing lack of meaningful catalysts and competitive concerns.
   
• Fastenal (FAST) climbed 4% after the industrial supply company posted better-than-expected earnings.
   
• Autodesk (ADSK) shares rose nearly 7% early Monday as Bloomberg reported the software company is no longer considering a merger and acquisition deal with PTC (PTC). Shares of PTC fell 5% ahead of the open.
   
• Kenvue (KVUE) rose 6% in pre-market trading as the company announced a CEO change.
   
• Crude oil (/CL) rose 1.5% early Monday on worries over tariffs raising costs.
   
• Chances of a Fed rate cut later this month were 6% early Monday, according to the CME FedWatch Tool, and odds of at least one cut by September were around 61%. Chicago Fed President Austan Goolsbee, a voting member of the Federal Open Market Committee, said Friday in an interview with The Wall Street Journal that recent tariffs unveiled by Trump could delay rate cuts by muddying the inflation outlook.
   
• Technically, momentum has exhibited "some signs of exhaustion" and market seasonality is shifting from bullish to more a more bearish stance in the coming weeks, Schwab's Peterson said.
   
• Analysts expect 4.8% second quarter S&P 500 earnings per share growth, down from above 13% in the first quarter, FactSet said Friday. Revenue growth is seen at 4.2%. Most of the projected earnings rise comes courtesy of info tech and communication services sector stocks, with five sectors expected to see declines.

The Nasdaq Bank Index (BANK—candlesticks) recently topped its 200-day moving average (blue line) as second quarter bank earnings approach the starting gate this week. Bank shares are up sharply from their April lows but remain below post-election 2024 highs that came on hopes of reduced federal regulation. The strength of banks heading into earnings season means banks might be under pressure from investors to impress with their results.