Trump's Trade Bombshell Shakes Wall Street--Is the Market's AI-Fueled Run at Risk?

Markets finally paused for breath. After a string of record highs, the S&P 500 (SPY) lost momentum Friday as Donald Trump turned up the heat on trade. The president floated a 15%20% blanket tariff on most U.S. trading partners, plus a targeted 35% hit on Canadian imports. That sent a wave through global assets. The dollar climbed to its best week since February, longer-term Treasuries sold off, and even Brazil's real trimmed losses after Trump hinted at potential talks. One more curveball? He's considering firing Fed Chair Jerome Powell if re-electeda headline that added to investor unease.

Tech stocks took the brunt of the pullback. Apple and Meta led the drop in megacaps, while Nvidia NVDA defied the trend, extending gains after blowing past a $4 trillion market cap. Tesla TSLA, Alphabet GOOG, and Microsoft MSFT edged lower ahead of earnings season. Still, sentiment isn't broken. UBS UBS expects trade policy to stabilize later this year, even if noise gets louder in the near term. Their base case sees the U.S. tariff rate settling around 15%a drag, but not enough to derail the economy. They're still calling for the S&P 500 to reach 6,500 by mid-2026, even if the path is bumpy.

So what's next? All eyes are now on earnings. Six of the biggest U.S. banks report next week, and investors are hoping for strong AI-driven guidance to keep the bull run alive. Michael Landsberg at Landsberg Bennett thinks the bar for Q2 earnings is lowand that sets up a favorable backdrop. Yes, tariffs created some noise last quarter, but expectations are muted, he said. If companies clear that bar, we could still see upside. Bank of America strategists echoed that view, saying few clients seem worried about valuations or growth. Still, Citi C struck a more cautious note, warning that upbeat forecasts may be running ahead of what the data can support.