Stocks opened comfortably higher Friday but fell off a cliff mid-morning after President Donald Trump's dire warning on China. Uncertainty surrounding the ongoing government shutdown – which will delay a key inflation update – did little to shift sentiment.
Around 11 am Eastern Standard Time, President Trump posted on Truth Social that "very strange things" are happening with China, and that the country is "becoming very hostile" regarding the production of rare earths.
Beijing has "a near-stranglehold on rare earth elements, a group of obscure minerals that happen to be vital to many high-tech applications and products," writes David Payne, staff economist of The Kiplinger Letter.
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Payne adds that extracting and refining rare earths is "a messy process that can cause a lot of pollution," and China, which realized this decades ago, has cornered the market. And it is using its outsize exposure as a "potent trade weapon."
Indeed, Trump noted in his post that China wants "to impose Export Controls on each and every element of production having to do with Rare Earths, and virtually anything else they can think of, even if it's not manufactured in China."
The president added that he was scheduled to meet with Chinese President Xi Jinping in two weeks, "but now there seems to be no reason to do so." He also threatened "a massive increase of Tariffs."
While the main indexes were sporting modest gains in early trading, they ended the day with sizable losses. At the close, the blue-chip Dow Jones Industrial Average was down 1.9% at 45,479, the broader S&P 500 was 2.7% lower at 6,552, and the tech-heavy Nasdaq Composite had shed 3.6% to 22,204.
Tech, Chinese stocks sink after Trump's post
Tech stocks with exposure to China were among the day's biggest decliners. Apple (AAPL) fell 3.5%, Nvidia (NVDA) gave back 4.9%, and Tesla (TSLA) slumped 5.1%.
U.S.-listed Chinese stocks also tumbled, with e-commerce giant Alibaba Group Holding (BABA, -8.5%) and Temu parent PDD Holdings (PDD, -5.3%) closing deep in the red.
Applied Digital climbs 16% after earnings
Not all of the day's price action was down. Applied Digital (APLD) shares climbed 16.1% after the digital infrastructure and data center provider said fiscal first-quarter revenue surged 84% to $64.2 million – beating analysts' estimates.
It also reported a narrower-than-expected fiscal Q1 loss of 3 cents per share.
"We have increasing confidence in APLD's pipeline," says Needham analyst John Todaro, who has a Buy rating on the tech stock and nearly doubled his price target to $41 from $21. "We view Applied Digital as an attractive way to gain 'pick-and-shovel' exposure to the fast-growing AI & HPC [high-performance computing] space."
Todaro notes that APLD's bitcoin mining business offers investors some "downside protection."
Earnings season starts next week, CPI delayed
Next week will be a big one on Wall Street. For one, it's the unofficial start of third-quarter earnings season, with several big banks – including JPMorgan Chase (JPM) and Goldman Sachs (GS) – making an appearance on the earnings calendar.
Meanwhile, an early week appearance from Fed Chair Jerome Powell marks one of the highlights of the economic calendar. Wall Street will have to wait a little longer to see the September Consumer Price Index (CPI) report, though.
The inflation update was supposed to be released on Wednesday morning, but it will be delayed due to the government shutdown.
According to the Bureau of Labor Statistics, the September CPI will be published on Friday, October 24, at 8:30 am EST. However, the BLS also said that "no other releases will be rescheduled or produced until the resumption of regular government services."
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