Stocks Slide Ahead of Powell Speech as U.S.-China Tensions and Jobs Data Cloud Outlook

Powell Poised to Reaffirm Caution as Tariff Tensions Rattle Markets

Federal Reserve Chair Jerome Powell is set to deliver a closely watched speech today at 17:00 GMT, with markets on edge over renewed U.S.-China trade tensions, a weakening global outlook, and escalating political pressure on Fed policy. Powell is expected to stick to the Fed’s “wait-and-see” message, but the timing of his remarks—amid deteriorating economic diplomacy and rising recession concerns—raises the stakes for investors.

Fed Holds Line as Trump Escalates Pressure

Despite a personal meeting last week with President Trump, during which Trump pushed Powell to begin cutting interest rates, the Fed chair is likely to reaffirm that the current 4.25%–4.50% rate range remains appropriate. Powell has consistently emphasized the Fed’s independence and commitment to data-driven policy, underscoring that rate decisions will hinge on inflation and labor data rather than political pressure. However, Powell now faces a tougher balancing act, as Trump’s newly revived tariff threats against China risk tightening financial conditions and potentially stalling growth.

U.S.-China Trade Rift Reopens

The positive tone following last month’s tariff ceasefire between the U.S. and China has quickly unraveled. Beijing has accused Washington of violating the Geneva trade agreement, prompting fears of retaliatory measures. Stock index futures dropped sharply in response: S&P 500 futures are down 0.53%, Nasdaq futures off 0.68%, and Dow futures lower by 174 points. With the White House now fast-tracking import levies, markets are pricing in potential disruptions to trade flows, corporate margins, and global supply chains.

Jobs Data Critical to Fed Path

Markets are also bracing for Friday’s May nonfarm payroll report. Expectations are for job growth around 130,000, with the unemployment rate holding at 4.2%. A soft print could shift market expectations toward a rate cut as early as Q3. Several labor indicators this week—including job openings, ADP payrolls, and weekly claims—will serve as key signals. Powell is unlikely to preempt the jobs data but may highlight labor market trends as a pivotal input for upcoming decisions.

Market Forecast: Bearish Bias Ahead of Powell

Given escalating geopolitical stress, downward pressure on risk assets, and uncertainty around Fed responsiveness, the near-term outlook turns bearish. Equity markets are likely to remain under pressure unless Powell surprises with dovish language. The U.S. dollar could see a bid as risk-off sentiment rises, while Treasury yields may decline on safe-haven flows.

For traders, today’s speech is less about what Powell says—and more about whether he signals flexibility in a rapidly tightening economic environment.

More Information in our Economic Calendar.