Weekly Market Insights | Trade Concerns Halt Stock Rally

Stocks fell last week amid concerns about trade with China, following an unsteady rally to record highs over the first half of the week.

The Standard & Poor’s 500 Index fell 2.43 percent, while the Nasdaq Composite Index declined 2.53 percent. The Dow Jones Industrial Average slid 2.73 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, slipped 1.64 percent.^1,2

Stocks Set Highs Before Friday’s Drop

Stocks began the week mostly positive. However, Monday marked Day 6 of the government shutdown, and two of the three major averages powered through any bearish sentiment. The S&P 500 and the Nasdaq each advanced to record closes on fresh enthusiasm for mergers & acquisitions activity after the announcement of two deals. By contrast, the Dow fell slightly.^3,4

Stocks pushed higher midweek as investors looked past the Fed meeting minutes from September, which revealed somewhat divided opinions on interest rates. The S&P and Nasdaq both closed at record highs.⁴

On Friday, sentiment turned negative a little over an hour into the trading session after the White House announced a tariff increase on imported goods from China. The decline, led by chip manufacturers, erased the week’s gains. It was the largest single-day decline for stocks since April.^5,6,7

China In Focus

Meanwhile, focus turned to new export controls that China imposed on so-called rare earth metals—key ingredients for AI-powered microchips and vital resources for the defense industry. Investor concern centered mostly around AI chip companies, which have exposure to China both as customers and in terms of manufacturing.⁸

The White House threatened to cancel its upcoming meeting with the Chinese president over the dispute. China controls approximately 70 percent of the global supply of rare earth metals, meaning a policy change can impact markets.⁸

Separately, the government shutdown entered its second week. Shutdowns typically don’t heavily impact markets, but the uncertainty continues to hang over trading.⁹

Footnotes and Sources

^{WSJ.com, October 10, 2025}
^{Investing.com, October 10, 2025}
^{CNBC.com, October 6, 2025}
^{CNBC.com, October 8, 2025}
^{CNBC.com, October 9, 2025}
^{WSJ.com, October 10, 2025}
^{WSJ.com, October 10, 2025}
^{WSJ.com, October 10, 2025}
^{WSJ.com, October 9, 2025}