Wall Street ended in a sea of red on Monday, as the Supreme Court ruling against President Donald Trump’s emergency tariffs sparked turmoil. Meanwhile, software stocks took it on the chin following the publication of a report examining the potential risks from rapid artificial intelligence development.
The benchmark S&P 500 index slid 1% to close at 6,838.95 points, the tech-heavy NASDAQ Composite slipped 1.1% to settle at 22,627.27 points, and the blue-chip Dow Jones Industrial Average shed 1.7% to conclude at 48,804.06 points.
The main averages on Wall Street advanced to end the prior week, with the Supreme Court’s much-anticipated decision driving sentiment, while investors also took some relief from the U.S. not launching military strikes against Iran.
Trump hikes tariffs to 15% after Supreme Court ruling
Trump said over the weekend he will raise a temporary universal tariff on imports to 15%, from 10% initially, shortly after the Supreme Court found he exceeded his authority in declaring an economic emergency to impose a swathe of trade tariffs.
The U.S. president called the ruling a "disgrace," and immediately responded by employing a section of the 1974 Trade Act to set 15% global tariffs for as long as 150 days to quickly address "international payment problems."
"President Trump’s 15% global tariff on almost all imports is through an under-the-radar law known as Section 122 of the Trade Act of 1974, and this adds a new layer of uncertainty to the tariff story," Michael Landsberg, chief investment officer at Landsberg Bennett Private Wealth Management, said.
"The tariff is allowed to stay in place for 150 days under this law before Congress must step in. The big question for the economy is what happens after this window, and if the tariff policy stays down this path, we may very well be back at the Supreme Court later this year," he said.
"The push and pull with tariffs is likely to be a distracting theme for markets for the remainder of the year, albeit with less volatility than the initial shock last April," Landsberg added.
According to Yale’s nonpartisan policy think tank The Budget Lab, American consumers faced an overall average effective tariff rate of 16% before the Supreme Court’s ruling, the highest since 1936. Following the latest Section 122 tariffs, the rate now stands at 13.7%.
Countries look to renegotiate deals, Trump threatens higher tariffs
Reports showed several major countries, with which the Trump administration had signed trade deals in the past year, were now seeking renegotiation or more clarity on his levies.
The European Commission, the executive arm of the European Union and the chief negotiator for the bloc’s 27 member states, asked that the U.S. stand by the terms of an accord reached in 2025. The Commission also demanded that Washington provide "full clarity" on how its tariff policies will change following the decision.
Trump on his Truth Social service said countries would be "met with a much higher" tariff if they wanted to "play games" with the SCOTUS decision.
Against this backdrop, investors received some remarks about the ruling from Federal Reserve Governor Christopher Waller on Monday. The FOMC voting member said it is too soon to know how the ruling could affect near-term consumer price increases.
"In any case, since tariffs only temporarily affect inflation, that is why I consider underlying inflation for my policy decisions. Traditional central bank wisdom suggests that we should ’look through’ tariffs. I did this when they went up and will do so if they come down. So, this ruling is unlikely to have a significant impact on my view of the appropriate stance of policy," he said in prepared remarks at a conference in Washington, D.C.
Waller was one of two policymakers who dissented to the Fed’s choice to leave interest rates unchanged at a range of 3.5% to 3.75% in January.
Citrini Research imagines dystopian future affected by AI
A Citrini Research report on Monday was weighing on software and selected technology stocks. It outlined a hypothetical scenario set in June 2028 in which AI disruption would have triggered widespread white-collar job displacement.
The report detailed a series of events that could lead to that scenario, beginning in late 2025 when agentic coding tools would enable developers to replicate mid-market SaaS products in weeks.
Citrini’s analysis weighed on software stocks, with the iShares Expanded Tech-Software Sector ETF (NYSE:IGV) - which tracks a basket of American stocks in the software industry and other select sectors - sliding to its lowest level since November 2023.
Enterprise software names such as Workday (NASDAQ:WDAY), Intuit (NASDAQ:INTU), and Atlassian (NASDAQ:TEAM) were among the top percentage decliners on the Nasdaq Composite.
"It is an interesting thought-provoking piece. I expect the authors intended to prompt investors to really consider the ramifications of AI should achieve the potential AI evangelists have preached. That is a good exercise for investors. Nonetheless, I can’t tell you what will happen three hours from now, forget about three years from now," Michael O’Rourke, chief market strategist at Jones Trading, told Investing.com.
Nvidia earnings in the spotlight
Elsewhere, the focus this week is squarely on earnings from AI major Nvidia (NASDAQ:NVDA), for more cues on the fast-growing industry. The company manufactures the most advanced AI processors in the market, making it a key bellwether for AI-linked demand.
Nvidia will report its fiscal fourth quarter earnings on Wednesday, and the world’s most valuable listed company is expected to post earnings per share of $1.52 on revenue of $65.56 billion, Investing.com forecasts showed.
That compares to EPS of $0.89 and revenue of $39.33 billion from a year ago.
Nvidia’s earnings come amid growing uncertainty over the outlook for the AI industry and its potential implications for tech. Software and logistics stocks were sold down heavily in recent weeks amid concerns over AI-related disruptions, with losses also spilling over into broader sectors.
Crude edges lower
Oil prices seesawed on Monday, last down slightly. The moves come after last week’s rally as investors weighed the prospect of a third round of U.S.-Iran nuclear talks and fresh uncertainty from U.S. trade policy.
Brent futures fell marginally to $71.27 a barrel, and U.S. West Texas Intermediate crude futures were just under the flat line at $66.47 a barrel.
Both contracts surged nearly 6% last week on concerns of a potential U.S.-Iran conflict as well as an unexpected drop in U.S. crude stockpiles.
The two countries are now expected to hold a third round of nuclear talks on Thursday in Geneva, raising hopes of a diplomatic solution that would dilute the risk of a disruption of crude flows from the Middle East.
Iran is a key producer within the Organization of the Petroleum Exporting Countries (OPEC) and holds some of the world’s largest proven crude reserves.
Comments