S&P500 and Nasdaq 100: US Indices Fall on Opening as Trump-Musk Feud Rocks Tech Stocks

Can Q2 Momentum Carry Into Second Half?

U.S. equity futures opened lower Tuesday to start the second half of 2025, despite the S&P 500 closing at fresh records after a stellar Q2 performance. Dow futures dropped 45 points (0.1%), while S&P 500 and Nasdaq-100 contracts fell 0.3% and 0.4% respectively.

Tesla Tumbles as Trump Targets Musk’s Subsidies

Tesla shares plunged 6% in premarket trading after President Trump suggested the Department of Government Efficiency review subsidies flowing to Elon Musk’s companies. The move escalates tensions between the two figures, with Musk calling Trump’s spending bill “utterly insane and destructive” and responding “I am literally saying CUT IT ALL. Now.”

This marks the latest chapter in their ongoing feud, with Trump previously threatening to cut Musk’s government contracts in June, calling the Tesla CEO “CRAZY.” The conflict adds uncertainty to EV sector support at a critical growth phase.

Federal Reserve Policy Holds Key to H2 Performance

Morgan Stanley’s Mike Wilson expects a “broader recovery” driven by Fed rate cuts in the second half or early next year. The strategist sees pent-up demand in interest-rate sensitive sectors like manufacturing and housing positioning for a “rolling recovery.”

Fed Chair Jerome Powell speaks at 14:30 GMT at the ECB’s Portugal forum, with markets parsing comments after last week’s signal that policy remains on hold pending tariff impact clarity. Key data includes the S&P Global PMI (14:45 GMT) and ISM manufacturing (15:00 GMT).

Can Trade Tensions Derail the Rally?

Monday’s record closes came after Canada rescinded its digital services tax to facilitate U.S. trade talks, following Trump’s threat to terminate negotiations. With the 90-day tariff reprieve expiring next week, traders are watching for deal progress with key partners.

The market has recovered dramatically from April’s tariff-induced selloff that pushed the S&P 500 near bear territory. The index surged 10.6% in Q2, while the Nasdaq gained nearly 18%, demonstrating resilience in the face of trade policy uncertainty.

Premarket Movers: Defense and Hospitality Stocks in Focus

Several notable moves are shaping premarket action beyond Tesla’s decline. AeroVironment dropped over 7% after announcing $750 million in common stock and $600 million in convertible notes offerings, diluting existing shareholders.

Textron fell 2% following a Goldman Sachs downgrade to neutral, citing market share losses in business jets.

On the upside, Hyatt Hotels gained 2% after Raymond James upgraded to strong buy, driven by Monday’s announcement to sell Playa-owned real estate assets.

Hasbro added 2% on a Goldman upgrade to buy, with analysts citing new Magic: The Gathering sets as a sales catalyst. Joby Aviation rose 1% after Monday’s 11% surge following its first flying taxi delivery to the UAE.

Market Forecast: Cautious Optimism Despite Political Headwinds

Despite record highs, the Trump-Musk conflict and looming tariff decisions create near-term volatility risks. However, Fed easing expectations and strong Q2 earnings momentum support the bull case.

Traders should monitor trade developments and Fed communications for directional cues, with interest-rate sensitive sectors offering upside potential if monetary policy pivots dovish.

More Information in our Economic Calendar.