A stock-market indicator has entered a phase historically associated with the worst return prospects for the S&P 500 Index. The Equity Market Regime Model, a Bloomberg Intelligence tool that tracks the benchmark stock gauge and clusters periods into three phases—accelerated growth (green), moderate growth (yellow) and decline (red)—fell into the cautious red zone in March and April. 

The timing coincided with Donald Trump’s chaotic tariff threats and retreats, which managed to upend financial markets, dim Corporate America’s outlook for profit growth and, at least temporarily last month, destabilize key pillars of the US economy.

The seven times that the model landed here in the past were followed by a 5.6% average drop in the S&P 500 in the next 12 months. That said, the red regime, which follows 21 months in the neutral “yellow” zone, is still in the early innings for most of the model’s components. While this may mean there are more losses ahead, unpredictable US trade policy has left investors debating whether the worst part of the selloff is over. 

A positive development for markets would be a broader retreat by Trump as tariff talks begin with China in Geneva this weekend. But even if—as with the recent framework deal with the UK—the administration strikes more deals and declares victory, the damage to America’s economy and its future may be done.

“There’s a growing belief that the Trump administration will back off its aggressive tariff policy once further weakness begins to show up in jobs growth,” said Seth Merrill, chief investment officer at Crewe Advisors. “But here’s the risk: By the time that happens it may be too little, too late since earnings growth is already slowing, which may trigger more selling if the economic outlook deteriorates further from here.” —David E. Rovella

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India and Pakistan continued to trade accusations about military action against each other as hostilities entered a third day. Pakistan’s military carried out “multiple violations of Indian airspace along the entire western border” using drones on Thursday, Indian Wing Commander Vyomika Singh said at a briefing in New Delhi today. She asserted that “the possible purpose of these large-scale aerial intrusions were to test the air defense systems and gather intelligence.” India said it thwarted those air strikes, while Pakistan’s government denied the claims.

Pakistan’s military said it will “finish” what India started, its spokesman Lieutenant General Ahmed Sharif Chaudhry said Friday. Tensions between the two nuclear-armed neighbors have surged to their most dangerous levels in years, with both nations shooting down missiles and drones over densely populated cities in the aftermath of a mass shooting in Kashmir that triggered the latest fighting. 

Demonstrators in Karachi burn an Indian flag and photos of Prime Minister Narendra Modi during a protest in response to India’s military strikes against Pakistan this week. Photographer: Asim Hafeez/Bloomberg

A federal judge granted a request by a Turkish graduate student to be released on bail while she fights possible deportation, ruling that her continued detention by the Trump administration “chills the speech” of noncitizens. Rümeysa Öztürk, 30, was on a quiet Massachusetts street when she was surrounded by masked American security agents, pulled away into a vehicle and flown to a Louisiana detention facility. A video of Öztürk’s seizure, including her screams as she was grabbed, went viral. She has been imprisoned since late March.

The ruling Friday in favor of the Tufts University doctoral student, who is not accused of any crime, is the latest legal setback for Trump. He has sought to deport foreign students who have protested against the war in Gaza despite the roundup’s facial violation of the First Amendment.  

Rumeysa Ozturk on an apple-picking trip in 2021.  Source: AP Photo

Öztürk’s detainment “chills the speech of the millions and millions of people in this country who are not citizens” and who fear being “whisked away to a detention center far from their home” if they say something the government disagrees with, US District Judge William Sessions in Vermont said. “I would like to know immediately when she’s released,” the judge told lawyers for the government as the hearing ended.

Trump, 78, has failed to adhere to multiple federal court orders tied to its deportation campaign, including directives from the US Supreme Court. The Republican’s use of the Alien Enemies Act, a two century-old law, to deny due process to noncitizens has been blocked as likely illegal by multiple judges. On Friday, Trump aide Stephen Miller, 39, floated the idea of eliminating Habeas Corpus, an even more grave divergence from American constitutional norms that would remove the right of individuals to use the courts. Like Trump’s attempt to use the Alien Enemies Act to quickly deport non-citizens, it too would likely face swift court challenge.

Bain Capital is said to be in talks to buy PCI Pharma Services in a deal that would rank among the year’s largest private equity takeovers. The buyout firm is in discussions with PCI’s backers, Kohlberg & Co., Mubadala Investment Co. and Partners Group Holding, about a deal for a majority stake that could value the Philadelphia-based drug services provider at more than $10 billion, including debt.

PCI makes sterile packaging and assembles and packages pre-filled syringes used to administer weight-loss injection drugs like Wegovy, a business that has grown with demand for obesity medicines. A buyout of the company would come at a time when many private equity firms are being forced to slow dealmaking in order to focus on managing existing assets.

Panasonic Holdings is slashing its employees by 10,000, or more than 4%. The supplier of lithium-ion batteries to Tesla said the firings target 5,000 of its workers in Japan and 5,000 of its overseas employees. The mass terminations are necessary to prepare the company for the next decade or two, Panasonic Chief Executive Officer Yuki Kusumi said during an earnings call. Tesla is by far Panasonic’s biggest EV battery client. In addition to the jointly operated Gigafactory in Nevada, Panasonic has been boosting production capacity in Kansas. That’s just as Tesla grapples with slumping sales and rising costs from Trump’s trade war. Consumers around the world are shying away from a brand that’s become a political symbol due to Elon Musk’s involvement in Washington.

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