By John Towfighi, CNN

New York (CNN) — US stocks closed out a wild month with a whimper as tariff jitters returned to Wall Street.

Stocks bounced around in a choppy trading session on Friday after President Donald Trump said China has “totally violated” its trade agreement with the United States — without specifying details — sending another jolt of uncertainty through markets.

The Dow closed higher by 54 points, or 0.13%, after fluctuating throughout the day. The broader S&P 500 edged lower by 0.01% and the tech-heavy Nasdaq Composite fell 0.32%.

Stocks had taken a step lower during the day on a report that said the Trump administration is considering broadening tech sanctions on China. The S&P 500 and Nasdaq dropped as much as 1.1% and 1.7%, respectively, in the afternoon after Bloomberg reported that the White House is mulling adding “licensing requirements on transactions with [Chinese] companies that are majority-owned by already-sanctioned firms.”

Stephen Miller, White House deputy chief of staff for policy, also told reporters on Friday that the Trump administration is preparing other trade actions to target China, according to Reuters.

Stocks pared some of their losses in the late afternoon, but the S&P 500 and Nasdaq still closed in the red as trade uncertainty persists.

“The bad news is that China, perhaps not surprisingly to some, HAS TOTALLY VIOLATED ITS AGREEMENT WITH US,” the president posted on social media early Friday morning. “So much for being Mr. NICE GUY!”

While stocks were lower Friday, the overall reaction from markets was relatively muted. Wall Street has started to bet that if Trump makes a trade war threat, he will eventually back down. It’s what’s been called the ‘TACO’ trade — or ‘Trump Always Chickens Out’.

Despite the recent fluctuations, investors who sold at the start of May missed out on a historically strong month for markets. The benchmark index is up more than 6% this month, posting its best month since November 2023 and its best performance in May since 1990.

The Nasdaq, which is up about 9.5% this month, also posted its best month since November 2023.

“We expect bouts of market volatility ahead as investors continue to navigate a range of market, economic and geopolitical risks,” said Ulrike Hoffmann-Burchardi, CIO of global equities at UBS Global Wealth Management, in a Thursday note.

Trade war back in focus

The president’s jab at China on Friday comes at the end of a week where the trade war has returned to the center of focus. Stocks had received a boost this week after the Court of International Trade late Wednesday blocked most of Trump’s tariffs on legal grounds, but that rally lost steam as traders bet the White House would aggressively appeal and pursue another legal strategy.

A federal appeals court on Thursday paused the CIT’s ruling to block Trump’s tariffs, leaving the president’s massive tariff agenda in limbo as the courts deliberate its legality.

“The stunning, head-spinning, mind-boggling trade fiasco will not be resolved quickly,” said Greg Valiere, chief US policy strategist at AGF Investments, in a note. “It probably will land in the Supreme Court — and even that may not settle the issue.”

Investors on Friday also digested fresh data that showed the Federal Reserve’s preferred inflation gauge cooled in April slightly more economists had expected, but also revealed a significant drop in consumer spending.

Trump has reignited his trade war in the past week, which has stirred up uncertainty in markets after Wall Street had begun to turn the page on tariff concerns. The S&P 500 has been steadily climbing out of an early April slump instigated by the president’s back-and-forth on his “reciprocal” tariffs.

“Even though the stock market has staged a decisive rebound since the April lows, there is still plenty of uncertainty on tariffs, especially given the legal battle that is brewing over the ‘Liberation Day’ tariffs,” said Clark Bellin, president and chief investment officer at Bellwether Wealth.

The benchmark S&P 500 is up about 0.5% this year.

Dollar decline

The dollar gained slightly on Friday. Yet the US dollar index, which measures the dollar’s strength against six major foreign currencies, as of the afternoon was set to end the month slightly in the red. It would be the dollar index’s fifth month of decline in a row and its longest monthly losing streak since 2020.

The dollar has broadly weakened this year amid concern on Wall Street that American assets are losing their appeal. The dollar index is down more than 8% this year.

Jonas Goltermann, deputy chief markets economist at Capital Economics, said in a Friday note that sentiment around the dollar “remains negative,” and it looks “vulnerable to further bad news on the fiscal and trade policy fronts.”

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