The resurgence of tariffs clouds the prospects of the industrial sector, and the "top students" of the US stock market face a major performance test.

Against the strong performance of the US stock market this year, industrial companies such as power equipment, heavy machinery, and air conditioning manufacturers have once been the market "top students." But as the earnings season approaches, the risk of tariffs is heating up again, putting pressure on this sector for a pullback. Although the easing of tensions in the Middle East had pushed industrial stocks higher last week along with the broader market rebound, internal market fluctuations intensified. Industrial distributor Fastenal Company (FAST.US) saw its stock price drop due to tariff erosion of profits, while Canadian RV manufacturer BRP Inc (DOO.US) warned that metal tariffs would raise costs and withdrew its performance guidance, leading to a sharp drop in its stock price, triggering a sector-wide sell-off. Analysts point out that as the markets were focused on the US-Iran conflict, some investors had temporarily overlooked the tariff risk, which is now coming back into focus. With heavyweights like Carter's Incorporated, Vertiv Holdings, and other major industrial companies about to announce their earnings, investors are closely monitoring the actual impact of US trade policy on corporate profits. Institutional investors have been net sellers of the industrial sector for the past 10 weeks, indicating a shift towards cautiousness in fund attitudes. In addition to tariff factors, the drag of the war on economic growth has also put pressure on the sector's prospects. Although the risk of energy supply disruptions has eased, the high oil price environment may still dampen demand and raise business costs. In terms of individual stock performance, leading companies like Deere & Co have recently been under pressure, reflecting market concerns about the industry cycle. However, the industrial sector has still accumulated about a 12% increase from the beginning of the year, significantly outperforming the S&P 500's approximately 4.1% increase, mainly benefiting from the optimistic expectations for the strong recovery of the US economy. After the previous rise, some institutions have expressed concerns about the sector's valuation. Some fund managers point out, "The sector has seen significant increases, valuations have clearly expanded, and there is short-term adjustment pressure." In terms of profit expectations, the market has significantly lowered first-quarter performance expectations for industrial companies. Data shows that analysts averagely expect industry profit growth of only 1.1%, the lowest level in recent quarters. This also means that once corporate performance slightly exceeds expectations, it may bring temporary positive news. Despite overall pressure on the outlook, some sub-sectors are still showing resilience. For example, there is continuous growth in demand for data center construction, driving up demand for cooling, power equipment, and engineering equipment. In addition, there are signs of recovery in the transportation industry. However, the market generally believes that in the context of trade policy uncertainty and increased macroeconomic volatility, the industrial sector will still face significant fluctuations in the short term.