President Donald Trump announced a 90-day pause on some tariffs on Wednesday. This provided the clarity Wall Street had been looking for amid concerns about his trade policies. US stocks immediately rallied, resulting in a historic rise.
The Dow skyrocketed 2,963 points (7.87%), the S&P 500 increased by 9.52%, and the Nasdaq soared 12.16%. The S&P 500 experienced its best day since October 2008, and the Nasdaq saw its second-best day in its history. The Dow enjoyed its best day in five years.
Chris Brigati, chief investment officer at SWBC, an investment firm in San Antonio, Texas, said “The market’s move upward is violent, and speaks to how badly the market was looking for clarity on this issue.”
The impact was felt widely as nearly every company in the S&P 500 rose. Amazon jumped 11.98%, Nike gained 11.36%, and airline stocks such as United Airlines, Delta Air Lines, and American Airlines saw increases of over 22%. Despite the relief, uncertainty remains as Trump continues to escalate the trade war with China by raising its tariff rates to 125% from 104%.
Universal duties of 10% on all US imports remain in place. Jamie Cox, managing partner at Harris Financial Group, said “Trump illustrated to everyone in the market today how incredibly difficult it is to trade around his tariff regime, because he and only he knows when it ends.”
Trump hinted at the benefits of the current market conditions by posting messages like “BE COOL!” and “This is a great time to buy!!!” on his social media platform. Earlier in the day, global markets were mixed after China announced significant retaliation and the European Union announced countermeasures against Trump’s tariffs.
However, the US markets surged after Trump stated that countries, besides China, subjected to the reciprocal tariffs would see those rates reduced to 10%.
Stocks rally amid tariff pause
Despite positive market reactions, the escalating trade war still poses risks.
Business investments, consumer spending, and hiring are anticipated to slow down due to ongoing uncertainty. Global markets had fallen earlier in the day. Japan’s Nikkei index closed 4% down while Hong Kong’s Hang Seng finished marginally higher.
In Europe, the STOXX 600 index fell 3.5%, with decreases also in France’s CAC index (3.34%), Germany’s DAX (3%), and London’s FTSE 100 index (2.92%). US oil prices reversed course and gained after initially tumbling earlier in the day. Oil prices had declined due to fears of a global recession affecting fuel demand, but rebounded following Trump’s announcements.
US Treasury yields, which had seen recent volatility, also rose. The bond market, typically a haven during times of crisis, has been experiencing unusual activity. Trump indicated that the volatility in the bond market was a factor in his decision to pause some tariffs.
Deutsche Bank analysts warned that the mass exodus from Treasury bonds could signal weakening demand for US-backed assets, traditionally considered the safest investment. This sentiment was echoed by JPMorgan CEO Jamie Dimon. The trade policies and the resulting market reactions continue to generate a mix of optimism and caution among investors.
