An expansive surge in the stock markets starting in Asia on Thursday gradually lost momentum as it moved across Europe and onward to the United States. This was due to rising doubts about the next possible steps following a halt on numerous expansive tariffs introduced by President Donald Trump, enacted by a U.S. court. The S&P 500 observed a slight increase of 0.4% after surrendering a significant part of its initial gains. Correspondingly, the Dow Jones Industrial Average and Nasdaq composite both marked an increment of 0.3% and 0.4% respectively.
This pause in the financial markets represents a step down from the initial surge of almost 2% observed in Tokyo and Seoul. These were the first markets to react to the U.S. Court of International Trade’s decision late on Wednesday. According to the court, the 1977 International Emergency Economic Powers Act, which Trump has referenced to sanction considerable elevations in import taxes worldwide, does not authorize tariff imposition.
Initially, this ruling was viewed as a beacon of hope by global financial markets. The assumption was that a constrained Trump would be unable to push the economy towards a recession via his broad range of tariffs. These tariffs, if implemented, were expected to suppress global trade and inflate consumer prices – an unwanted situation for consumers already grappling with high inflation rates.
Trump’s argument for these tariffs centers around the reinvigoration of the manufacturing sector in the United States. He cautioned that this route could result in some financial discomfort for U.S. citizens. However, the currently blocked tariffs remain active while the White House appeals the court’s decision, leaving their final status indefinite.
In addition to this uncertainty, the court’s ruling only impacts a section of Trump’s proposed tariffs, excluding those on foreign steel, aluminum and autos, which were invoked under a separate law. According to Ulrike Hoffmann-Burchardi, the chief investment officer of global equities at UBS Global Wealth Management, Trump still has the capacity to introduce pervasive and impactful tariffs in the long run through other methods.
This ambiguity played a significant part in cooling the initial fervor in the financial markets as trading progressed from Europe to the U.S., where the shifts were noticeably smaller than in Asia. As Brian Jacobsen, the chief economist at Annex Wealth Management, put it, ‘The bar has now been set higher for President Trump to reintroduce his tariffs.’
Market stakeholders are pricing this new development as a somewhat improved form of uncertainty compared to what they have been facing since what Trump labeled as ‘Liberation Day.’ This day refers to his April 2nd announcement demanding a global set of expansive tariffs.
Post dropping nearly 20% below at one point last month, the S&P 500 has now positioned itself within 3.8% of its record high. Leading the way on Wall Street were technology stocks, notably after Nvidia once again exceeded profit and revenue expectations in the previous quarter.
Owing to the hype surrounding artificial intelligence technology, the chip company has grown into one of the U.S. market’s largest and most impactful stocks. Its rise of 3.2% significantly contributed to the upliftment of the S&P 500. Another contributor to this upswing is C3.ai, an AI application software company, which shot up by 20.8%.
C3.ai surpassed analysts’ profits expectations for the last quarter and stated that the maximum possible value of its contract with the U.S Air Force was increased by $350 million, taking it to a total of $450 million. The company’s revenue for the last quarter totalled $108.7 million.
However, there were some mitigating circumstances, such as the case of Best Buy. Despite posting stronger-than-expected profit, the company’s shares dipped by 7.3% because their revenue failed to meet analysts’ projections.
Recently, many companies have expressed that the uncertainty stemming from the fluctuating tariff scenario has made forecasting for the upcoming financial year extremely challenging. When the dust settled, the S&P 500 had risen 23.62 points to reach 5,912.17. Meanwhile, the Dow Jones Industrial Average increased by 117.03 points to 42,215.73, and the Nasdaq composite gained 74.93 to reach a high of 19,175.87.
In the bond market, Treasury yields witnessed a slight decline following some inconsistent reports on the economy. One report indicated that the contraction of the U.S. economy in the first three months of this year was less severe than initially estimated.
Contrastingly, another report suggested that a higher-than-anticipated number of U.S. workers applied for unemployment benefits in the last week. Consequently, the yield on the 10-year Treasury fell from 4.47% to 4.43%.
Internationally, Japan’s Nikkei 225 ascended by 1.9%, taking the lead in elevating Asian markets, followed by stocks rising by 1.4% in Hong Kong and a 0.7% increase in Shanghai. South Korea’s Kospi surged by 1.9% following the Bank of Korea’s decision to cut its key interest rate to relieve economic pressure.