Tariff Relief Spurs Positive Motion in U.S. Markets
The U.S markets swung upwards at the outset due to the provide relief granted to semiconductor companies, amid the latest series of tariffs enforced by President Donald Trump. The President proclaimed that semiconductor firms would be subjected to a hefty tax of 100%, barring those contributing to the American economy through local operations. This exemption serves as a boon for organizations such as Apple who have investments rooted in the U.S. Further bolstering its commitment to American businesses, Apple recently announced plans to inject another $100 billion into U.S companies and suppliers over the next four years. This is in addition to the $500 billion investment Apple publicized in February.
Reports from Taiwan reveal that tech company, TSMC, will not be affected by the tax levy. South Korea also announced that its domestic firms, Samsung Electronics, and SK Hynix won’t find themselves at the receiving end of the 100% tariff. The invocation of these taxes is the latest action from President Trump who also recently declared a 25% tax increase on India, swelling the total duty to a staggering 50%.
Trump’s reasoning for this rise in tariff for India links to its continued purchase of Russian oil. Furthermore, those nations that couldn’t reach an agreement with Trump by August 7 are now facing new tariffs. However, the response from investors to this has been fairly nonchalant given previous deals that are already in place with major trade allies such as the European Union. Additionally, countries like Switzerland are still in the process of negotiating their agreements.
Emerging from this situation is the Swiss government, which has found itself compelled to organize an emergency meeting. This was a subsequent measure after their President, Karin Keller-Sutter, was unsuccessful in her bid to negotiate a 39% tax at a meeting in Washington D.C on August 6. Despite all of this, investors seemed to remain optimistic as it was observed that at 9:37 a.m. ET on August 7, the Dow Jones Industrial Average had ascended by 0.52%, or 227.65 points, reaching 44,420.77.
The broader S&P 500 Index rose by 0.58%, or 36.85 points, amounting to 6,381.91. Likewise, the NASDAQ, with its significant technology representation, experienced an increase of 0.91%, or 193.37 points, propelling it to 21,362.80. In tandem with these shifts, the benchmark 10-year yield saw a nominal rise, moving up to 4.238%.
Keeping an eye on the corporate earnings report may have also influenced the sentiment of investors. The outcomes of these reports were largely positive. On comparing with analytics predictions, nearly 80% of the reports surpassed projected earnings. This figure exceeded the average 76% beat rate that was maintained over the previous four quarters, as per data sourced from LSEG.
The data exhibited a promising growth in earnings for the quarter, coming in at an estimated 12.1%. This reveals a significant shift from the 5.8% projection made at the beginning of July. Further confidence seemed to emanate from the jobless claims reports, which experienced only a marginal increase, defying expectations.
Additionally, a robust productivity report painted a bright picture for the economy. An increment of 2.4% was observed for the second quarter productivity, indicating that companies may have enhanced their efficiency. This figure exceeded the initial estimate of 2%, suggesting that businesses may be operating more proficiently than expected.