Stocks Climb Following U.S. Court Decision on Tariffs
Global stock markets experienced an upswing on Thursday after a U.S. court decision blocked many of President Donald Trump’s extensive tariffs. However, this positive momentum showed signs of diminishing as the trading progressed from Asia to New York.
In the early trading session, the S&P 500 increased by 0.7%, nearing its all-time high set earlier this year. This is a remarkable recovery considering it had fallen nearly 20% previously, during heightened fears that the trade war could plunge the economy into a recession.
The Dow Jones Industrial Average experienced a modest increase of 60 points, or 0.1%, at 9:35 a.m. Eastern time, while the Nasdaq composite gained a more substantial 1.3%.
Significant Gains in Asia
Asian markets enjoyed more pronounced gains as they were the first to respond to the positive impact of the U.S. Court of International Trade’s decision issued late on Wednesday. The court declared that the 1977 International Emergency Economic Powers Act did not authorize Trump’s move to impose global tariff increases.
Despite the White House’s immediate appeal, and the continuing uncertainty over the long-term implications of these legal disputes, the court’s ruling is seen as favorable for the markets. It is important to note that the ruling currently impacts only certain tariffs and does not cover those on foreign steel, aluminum, and automobiles invoked under a different law.
Analysts are cautious yet optimistic. According to Ulrike Hoffmann-Burchardi, Chief Investment Officer at UBS Global Wealth Management, the President still has avenues to impose broad tariffs over the longer term.
Nevertheless, as trading moved into Europe and the U.S., market enthusiasm tempered somewhat. However, the ruling is overall seen as a positive development for financial markets. “The bar is raised for President Trump to resurrect his tariffs,” stated Brian Jacobsen, Chief Economist at Annex Wealth Management. He emphasized that the current situation presents a relatively favorable form of uncertainty compared to previous periods.
Tech Stocks Lead the Rally
In Wall Street, technology stocks spearheaded the market rise, with Nvidia taking center stage as it exceeded profit and revenue expectations for its latest quarter. The chip manufacturer’s 5.9% increase was a significant contributor to the S&P 500’s gains, driven by the ongoing excitement around AI technology.
Other notable movements in the tech industry include C3ai, an AI application software company, which saw its shares rise by 25.6%. This surge followed the company’s report of higher-than-expected profits and an increase in the potential value of its contract with the U.S. Air Force, which now could range up to $450 million.
Meanwhile, E.l.f. Beauty experienced a major jump, soaring by 31.1%, after announcing robust quarterly earnings and its decision to acquire Hailey Bieber’s Rhode skincare brand for $1 billion. Bieber is set to take on leadership roles within the combined entity.
Best Buy, on the other hand, fell 6.3% despite reporting better-than-expected profits. The electronics retailer lowered its revenue and profit forecasts for the year, citing current tariffs and stable consumer behavior as influencing factors.
Steady Treasury Yields Amid Economic Reports
The bond market saw relative stability with Treasury yields hovering around recent levels amid mixed economic data. Reports suggested that the U.S. economy contracted less than initially estimated in the year’s first quarter. However, claims for unemployment benefits were slightly higher than economists’ forecasts.
The 10-year Treasury yield slightly declined to 4.45% from 4.47% and the two-year yield remained steady at 3.96%.
International Market Movements
Internationally, Japan’s Nikkei 225 led Asia’s markets with a 1.9% surge. Similarly, South Korea’s Kospi rose 1.9%, buoyed further by the Bank of Korea’s decision to cut its key interest rate to mitigate economic pressures.
In contrast, European markets displayed more restrained activity. France’s CAC 40 posted a 0.3% increase, while Germany’s DAX showed little movement.
Overall, the recent developments in U.S. trade policy, notably the court’s decision to block numerous tariffs, have injected a dose of optimism into global markets, particularly benefiting tech stocks. However, the landscape remains uncertain with long-term outcomes of trade policies hanging in the balance.
