Bull Market Rides High Amid Trade Tension Ease, Inflation Concerns Loom
Market Anticipation Fuels Wall Street Optimism amid Tariff Relief Prospects
The final trading day of the week brought a sense of optimism to Wall Street as tensions between the US and its trade partners seemed to ease. The Dow Jones Index climbed 0.8% to 42,655 points, boosted by promising signs in the US-China trade conflict. However, concerns over inflation fuelled by President Trump's trade policies lingered.
The S&P 500 and the Nasdaq Composite followed suit, seeing gains of 0.7% and 0.5%, respectively. Intraday, economic data damped spirits briefly, but overall, stocks performed well. By day's end, 1916 stocks had gained, while 831 lost ground, and 61 remained unchanged.
Among economic news, yields on marketable securities offered some support, with the 10-year notes yield falling by 2 basis points to 4.44%.
Fertile Ground for Future Discussion
Ongoing trade disputes continued to dominate investor conversations. Plans for agricultural tariff discussions between the US and the European Union along with addressing economic security and digitalization draw attention in upcoming trade talks.
Alexandra Wilson-Elizondo of Goldman Sachs noted that if set aside, issues like budget, taxes, and deregulation would come to the fore. Although there are risks, investors may have weathered the worst of the negative news already.
Blazing Inflationary Pressure
Trump's tariffs, notably on imports from China, have left a clear mark on inflation. Despite the expectation of a 0.4% decrease in April, import prices rose by 0.1%. The lack of an oil price decrease would have seen a higher increase by 0.4%. This suggests strong inflationary pressure from the tariffs, according to traders.
Ho-Hum on Boeing, Big Merger in Cable Market
Boeing suffered a 0.2% loss despite securing orders for 28 wide-body aircraft from Etihad Airways. The deal includes a mix of 787 and 777X aircraft, but the new aircraft are not expected to enter service until the end of the decade. Critics pointed out Boeing's slow production recovery from crashes, the Covid pandemic, and a 2024 incident involving an Alaska Airlines Boeing plane losing an emergency exit door.
Charter Communications is merging with rival Cox Communications for $21.9 billion, with Cox valued at $34.5 billion including debt. Shares of Charter Communications grew by 1.8%.
Applied Materials Slips, Mixed Signals from Take-Two Interactive
Chipmaker Applied Materials missed expectations in the second quarter but reported better-than-expected revenue. However, its future revenue projection fell short of market expectations. Video game developer Take-Two Interactive reported mixed figures for the fourth quarter, with guidance for the current fiscal year below expectations.
Dollar Holds Slightly, Oil Prices Rebound
The dollar edged back slightly, with the Dollar Index gaining 0.2 percent. Import prices and inflation expectations weighed against further rate cuts by the US Federal Reserve. Oil prices slightly recovered from the previous day's drop due to ongoing concerns surrounding OPEC+ production cuts and a potential Iran deal.
- Wall Street
- Tariffs
- Inflation
- Trade disputes
- The optimistic rally on Wall Street, in part due to alleviated trade tensions, could be impacted by the ongoing trade disputes and the resulting inflation concerns, as Trump's tariffs continue to significantly impact the US economy.
- As the US and its trade partners collaborate on addressing economic security, digitalization, and agricultural tariffs, investors might find opportunities for investing in the business sector, particularly financial institutions, given the potential future improvements in trade policies.
