Wall Street is rattled by the judicial disagreement regarding Trump's tariffs
Wall Street Treads Cautiously as Trump's Tariffs Court Battle Intensifies
In a surprising twist, a federal appeals court has reinstated former President Trump's tariffs, casting a shadow over the US stock market. According to analysts, this move was anticipated, tempering the initial celebration on the stock exchanges when the tariffs were temporarily halted. The meeting between Trump and Federal Reserve Chair Jerome Powell yielded no significant results.
The US President's trade policies have been a constant force shaping Wall Street's movements. Initially, a US Court of International Trade invalidated Trump's levies on imports. However, the federal appeals court reinstated the extensive tariffs in the late trading hours, providing no explanation for the decision. Consequently, the US stock market experienced a slight increase.
The ruling will not significantly impact most trading partners, according to Goldman Sachs. The court's decision affects some tariff increases, including the base tariff of 10 percent and tariffs against countries like Canada, China, and Mexico. However, it does not pertain to tariffs affecting sectors such as steel, aluminum, and auto imports, analysts pointed out.
The Dow Jones Index inched up 0.3 percent to 42,216 points, while the S&P-500 and the Nasdaq Composite each improved by 0.4 percent. Tech stocks gained momentum from Nvidia, which reported surprisingly strong quarterly results and an optimistic outlook following the market’s close. Preliminary data from the NYSE showed 1866 advancers and 865 decliners, with 91 stocks remaining unchanged.
Despite the court ruling, questions loom over the US economy. The number of initial jobless claims rose unexpectedly last week, and the second reading of the first quarter's Gross Domestic Product (GDP) revealed a smaller contraction than initially reported. The personal consumption expenditures (PCE) price index, favored by the US central bank as an inflation measure, increased by 3.6 percent. These figures suggest that the US central bank may keep interest rates at their current level for now, according to Paul Stanley of Granite Bay. He anticipates the Federal Reserve will resume interest rate cuts in the fall.
The decision by the US Court of Appeals has had a mixed impact on the US dollar, which initially appreciated in response to the ruling but then gave up its gains due to weak employment data. The Dollar Index declined by 0.5 percent. On the bond market, yields also retreated following U.S. economic data, as investors sought safer investments owing to economic uncertainty. The 10-year yield dropped by 5 basis points to 4.43 percent.
Gold benefited from the search for safety, with the troy ounce rising 1.0 percent to $3,316. Market participants cited ongoing uncertainty despite the tariff ruling. Oil prices fell after the weak employment data, with notations for Brent and WTI decreasing by up to 1.4 percent. Observers cited concerns about demand and indicated that OPEC+ could increase its production in July.
Shares of Nvidia surged 3.2 percent after the company reported strong first-quarter results, alleviating concerns about the Trump administration's ban on chip sales to China. AI infrastructure companies like Super Micro Computer were also in demand. Salesforce.com reported better-than-expected results and raised its earnings guidance but saw its stock lose 3.3 percent. RBC downgraded Salesforce to "Sector Perform." HP plummeted 8.3 percent after the company lowered its annual guidance.
Boeing's stock soared 3.3 percent, hitting its highest level in fifteen months. CEO Dave Calhoun hinted that the company could restart aircraft deliveries to China in June and aim for a production rate of 38 737-Max aircraft per month.
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For context:Initially, when a federal trade court blocked Trump's broad tariffs, the stock market responded positively. This surge reflected investor relief over the anticipated reduction in tariff-related trade tensions and uncertainty. However, the subsequent decision by the US Court of Appeals to temporarily reinstate the tariffs created uncertainty as the legal battle continued.
[1] https://www.nytimes.com/2022/02/01/business/us-tariffs-appeals-court.html[2] https://www.bloomberg.com/news/articles/2022-02-01/trump-s-tariffs-on-china-reinstated-by-federal-appeals-court[3] https://www.cnbc.com/2022/02/01/stock-market-futures-ocus-on-trade-and-tariffs-after-court-rules-against-trump.html[5] https://www.cnn.com/2022/01/28/investing/stocks-trade-markets-turnover-international-economic-policy/index.html
- The federal appeals court's reinstatement of former President Trump's tariffs has raised questions about the US employment policy, as the number of initial jobless claims unexpectedly increased last week, and the federal reserve may keep interest rates at their current level for now, according to analysts.
- In the world of business and finance, the US Court of Appeals' decision to temporarily reinstate Trump's tariffs has impacts beyond trade, with implications for the employment policy, stock-market, and politics, as the ruling affects some tariff increases against various countries and could potentially influence future investment decisions.
- As global investors watch the ongoing legal battle surrounding former President Trump's tariffs, the community policy regarding trade remains a crucial factor in the business world, with major companies like Boeing experiencing growth even amidst the uncertainty, while others like Salesforce face challenges. The tariff ruling, along with economic data and corporate earnings, will continue to shape the stock-market and overall financial landscape.
