Financial dispute over Trump's tariffs stirs turmoil on Wall Street
Market Misstep: Trump's Tariffs Resurface in Legal Battle, Sowing Unrest on Wall Street
US stock markets have seen a setback following the reinstatement of President Trump's tariffs by a federal appeals court. Analysts had cautioned investors against celebrating prematurely. A meeting between Trump and Federal Reserve Chair Powell yielded no significant response.
Donald Trump's trade policies continue to shape Wall Street's movements. In an earlier ruling, the US Court of International Trade invalidated Trump's tariffs. However, the appeals court reimposed the extensive tariffs in after-hours trading, without providing a rationale. The US stock market demonstrated a minor increase in response to these developments.
Market observers had already advised investors to remain cautious before the appeals court's decision. Goldman Sachs posited that for most of the US' trading partners, the ruling will make little difference. The reinstated tariffs only affect some tariff increases, such as the base tariff of 10 percent and those affecting countries like Canada, China, and Mexico. Exclusions cover tariffs on sectors like steel, aluminum, and auto imports, according to analysts.
The Dow Jones Index closed 0.3 percent higher at 42,216 points. The S&P-500 and the Nasdaq Composite each added 0.4 percent. Tech stocks gained momentum from Nvidia, boosted by surprise strong quarterly results after market close the previous day and an optimistic outlook. Preliminary data from the NYSE showed 1866 (previous: 699) advancers and 865 (previous: 2061) decliners, with 91 (previous: 81) stocks remaining unchanged.
Economic Forecasts: Interpreting the Impact of the Ruling Against Trump's Tariffs
Political Wrangle: US Appeals Court Restores Trump Tariffs
In the tariff dispute, the Court of International Trade determined that President Trump had overstepped his authority. A group of small US companies had filed the lawsuit. The court argued that the Constitution delegates the power to regulate trade solely to the US Congress.
The meeting between Trump and Fed Chairman Jerome Powell generated no market reaction. According to the Fed statement, Powell did not discuss his monetary policy projections during the encounter. The White House Press Secretary, Karoline Leavitt, reported that Trump expressed his belief that Powell was making a mistake by not lowering interest rates, which puts the US at an economic disadvantage compared to countries like China.
On the economic front, the number of initial jobless claims unexpectedly increased last week. The second reading of the first quarter's Gross Domestic Product (GDP) indicated a smaller contraction in the US economy than anticipated and previously reported. The personal consumption expenditures (PCE) price index, favored by the US central bank as an inflation metric, increased by 3.6 percent, climbing from a 2.4 percent increase in the preceding quarter. The GDP data suggests that the US central bank will maintain interest rates at their current level for now, according to Paul Stanley of Granite Bay. He predicts that the Federal Reserve will resume rate cuts in the fall.
The dollar initially appreciated in response to the court ruling, but later relinquished those gains following weaker labor market data and turned negative. The Dollar Index declined by 0.5 percent. On the bond market, yields also retreated following US economic data, as investors sought "safe havens" due to economic uncertainty. The 10-year yield decreased by 5 basis points to 4.43 percent.
Gold also benefited from the search for security. The troy ounce gained 1.0 percent to $3,316. Market participants cited ongoing uncertainty despite the tariff ruling as the reason for this rise.
Oil prices dropped after weaker labor market data. Notations for Brent and WTI fell by up to 1.4 percent. Experts cited concerns about demand and noted that OPEC+ could increase its production in July. Meanwhile, US weekly crude oil inventories fell more than analysts had projected.
Nvidia Climbs, Boeing Soars
Nvidia shares jumped 3.2 percent due to strong company results. Nvidia eased concerns about the impact of the Trump administration's ban on chip sales to China. Shares of AI infrastructure companies like Super Micro Computer experienced demand as well.
Salesforce.com reported results better than expected and raised its earnings guidance, but its stock still fell 3.3 percent. RBC downgraded Salesforce to "Sector Perform". HP plummeted 8.3 percent after the company adjusted its annual guidance.
Boeing shares (+3.3%) reached their highest level in 15 months. CEO Dave Calhoun hinted that aircraft deliveries to China could resume in June and that the company was approaching a production rate of 38 737-Max aircraft per month.
The reinstatement of President Trump's tariffs by the US Appeals Court has sparked discussions on the economic impact, with economists like Paul Stanley predicting potential Federal Reserve interest rate cuts in the fall. In light of this, the community and employment policies of various organizations may need to address the potential effects on their financial investments and business operations. For instance, investment strategies in the stock-market might require adjustments due to the unpredictable movements in the US stock markets, such as the Dow Jones Index and the S&P-500. Consequently, some companies, like Nvidia, may need to reassure their investors about their performance, given the impact of the tariffs on certain sectors and countries, like China.
