Wall Street Treads Water Amid Tariff Woes and Trade Hopes
Stock market optimism surges due to potential tariff relaxation
The final trading day of the week sees Wall Street in a balancing act, with signs of easing trade conflicts between the US and China boosting sentiment on the stock market, but also concerns about inflation caused by US tariffs weighing on investors.
Stocks closed higher on Friday, with the Dow Jones Index advancing 0.8 percent to 42,655 points. The S&P-500 and the Nasdaq Composite climbed by 0.7 and 0.5 percent, respectively. The positive market movement was supported by signs of easing tensions in the ongoing US-China trade war, as well as strong first-quarter earnings. However, the economic data shows a rise in inflation due to US tariffs, which is causing jitters among investors.
Trade disputes continue to be a contentious issue in the market, with the US government planning to discuss agricultural tariffs and other trade barriers with the European Union during upcoming trade talks. The discussions are also expected to cover topics such as economic security and digitalization. Despite the trade issue, some investors remain optimistic about the market's future, viewing the next 90 days as a window of opportunity to focus on other issues like the budget, taxes, and deregulation after temporarily putting the trade dispute aside.
Inflationary Pressure on the Rise
The US import prices surged beyond expectations in April, offering clear evidence of the impact of US tariffs, particularly the tariffs on Chinese goods. The increase in imports was 0.1 percent from the previous month, which appears minor but would have been a 0.4 percent increase if it weren't for lower oil prices. This demonstrates strong inflationary pressure from the tariffs, according to traders. The higher inflation could lead to purchase hesitation or forward buying rather than long-term purchasing intent.
Other economic indicators have also pointed to high inflation expectations due to the US tariffs, such as a drop in the University of Michigan's consumer sentiment index. This inflationary impact can erode purchasing power and affect consumer spending, a key driver of economic growth.
Stocks on the Move
Boeing lost 0.2 percent despite a new order from Etihad Airways for 28 wide-body aircraft. The order includes both Boeing 787 and 777X planes with GE engines, as well as a service package. However, the delivery of the new aircraft is not expected until the end of the decade, and some critics suggest that Boeing should be producing more planes to recover from the plunge following the 2019 crashes of two 737 MAX planes, the start of the Covid pandemic, and the January 2024 incident with an Alaska Airlines Boeing plane that lost an emergency exit door.
Charter Communications is acquiring Cox Communications for $21.9 billion, with Cox being valued at $34.5 billion including debt. Charter Communications shares gained 1.8 percent due to the merger news.
Applied Materials missed expectations in the second quarter and also disappointed with its revenue outlook, causing the chipmaker's shares to fall by 5.3 percent. Video game developer Take-Two Interactive posted mixed numbers for the fourth quarter and fell 2.4 percent. The company's guidance for the current fiscal year was also below market expectations.
Currency and Commodity Market Moves
The dollar recovered slightly, with the Dollar Index gaining 0.2 percent, despite the drag of higher import prices and inflation expectations on further rate cuts by the US Federal Reserve.
Oil prices showed some stability, rebounding somewhat from yesterday's decline, although concern about OPEC+ production cuts and a potential Iran deal remains a significant factor in the market. A deal could lead to an increase in Iranian oil supplies at a time when the market is already facing an oversupply, which is bearish for oil prices. The gold price failed to maintain its previous day's gains.
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- Wall Street
- Inflation
- Trade disputes
- Tariffs
- The ongoing US-China trade war and US tariffs are causing inflationary pressure, as indicated by the rise in US import prices, which could erode purchasing power and affect consumer spending.
- In the world of finance and business, some investors are viewing the next 90 days as an opportunity to focus on issues like the budget, taxes, and deregulation after temporarily putting the trade dispute aside.
- Political implications of trade policies extend beyond Wall Street, as the US government plans to discuss agricultural tariffs and other trade barriers with the European Union. This discussion is expected to cover topics like economic security and digitalization.
