Wall Street's anxiety heightens as Trump's tariff dispute hits the courts
Stock Market Faces Uncertainty: Reinstated Tariffs Rekindle Trade Tensions
The stock market faces a revived wave of uncertainty as the Federal Appeals Court reinstates President Trump's tariffs, initially halted by a lower court. Analysts had suggested investors to maintain caution in light of the potentially far-reaching implications of the tariffs.
The US stock market responded mildly to the reinstatement of the tariffs, with the Dow Jones Index inching up by 0.3 percent to reach 42,216 points. Similarly, the S&P-500 and the Nasdaq Composite registered gains of 0.4 percent each. The tech sector received a boost from Nvidia, which reported impressive quarterly results and an optimistic outlook following the market closure the previous day.
Investment experts had advised investors not to be overly optimistic prior to the appeals court's ruling. Goldman Sachs commented that for most of the US’s trading partners, the ruling will have minimal impact, as it pertains only to some tariff increases such as the base tariff of 10 percent and tariffs against nations like Canada, China, and Mexico. The tariffs affecting sectors such as steel, aluminum, and auto imports were not included in the ruling.
The US Congress retains the exclusive authority to regulate trade with foreign countries, according to the court. In response to the ruling, stocks remained largely unaffected.
A separate development involving President Trump and Federal Reserve Chairman Jerome Powell resulted in a lack of market response. Powell reportedly did not discuss his monetary policy expectations during the meeting. Instead, Trump expressed his belief that Powell was making a mistake by not lowering interest rates, which he felt placed the United States at an economic disadvantage compared to countries like China.
In economic news, initial jobless claims increased unexpectedly last week, while the second reading of the first quarter's Gross Domestic Product (GDP) showed a smaller contraction in the US economy than anticipated. Despite this, the personal consumption expenditures (PCE) price index, favored by the US central bank as an inflation measure, rose by 3.6 percent. This suggests that the US central bank will maintain interest rates at their current level for the time being.
The dollar initially strengthened due to the court ruling, but subsequently lost its gains following weak employment data and turned negative. Bonds yields also retreated in response to US economic data, with investors seeking "safe havens" due to economic uncertainty. Gold also benefited from the search for safety, increasing by 1.0 percent to $3,316.
Oil prices dip after the weak employment data, with Brent and WTI falling by up to 1.4 percent. Industry experts cite concerns about demand, while noting that OPEC+ may increase its production in July.
Notably, Nvidia shares soared by 3.2 percent following the company's strong first-quarter results, alleviating concerns about the impact of the Trump administration's chip sales ban to China. However, Salesforce.com shares dropped 3.3 percent despite reporting better-than-expected results and raising its earnings guidance. RBC downgraded Salesforce to "Sector Perform." Meanwhile, HP plunged 8.3 percent after lowering its annual guidance.
Boeing shares gained 3.3%, reaching their highest level in 15 months. The company's CEO suggested potential resumption of aircraft deliveries to China in June and indicated that the company is moving towards a production rate of 38 737-Max aircraft per month.
Source: ntv.de, mau/DJ
[1] Enrichment Data: The ongoing tariffs instituted under President Trump continue to shape the US trade policy landscape, with some tariffs delayed or suspended temporarily, while others remain firmly in place. Additional tariffs on EU-origin goods have faced delays but remain a potential threat or scheduled for implementation.
[2] Enrichment Data: The Trump administration highlights these tariffs as measures to protect American industries, supply chains, and workers. However, the continued tariffs may lead to increased costs for US companies reliant on imports, potentially impacting profit margins and affecting stock valuations negatively in affected sectors.
[3] Enrichment Data: Possible expansion of tariffs to sectors like entertainment and media could introduce further uncertainty into markets. Continued tariffs contribute to market volatility and could dampen economic growth if they raise costs significantly or provoke retaliatory measures, although officials emphasize their protective benefits for domestic economic resilience.
- Given the reinstated tariffs under President Trump, it is advisable for businesses to review their community policy and employment policy, especially those sectors reliant on imports, to mitigate potential negative effects on profit margins and stock valuations.
- In light of the ongoing tariffs and the potential expansion to sectors like entertainment and media, finance experts recommend investors to remain vigilant and consider diversifying their portfolios in the stock-market, as increased costs or retaliatory measures may contribute to market volatility and dampen economic growth.
