Today’s Rally Fizzled
The U.S. stock markets staged an early rally, buoyed by President Donald Trump's softened rhetoric on Federal Reserve Chair Jerome Powell and a more conciliatory approach toward China tariffs.
Today, the U.S. stock markets staged an early rally, buoyed by President Donald Trump's softened rhetoric on Federal Reserve Chair Jerome Powell and a more conciliatory approach toward China tariffs.
Specifically, reports indicated that the Trump administration might reduce U.S. tariffs on Chinese goods might by 50-60%, signaling a potential de-escalation in trade tensions. This was welcome news to investors looking for any light in a very dark tunnel.
On top of this news, Trump seemingly walked back reports he was going to fire Fed President Jerome Powell. While some might agree that a lawyer with no formal economic education overseeing the U.S. economy might not be a great idea, the idea that Trump would fire Powell spooked the markets earlier this week. Markets rose more than 3% in early trading on the positive news.
But was the market too optimistic?
At the close, the market posted a solid win, no doubt about it. Technology and consumer discretionary sectors rallied with notable performances from Tesla, Nvidia, Apple, and Meta Platforms. Tesla shares rose 5% following better-than-expected profits in its automotive division, while Apple and Meta advanced despite facing a combined $800 million fine from the European Union for violating the Digital Markets Act. But on a broader scale, the rally showed some cracks.
Today’s rally fizzled later into the session and ended just narrowly above session lows. No matter how you spin today’s events, the rally showed some deep cracks, led by Treasury Secretary Scott Bessent’s comments casting doubts on the immediacy of a comprehensive trade deal with China, suggesting that negotiations are ongoing and complex. He implied both sides are far apart on any possible tariff deal. On top of this news news, we learned that U.S. business activity hit a 16-month low amid tariff uncertainties, indicating that underlying economic challenges are widespread and deep.
Overall, today's market rally reflects a positive response to political developments, but don’t let today’s rally lead to erroneous conclusions that all is well in the markets. They aren’t. Not by a long shot.
