The S&P 500 and Nasdaq Composite both reached record highs shortly after the market opened, reflecting investor optimism despite ongoing concerns about the economic impact of the trade war and instability in the Middle East. This upward momentum signifies a historic rebound from the turmoil triggered by tariffs in April. The Dow Jones Industrial Average surged by over 500 points during the day before experiencing a pullback after President Trump announced the termination of trade discussions with Canada.
As the trading day progressed, the Dow was up around 250 points, while the S&P 500 and Nasdaq showed little change. Trump's comments unsettled traders and investors who, after an impressive rally, seemed ready to cash in their profits at the first sign of potential trouble. Jay Hatfield, the chief executive at Infrastructure Capital Advisors, noted that many investors are eager to realize gains, stating, “A lot of people have huge gains and so they're ready to take some profits. It doesn't take much to set us off.”
The trade front saw significant developments as President Trump announced a deal had been signed with China late Thursday. This agreement included a commitment from Beijing to approve export applications for rare earth materials, which had been a major point of contention in trade negotiations. Both Commerce Secretary Howard Lutnick and Treasury Secretary Scott Bessent indicated that the U.S. is nearing completion on numerous other trade deals. Bessent expressed hope that trade discussions with over a dozen nations could be finalized by early September.
On the economic front, interest-rate futures indicated that traders now see a 21% chance of a quarter-point rate cut at the next Federal Reserve meeting, an increase from approximately 15% the previous week, according to data from CME. Market analyst Antonelli remarked, “Earnings reports were fine and guidance was fine, and that’s enough for the market. At this point, yes the economy appears to be weakening, but what if the Fed can cut and solve that problem? I think the market is really thinking about that.”
In a further boost to market sentiment, the Treasury Secretary announced that a proposed “revenge tax” would likely be removed from Trump’s fiscal megabill. This decision came after G-7 countries agreed to exempt U.S. companies from an international minimum tax pact, alleviating concerns among foreign-owned entities that feared the tax could dampen U.S. investment. Additionally, the Federal Reserve's preferred inflation gauge showed a slight increase in May; however, the trend was not significant enough to raise serious alarm about price increases driven by tariffs. Consumers now anticipate a 5% inflation rate over the next year, a decrease from 6.6% the month prior.
At the close of trading, the Dow Jones Industrial Average was up approximately 250 points, while the S&P 500 and Nasdaq were mixed. The WSJ Dollar Index remained stable, hovering near its lowest level since 2023. U.S. bond yields stayed flat, with the 10-year yield around 4.25%. Meanwhile, gold prices fell below $3,300 per troy ounce, reflecting broader market trends.
