Wall Street's Mellowed Response to Trump's Tariff Surprises
Increased U.S. Tariffs Pose No Concern for the Financial District of Wall Street
These days, President Trump's tariff announcements don't exactly set Wall Street on edge. His latest round of hikes? Meh. The indices are actually climbing higher, a clear sign of habituation.
Traders can't help but notice the trend. Despite the increased uncertainty surrounding the ongoing tariff conflict, they remain more or less calm. US President Trump has announced a hefty increase in tariffs on steel and aluminum imports, setting them at 50 percent as of June 4th. To add fuel to the fire, the US and China are firing accusations at each other, with China claiming the US undermines recent trade deals, sparking concerns about the breakdown of the US-China trade peace over the handling of rare earths.
Market strategist Jim Reid of Deutsche Bank doesn't mince words: "It's a real headache to keep up with the twists and turns in trade these days. For now, it seems like tariff uncertainty is here to stay, even if we might have passed the peak of US policy aggression."
A quick rundown of the day's stats:- The Dow Jones Index sneaked up by 0.1 percent, hitting 42,305 points.- The S&P-500 closed the day with a 0.4 percent jump.- The Nasdaq Composite saw a 0.7 percent increase.
According to preliminary data, 1,264 stocks saw gains (compared to 1,216 the previous Friday), 1,487 experienced losses (1,557), and 79 remained unchanged.
The economic data of the day painted a mixed picture. US industry activity slowed down in May, as indicated by ISM. However, a survey by S&P Global for the US industry showed a strengthening compared to the previous month.
The resurgence of the controversial retaliatory measure against foreign governments contained in a tax law by US President Trump has stirred up some uneasiness. This measure would enable the US government to impose new taxes of up to 20 percent on foreigners with US investments, potentially affecting governments, individuals, and companies with US branches. Dubbed the "revenge tax," it's specifically designed to be applied against countries accused of unfair or discriminatory treatment of US companies.
The Greenback Takes a Dive
The "revenge tax" could dampen demand for some US assets and weigh on the dollar, according to Barclays. Consequently, the dollar index took a tumble, falling by 0.7 percent. The drop was primarily attributed to the resurfacing tariff issue.
On the bond market, the yield on ten-year US Treasury notes rose by 4 basis points to 4.45 percent. Investors ditched US bonds despite US Treasury Secretary Scott Bessent ruling out a US default. However, this sparked concern among investors given the high level of debt. Rabobank notes that the mere fact that this question is being raised is significant in itself. Furthermore, Jamie Dimon, CEO of JPMorgan, has warned that the US bond market could face pressure due to soaring US debt.
Gold Glitters and Gas Prices Sizzle
The reignited trade conflict sparked renewed interest in gold, with the precious metal seeing a 2.8 percent surge to $3,381. A weak dollar and increasing worry about a potential end to the Ukraine conflict also contributed to gold's allure. In Russia, news fueled a spike in oil prices, with Brent and WTI prices climbing by up to 3.8 percent. The OPEC+ agreement to increase production from July was already reflected in the prices, which is why the announcement didn't make a significant impact.
Steel stocks, on the other hand, were sought after following the announced US tariffs on US steel and aluminum imports. Cleveland-Cliffs shares soared by 23.7 percent, while Steel Dynamics and Nucor saw gains of 10.3 and 10.1 percent, respectively.
Biontech shares jumped by 18.1 percent following an agreement with Bristol Myers Squibb for the development and commercialization of Biontech's antibody candidate "BNT327." The deal is worth multiple billions.
The UK takeover panel has extended the deadline for a takeover offer by Qualcomm for Alphawave IP Group for the fourth time. Campbell's, the ready-to-eat meal manufacturer, beat market expectations in the third quarter but provided a bleak outlook. Its stock inched up by 0.7 percent.
- The Commission, in examining the ongoing trade tensions and the potential impact of tariffs on business and finance, may find it crucial to address issues such as the "revenge tax" and its potential effects on the market and general-news.
- Despite the mellowed response from Wall Street to Trump's tariff surprises, political factors remain entwined with the performance of indices like the Dow Jones Index, S&P-500, and Nasdaq Composite, underlining the complex interplay between finance, business, and politics.
