DJIA, S&P 500, Nasdaq Climb Post US Tariff Announcements - Habituation on Wall Street
U.S. Duties Escalate Financial Strain on Wall Street
Traders on Wall Street appear unperturbed by Donald Trump's regular tariff announcements, as the latest round of US tariff hikes have failed to ignite a stir on the stock market. Instead, the indices are on an upward trajectory. This apparent habituation to trade tensions has left market strategists in a spin, with increased uncertainty about the tariff war's future developments.
Wall Street's resilience is a stark contrast to the initial reaction when the Trump administration first imposed tariffs. Back then, the market was thrown into chaos, with investors struggling to gauge the impact of the new trade policies. However, as repeated tariff announcements andimplementations have become the norm, the market seems to have adapted.
Although traders are habituated to tariff announcements, the trade conflict's underlying unpredictability remains. US President Trump announced a 50% increase in steel and aluminum tariffs starting on June 4th. Additionally, both the US and China continue to accuse each other of undermining the recently agreed-upon trade deals. The fragile peace between the US and China is at risk of collapsing over the handling of rare earths, as reports suggest.
Market strategist Jim Reid of Deutsche Bank remarked, "It's really difficult to keep up or predict what's happening in trade right now. For the moment, it seems likely that tariff uncertainty will persist, even if we've probably passed the peak of US policy aggression."
The Dow Jones Index gained 0.1% to reach 42,305 points, while the S&P-500 closed 0.4% higher. The Nasdaq Composite saw a 0.7% increase. According to preliminary figures, 1,264 (Friday: 1,216) stocks gained, while 1,487 (1,557) lost ground on the NYSE. 79 (58) titles remained unchanged.
Economic indicators provided a mixed picture. The ISM reported a slowdown in US industrial activity in May, while the S&P Global survey for the US industry showed a strengthening compared to the previous month.
Meanwhile, some traders are growing anxious about a proposed retaliatory measure against foreign governments contained in a tax law by US President Trump. The proposed change would empower the US to impose new taxes of up to 20% on foreigners with US investments, affecting governments, individuals, and companies with US branches. It is often referred to as a "revenge tax" as it is designed specifically to target countries accused of unfair or discriminatory treatment of US companies.
The dollar index fell by 0.7%, with traders primarily attributing the weakness to the resurgence of the tariff issue. On the bond market, the yield on ten-year US Treasury notes rose by 4 basis points to 4.45%. Investors sold US bonds despite US Treasury Secretary Scott Bessent ruling out a US default. However, the high level of debt raised concerns among investors.
The re-escalating trade conflict boosted demand for "safe-haven" gold, supported by a weak dollar. The troy ounce increased by 2.8% to $3,381. News from Russia also sent oil prices soaring by up to 3.8%, while Opec+ decided to increase production from July—a decision that was already reflected in prices.
In the steel sector, Cleveland-Cliffs (+23.7%), Steel Dynamics (+10.3%), and Nucor (+10.1%) skyrocketed following the US tariffs on US steel and aluminum imports.
Apple (+0.5%) is embroiled in a legal challenge against the EU competition authority's decision on how it must make its iOS operating system more compatible with products from competing tech companies under the Digital Markets Act. Biontech rose by 18.1%, after entering into an agreement with Bristol Myers Squibb (+1.1%) for the development and commercialization of its antibody candidate "BNT327". This deal is worth several billion dollars.
The UK takeover panel has extended the deadline for US chipmaker Qualcomm's (+1.0%) takeover offer for Alphawave IP Group for the fourth time. Campbell's, the ready-meal manufacturer, beat third-quarter market expectations but provided a negative outlook. Its stock rose by 0.7%.
The Commission, given the current trade tensions and tariff announcements, may find it challenging to predict the future trends of finance and business, as market strategists are faced with increasing uncertainty about politics and general-news regarding the tariff war. Meanwhile, traders are growing anxious about a proposed retaliatory measure against foreign governments contained in a tax law, which could have implications for finance and business.
