Financial markets also had only modest reactions to the conclusion of two days of trade talks between the United States and China in London.
Trump said Wednesday that China will supply rare-earth minerals and magnets to the United States, while his government will allow Chinese students into U.S. universities in a deal that still needs an agreement by him and by China’s leader. Trump also said that “President XI and I are going to work closely together to open up China to American Trade. This would be a great WIN for both countries!!!”
Investors are still hoping for a more sweeping trade deal that would ease tensions between the world’s two largest economies.
Hopes for such deals between the United States and countries around the world have been one of the main reasons the S&P 500 has charged nearly all the way back to its all-time high after dropping roughly 20 per cent below a couple of months ago. Without them, the fear is that Trump’s high tariffs could drive the economy into a recession while pushing inflation higher. The S&P 500 is sitting 2.1 per cent below its record.
On Wall Street, Chewy dropped 12.5 per cent after the seller of pet supplies reported a weaker profit for the latest quarter than analysts had forecast. Expectations were high after its stock had already rallied nearly 37 per cent coming into the day for the year so far.
Tesla swung from a gain in the morning to a loss of 0.4 per cent to continue its shaky run. It’s been recovering much of its big losses taken last week after Elon Musk’s relationship with Trump imploded, which in turn raised fears about a loss of business for the electric-vehicle company. Musk on Wednesday backed away from some of his earlier comments and said they went “too far.”
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In the bond market, the yield on the 10-year Treasury eased to 4.41 per cent from 4.47 per cent late Tuesday. Shorter-term yields, which more closely track expectations for what the Fed will do with overnight interest rates, fell more.
Wednesday’s better-than-expected reading on inflation raised expectations along Wall Street that the Fed could cut its main interest rate at least twice by the end of the year.
The Fed has been keeping interest rates steady so far this year, going on pause after cutting rates at the end of last year. It has been waiting to see how much Trump’s tariffs raise inflation because cutting interest rates could push inflation up even more, as they give the economy a boost.
“The Fed could be justified in doing some preemptive rate cuts,” said Brian Jacobsen, chief economist at Annex Wealth Management. “They were afraid that inflation would rise before growth would slow, but the script has been flipped and they will likely change their tune.”
In stock markets abroad, indexes fell across much of Europe and rose in Asia. South Korea’s Kospi was one of the best performers and jumped 1.2 per cent.
AP
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