The S&P 500 slumped 9.1 per cent during the first week of April as Trump announced a major escalation of his trade war with more tariffs. The market has now clawed back its losses since then, helped by a string of resilient earnings reports from US companies, hopes for de-escalation of trade tensions with China and expectations that the Federal Reserve will still be able to cut rates a few times this year.
The benchmark index is still down 3.3 per cent so far this year, and 7.4 per cent below the record it reached in February.
All told, the S&P 500 rose 82.53 points to 5,686.67. The Dow gained 564.47 points to 41,317.43, and the Nasdaq added 266.99 points to 17,977.73.
The job market is being closely watched for signs of stress amid trade war tensions. Strong employment has helped fuel solid consumer spending and economic growth over the last few years. Economists are now worried about the impact that taxes on imports will have on consumers and businesses, especially about how higher costs will hurt hiring and spending.
The economy is already showing signs of strain. The US economy shrank at a 0.3 per cent annual pace during the first quarter of the year. It was slowed by a surge in imports as businesses tried to get ahead of Trump’s tariffs.
The current round of tariffs and the on-again-off-again nature of Trump’s policy has overshadowed planning for businesses and households. Companies have been cutting and withdrawing financial forecasts because of the uncertainty over how much tariffs will cost them and how much they will squeeze consumers and sap spending.
Hopes remain that Trump will roll back some of his tariffs after negotiating trade deals with other countries. China has been a key target, with tariffs of 145 per cent. Its Commerce Ministry said Beijing is evaluating overtures from the US regarding the tariffs.
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Investors had a relatively quiet day of earnings reports following a busy week. Exxon Mobil rose 0.4 per cent, recovering from an early slide, after reporting its lowest first-quarter profit in years. Rival Chevron rose 1.6 per cent after it also reported its smallest first-quarter profit in years.
Falling crude oil prices have weighed on the sector. Crude oil prices in the US are down about 17 per cent for the year. They fell below $US60 per barrel this week, which is a level at which many producers can no longer turn a profit.
Block slumped 20.4 per cent after reporting a sharp drop in first-quarter profit that fell short of analysts’ forecasts. The financial technology company behind Cash App cited a pullback in consumer spending on travel and other discretionary items as a key reason for the results.
Treasury yields rose in the bond market. The yield on the 10-year Treasury rose to 4.31 per cent from 4.22 per cent late Thursday.
AP
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