The stock market took a dramatic turn on Thursday following a massive rally sparked by President Donald Trump’s unexpected announcement of a 90-day reprieve on some of his “reciprocal” tariffs. Dow Jones Industrial Average futures plummeted 600 points, equivalent to a 1.5% drop, while S&P 500 futures fell by 1.9% and Nasdaq-100 futures traded down by 2.4%. The market was shaken by the decline in leading companies like Apple and Tesla, both experiencing a more than 3% drop in premarket trading. This abrupt shift came on the heels of a historic surge on Wall Street, with the S&P 500 soaring over 9% for its third-largest gain since World War II. The Dow Jones Industrial Average and Nasdaq Composite also saw significant advances, marking some of the best performances in years.
Market Surge and Unprecedented Trading Volume
During Wednesday’s trading session, the market witnessed an unusual surge in trading volume, with approximately 30 billion shares exchanged. This level of activity marked the highest volume in history, with records dating back 18 years. The rally was largely fueled by Trump’s announcement of a temporary reduction in tariff rates for most countries. While this move instilled a sense of optimism in the market, some experts believe that uncertainties still linger.
Expert Insights and Market Responses
Michael Gapen, Chief U.S. Economist at Morgan Stanley, highlighted that despite the 90-day reprieve, the effective tariff rate remains high at 23%, reaching historical peaks. He emphasized that while delays in tariffs provide some relief, they do not alleviate the prevailing uncertainty. Echoing this sentiment, Jeffrey Roach, Chief Economist at LPL Financial, cautioned that market volatility could persist, despite the temporary pause in tariffs for non-retaliating countries. He pointed out that economic data from earlier in the year indicates a slowing economy, irrespective of the trade policy in place.
The latest consumer price index report revealed a decrease in inflation to 2.4% year-over-year in March, lower than the initial estimate of a 2.6% rise by Dow Jones. Amidst these market dynamics, several stocks experienced notable movements before the opening bell. Big Tech companies like Tesla and Nvidia saw declines following Trump’s tariff announcements, with Tesla dropping more than 3%. U.S. Steel shares also plummeted by 10.4% after Trump expressed reluctance towards a potential acquisition by Nippon Steel.
Global Market Responses and Analyst Predictions
In response to Trump’s tariff pause, global markets exhibited significant movements, with Japan’s Nikkei leading Asian markets with a 9% jump. The European Union followed suit, announcing a 90-day halt on retaliatory tariffs targeting the U.S. European shares surged at the open, with the Stoxx 600 index climbing 7% in London. Analysts and economists weighed in on these developments, with Capital Economics attributing Trump’s tariff policy shift to market pressure. The firm’s chief North America economist, Paul Ashworth, predicted that a full rollback to pre-tariff levels is unlikely, projecting an effective tariff rate on China to settle around 60%.
The market’s reaction to these shifts remains uncertain, with varying opinions on the future trajectory of the economy. While some experts anticipate ongoing volatility, others see potential for stability amidst changing trade policies. As the market navigates through this period of uncertainty, investors and analysts alike are closely monitoring developments to gauge the broader economic impact and potential investment opportunities.
