U.S. Markets Surge on Easing Trade Policy and Fed Support
U.S. equity markets advanced sharply on Wednesday, lifted by positive sentiment around trade relations and monetary policy direction. The Nasdaq Composite led with a 2.5% gain, closing at 16,708.1, while the S&P 500 rose 1.7% to 5,375.9. The Dow Jones Industrial Average climbed 1.1% to 39,606.6. Investor sentiment improved following indications of a softer U.S. stance on China tariffs and President Donald Trump’s reaffirmed support for Federal Reserve Chair Jerome Powell. These developments eased concerns over central bank independence and sparked optimism that trade restrictions could soon be relaxed.
Technology and consumer discretionary sectors—typically growth-focused—drove the rally, while defensive sectors like consumer staples and energy underperformed. Despite April’s S&P Global PMI showing signs of slowing economic activity, market sentiment remained upbeat. Analysts noted that easing trade tensions could fuel renewed global growth and equity market upside.
Corporate Earnings in the Spotlight
Earnings remain a key market driver, with roughly 20% of S&P 500 firms reporting Q1 results. Among them, Tesla’s shares climbed despite a profit miss, supported by the company’s continued push to roll out a lower-cost EV and the Cybercab. Overall S&P 500 earnings growth is forecast at 7% for Q1, slightly below early projections but still reflecting solid performance, particularly in IT and healthcare.
Looking ahead, 9.6% earnings growth is forecast for 2025, though analysts warn this may be tempered if tariff disputes escalate. However, potential progress in trade negotiations and a tilt toward pro-growth policies later this year could help support both corporate margins and equity valuations.
Global Market and Economic Highlights
Asian Markets Mixed Amid Trade Hopes and Economic Data
Asian equities were broadly higher on Thursday. Japan’s Nikkei 225 rose nearly 1%, boosted by renewed U.S.-Japan trade talks and speculation around lower auto tariffs. Meanwhile, South Korea’s KOSPI fell 0.6% after a Q1 GDP contraction, while China’s Shanghai Composite and Australia’s ASX 200 posted modest gains. Hong Kong’s Hang Seng ended lower.
U.S. Futures Edge Higher Ahead of Key Earnings
U.S. equity futures advanced overnight as markets digested President Trump’s comments on reducing tariffs, sparking optimism over U.S.-China trade talks. Traders also looked ahead to Alphabet’s upcoming earnings report, though uncertainty remains due to inconsistent signals from trade negotiations and lingering macroeconomic concerns.
European Equities Climb on Trade Optimism
In Europe, major indices surged: Germany’s DAX rose 3.2%, France’s CAC 40 added 2.1%, and the UK’s FTSE 100 gained 1%. Gains were attributed to growing hope for a resolution to U.S.-China trade tensions. Corporate updates were mixed: Volvo and Akzo Nobel posted weaker results, while BE Semiconductor delivered strong earnings driven by AI sector demand.
Currencies and Commodities
U.S. Dollar Slides on Policy Signals
The U.S. dollar weakened on Thursday, slipping to 99.6 on the DXY following two days of gains. The decline followed Trump’s tariff remarks and his public support for Fed Chair Powell, which helped ease policy-related concerns. The dollar fell to 1.1341 vs the euro, and also weakened against the British pound and Japanese yen.
Oil Prices Rebound Despite Inventory Surprise
After steep losses in the previous session, oil prices rebounded. Brent crude rose 0.3% to $66.33, and WTI edged up 0.2% to $61.78, despite a surprise increase in U.S. crude inventories. Markets were supported by talks of a potential OPEC+ production increase in June and improving U.S.-China trade prospects.
Auto Tariffs: Partial Relief for U.S. Carmakers
President Trump is expected to exempt certain Chinese-made car parts from tariffs, responding to lobbying from the auto industry. However, the broader 25% tariff on imported vehicles and parts remains in place. The move is aimed at reducing costs for automakers reliant on Chinese supply chains, though ongoing tariffs are likely to keep vehicle prices high and strain global logistics.
Notable Corporate Developments
- Lam Research beat Q3 expectations, with $4.72B in revenue and $1.04 EPS. Shares gained 2.6% after-hours as demand for AI chips surged.
- Boeing posted a smaller-than-expected Q1 loss and higher jet output. Plans are underway to increase 737 MAX production to 38 per month, aiming for positive free cash flow in H2.
- ServiceNow reported 19% YoY growth in Q1 subscription revenue to $3,005M, fueled by strong AI adoption. Remaining performance obligations rose 22%.
- Chipotle cut its full-year comp sales forecast to low single digits. Q1 sales declined 0.4%, hit by inflation and tariff-driven input costs.
- GE Vernova posted $8.03B in Q1 revenue, but warned of a $300-$400M tariff impact, mainly from offshore wind operations.
- Newmont exceeded Q1 earnings estimates with $1.25 EPS, helped by a 41% surge in gold prices, despite an 8.3% output decline.
- Adidas posted an 82% jump in operating profit to €610M, supported by 13% sales growth and strong demand for Samba and Gazelle lines.
- Kering’s Gucci saw Q1 sales drop 25%, with total group revenue falling 14%. Plans are underway for job cuts, store closures, and a brand revamp.
- Tesla suffered a 37.2% YoY drop in European sales in Q1. Tariffs, competition, and a regional sales boycott contributed to the decline.
- Nintendo shares rose nearly 6% following 2.2M lottery signups for its Switch 2 console in Japan. U.S. pre-orders were delayed amid tariff concerns.
- Eli Lilly filed lawsuits against four compounders for selling unapproved tirzepatide drugs, citing patient safety risks.
Regulatory Watch: First DMA Fines for Apple and Meta
In a landmark ruling under the EU’s Digital Markets Act (DMA), regulators imposed the first major fines: €500M on Apple and €200M on Meta for compliance failures. Both companies plan to appeal, and the case could heighten U.S.-EU tech tensions moving forward.
Investment Ratings and Analyst Moves
- Piper Sandler downgraded Oracle to Neutral, citing margin pressure and a projected 50% rise in CapEx tied to cloud infrastructure.
- Bernstein upgraded Cava Group to Outperform, citing attractive valuation and strong fundamentals.
- Baird upgraded Lockheed Martin to Outperform, citing missile demand, and raised the EPS estimate and price target to $540.
- Morgan Stanley initiated coverage of Duolingo with an Overweight rating and a $435 target, citing user growth and AI-led profitability.
Commodities: Oil Sector Downgrades
Barclays and Redburn Atlantic issued cautious outlooks for oil and gas stocks, citing weaker oil prices and macroeconomic uncertainty. Downgrades included Chevron, Equinor, and Murphy Oil, alongside lowered WTI and Brent forecasts.
On the Radar: Economic Releases and Tech Earnings
Today’s U.S. economic reports include:
- Durable goods orders
- Initial jobless claims
- Existing home sales
Investors also await key earnings from Alphabet, Intel, and T-Mobile, which may provide further insight into sector trends and macro resilience.
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