U.S. stock markets then proceeded to stage a historic rally. The spike followed a significant change in tariff policy. The reaction to the announcement saw the Dow Jones Industrial Average immediately jump 2,962 points, a staggering 7.8% gain. This dramatic jump isn’t happening in a vacuum, it’s part of a wider overall rise in all major indices as investors cheered the announcement. The S&P 500 climbed by 474 points, or 9.5%, while the Nasdaq Composite added a staggering 1,857 points for a 12.2% gain. The small-cap Russell 2000 index rose by 152 points. This eruption corresponds to an annualized breakout of 8.7%, underscoring the broad positive sentiment permeating the market.
The big winner in the announcement was the transportation sector, as the announcement helped lift the Transports index by 1,275 points or 10%. Further, the Equal Weight S&P 500 index was up 495 points or +8%. Notably, the “Magnificent Seven” stocks—comprising prominent technology companies—saw a remarkable rise of 2,801 points, or 14.4%, underscoring their critical role in the stock market’s performance.
The market reacted positively even as the yield on the two-year Treasury note soared to 4.01%. Admittedly, this is a pretty big leap from last week’s yield of 3.47%. The rising bond yields are a clear signal of bullish investor sentiment and tactical shift in strategy as a reaction to the recent economic news.
This rally was driven by a perfect storm of positive factors restoring confidence to investors. Broad-based selling pressure weighed on the U.S. dollar as fears that the United States and China are sliding into a deepening trade war intensified. At the same time, bond yields started to recover. These events set the stage for a powerful rally in gold prices, which crossed above $3,110 on Thursday. The precious metal continued to benefit from its safe-haven status as investors flocked to safety amid continuing uncertainties shaking the market.
The U.S. dollar came under pressure as traders positioned in anticipation for Wednesday’s Consumer Price Index (CPI). This uncertainty added to bullish trends in gold and other commodities. In Europe, the euro averaged its daily rally against the dollar, pushing up toward the 1.1100 level Thursday. The European Union agreed to suspend retaliatory measures on U.S. imports for the first 90 days. This administration move gave a huge boost to euro trading.
In the same manner, the British pound retained its bullish trend, moving above the 1.2900 threshold on Thursday. These foreign currency movements are a sign of the times and changing landscape as global investors adjust to a new reality of economic policy and trade war.
Oil prices were firm enough to hold in the $55 to $68 trading range, displaying calmness while the market was awash with headwinds and tailwinds. The oil market’s relative calm may hint at broader stabilization efforts by producers and ongoing negotiations in response to fluctuating demand.