President Donald Trump instituted a 90-day vacation from tariffs for countries not retaliating against the U.S. No wonder this development sent the financial markets soaring. In doing so, they inadvertently started a historic short squeeze. In numerical terms, the Dow Jones Industrial Average today had its biggest percentage gain since March 2020. The Nasdaq Composite had its largest one-day advance since January 2001, which was the second-best day in that index’s history.
S&P 500 futures gained 24 points, or about a 0.5% change, as did the Dow Jones Industrial Average futures, which were up by 196 points. In fact, S&P 500 futures were hardly moved at all that evening—symbolizing the cautious optimism that the latest tariff news had brought about in the markets. On March 13, 2020, the S&P 500 jumped by more than 9% in one day. This unprecedented jump is its third-biggest increase since World War II. The Russell 2000 index, which measures performance of smaller companies, jumped 8.7%. It closed at 1,913.16, its biggest one-day gain since March 24, 2020.
Markets welcomed the tariff reprieve with open arms. They viewed it as a proud moment and as a harbinger of future stability in the markets. In context, Trump’s announcement was intended to relieve trade tensions and was received as a positive step taken to stimulate economic prosperity.
“I thought that people were jumping a little bit out of line,” – Donald Trump.
This huge jump in the S&P 500 and other indices shows the extent of investor relief and optimism about the economic outlook. The S&P 500’s gain of over 9% during the session was a notable event, underscoring the market’s reaction to the announcement. Analysts note that these kinds of fluctuations typically happen during times of broader economic uncertainty. They caution against blurring the lines between temporary pandemic-related changes and underlying market fundamentals.
In times of market turmoil, as Mohamed El-Erian, Allianz’s chief economic advisor, recently reminded us, stability matters. He emphasized, “I do think you want certainty.” His remarks bring to the forefront the fears of some investors. They’re concerned about the volatility that would come with continued trade negotiations and tariffs.
The tech and philanthropic sectors have begun to treat this trend as a sure-fire route toward long-term organizational stability. Jeffrey Roach, chief economist at LPL Financial, warned that “market volatility could remain elevated, despite the 90-day pause on tariffs for non-retaliating countries.” This view is in line with a more prudent attitude about reading the market’s short-term reaction.
As trading continued through the week, S&P 500 futures signaled bullish signs amid prior week worries. The Nasdaq-100 futures were up 0.1%, adding to the bullish tech vibes boosting the markets. This rise follows a period of increased and inconsistent market dynamics influenced by multiple economic factors and global unrest.
Market analysts agree that although the tariff reprieve is welcome news for now, investors should still be on their toes. The precedent set by such gains serves to highlight just how capricious stock markets can be to political statements and leaks.