The U.S. stock market reached another historical milestone on Friday, marking a significant recovery from a dramatic plunge earlier this spring. Concerns over potential economic harm from the Trump administration’s trade policies initially sent the markets into a tailspin. However, the S&P 500 rebounded, climbing 0.5% to break its previous February record. This exceptional turnaround came after the S&P 500 experienced nearly a 20% drop from February 19 to April 8. The market’s recovery occurred at an unprecedented pace, taking only half the usual time, according to Sam Stovall, CFRA’s chief investment strategist. “Investors will breathe a sigh of relief,” he commented.
Friday also saw the Nasdaq composite advance by 0.5%, establishing its own new high, while the Dow Jones Industrial Average increased by 1%. Tensions arose when President Donald Trump called off trade discussions with Canada, momentarily unsettling the market. Nevertheless, stability returned after a brief dip in the S&P 500. The upbeat performance was widespread, with most sectors experiencing gains. Nike led with a notable 15.2% surge, even as it cautioned about tariffs negatively affecting its bottom line.
Globally, investors appear to have set aside concerns linked to the ongoing Israel-Iran conflict disrupting oil supplies and causing price spikes. The established ceasefire between both nations remains intact. Despite these geopolitical tensions, U.S. crude oil prices rose 0.4%, reaching $65.52 a barrel, aligning back to pre-conflict rates.
Additionally, attention is fixed on potential trade progress between the U.S. and China. Recent deals aim to facilitate American firms’ access to Chinese magnets and rare earth minerals, which are crucial for manufacturing and technology sectors, as stated by U.S. Treasury Secretary Scott Bessent. Simultaneously, China’s Ministry of Commerce confirmed advancements in the trade negotiations framework, although it did not explicitly ensure U.S. access to critical rare minerals. Instead, they mentioned evaluating and authenticating export permits for controlled items.
The inflation metrics showcased a moderate uptick in May, aligning with most expert forecasts. Nonetheless, both businesses and consumers continue to grapple with inflation challenges. The inconsistent tariff policies have complicated corporate financial forecasting while heightening consumer anxiety over persistent price hikes. A myriad of industries, including automotive and retail, warn of revenue and profit impacts due to increased import duties.
The United States maintains a 10% base tariff on all imported goods, with steeper levies for Chinese products and additional duties on steel and automotive imports. Both businesses and consumers demonstrate remarkable resilience, although analysts expect more apparent effects as tariffs influence economic conditions further. “We anticipated seeing more inflationary pressure but expect more pronounced impacts in the coming months,” remarked Greg Wilensky of Janus Henderson.
While the threat of heavy tariffs looms, the current suspension of retaliatory tariffs is temporary, set to lapse in July. Without successful negotiations or extensions, a market and consumer jolt could occur. The Federal Reserve remains vigilant over the tariff situation, ensuring inflation does not spiral out of control. Inflation rates hover just above the Fed’s 2% target, with its favored personal consumption expenditures index ticking up to 2.3% in May from April’s 2.2%.
In response to inflation concerns, the Federal Reserve implemented three rate cuts in late 2024 after an aggressive rise in interest rates to counter inflation. In 2022, the PCE peaked at 7.2%, while the consumer price index hit a high of 9.1%. Although interest rates remain steady in 2025 due to tariff uncertainties, economists project at least two rate reductions by year-end.
Bond yields showed minimal change, with the 10-year Treasury yield rising slightly from 4.24% to 4.27%. The 2-year Treasury yield, directly tied to Federal Reserve actions, inched up to 3.74%. By the close of the trading day, the S&P 500 was up by 32.05 points at 6,173.07. The Dow Jones climbed by 432.43 points to 43,819.27, and the Nasdaq grew by 105.55 points, reaching 20,273.46. European markets mostly saw gains, whereas Asian markets had mixed outcomes.