US markets react to Trump's tariff announcements

[UNITED STATES] US market indices closed higher following a tumultuous trading session on Wednesday, dipping early and then rebounding as investors made last-minute bets to position themselves ahead of US President Donald Trump's massive tariff announcements.

Trump began speaking after Wall Street had closed, and both S&P 500 and Nasdaq futures reversed gains as investors reacted to his broad tariff intentions. As he spoke, S&P 500 futures were down 1.6%, while Nasdaq futures were down 2.4%. This warned that investors can expect significant losses when Wall Street opens on Thursday.

Trump's sweeping measures included a 10% baseline tariff on all imports to the United States and increased tariffs on several of the country's largest trading partners.The potential impact of these tariffs extends beyond immediate market reactions. Analysts warn that higher import costs could lead to increased consumer prices, potentially stoking inflation. This, in turn, could force the Federal Reserve to reconsider its monetary policy stance, further complicating the economic outlook.

US markets have been volatile in recent weeks as investors worried about the breadth of tariffs and their impact on the global economy, inflation, and corporate earnings.

The CBOE Volatility Index, also known as Wall Street's fear barometer, has stayed stable for the last three sessions at a level last seen in mid-March. Trading in that index ends at 4:15.

Global trade partners have been keenly following the issue, with several countries already indicating a willingness to retaliate with their own duties. This tit-for-tat approach might lead to a full-fledged trade war, disrupting supply networks and slowing global economic development.

Some duties, notably those on steel, aluminum, and automobiles, have already been announced, but Trump revealed the specifics of his tariff strategy during a White House Rose Garden event at 4 p.m. ET (2000 GMT).

"Words from presidents matter," said Christopher Wolfe, president and chief investment officer of Pennington Partners & Co. "They can and do influence legislation and how corporate America reacts to events. That is the weight we are all experiencing right now."

Prior to the speech, Wolfe predicted that investors' reactions would be heavily influenced by whether they saw it as a calibrated economic policy move or a series of seemingly arbitrary levies with unexpected repercussions.

Investors are also considering the geopolitical ramifications of these levies. Tensions with trading partners may strain diplomatic relations and contribute to greater geopolitical instability, further disturbing markets.

The Dow Jones Industrial Average increased 235.36 points, or 0.56%, to close at 42,225.32, the S&P 500 gained 37.90 points, or 0.67%, to 5,670.97, and the Nasdaq Composite climbed 151.16 points, or 0.87%, to 17,601.05. On Wednesday, several IT companies pledged support for benchmarks.

Tesla soared 5.3% after Politico reported that Trump has informed Cabinet officials and other close contacts that his billionaire buddy Elon Musk, CEO of the electric vehicle manufacturer, will shortly stand down from his government position. This helped reverse earlier declines triggered when Tesla reported a 13% drop in first-quarter deliveries.

Its gains aided the consumer discretionary index, which jumped 2% and was the best performing of the 11 S&P sectors. Tesla's stock plummeted during Trump's post-bell speech. Among the Magnificent Seven, Amazon.com closed 2% higher when it was revealed that the corporation was bidding for the short video site TikTok.

On the data front, US private payroll growth quickened in March, while new orders for US-manufactured products climbed significantly in February, most likely due to corporations front-loading orders ahead of tariffs.

The focus will now shift to the critical monthly non-farm payrolls statistics, as well as Federal Reserve Chair Jerome Powell's address on Friday, for insights into the health of the US economy and interest rate trajectory.

Traders expect the Fed to drop interest rates three times this year, but the threat of tariff-induced inflationary pressures has muddied the view. Among the newest public firms, CoreWeave continued to recover from a rough first two trading days, with the artificial intelligence startup adding 16.7% to the previous session's gains.

However, conservative news provider Newsmax, which had seen triple-digit percentage gains in its first two days, fell considerably, dropping 77.5% on the day. Volume on US markets totaled 15.94 billion shares, compared to the 15.86 billion average for the prior 20 trading days.