Trade Pause, Tech Surge: Is This the Market’s Turning Point? | Affinity Capital
As of midweek, U.S. equity markets have shown resilience, buoyed by a temporary easing in trade tensions and encouraging inflation data. The S&P 500 rose 0.7% to 5,886.55, effectively erasing its year-to-date losses. The Nasdaq Composite outperformed with a 1.6% gain to 19,010.08, driven by strength in AI and technology stocks. In contrast, the Dow Jones Industrial Average declined by 0.6% to 42,140.43, reflecting underperformance in industrial sectors.
Key Drivers
Trade Developments : A major catalyst for this week’s activity was the unexpected 90-day tariff truce between the U.S. and China. Both countries agreed to slash reciprocal tariffs—U.S. tariffs on Chinese goods dropped from 145% to 30%, while China reduced tariffs on U.S. imports from 125% to 10%. This move has momentarily eased fears of a full-blown trade war and provided a boost to investor sentiment.
Inflation Outlook : New data indicates a nationwide slowdown in inflation, bolstering hopes that the Federal Reserve could consider interest rate cuts later this year. However, Fed Vice Chair Philip Jefferson noted that the impact of newly imposed tariffs could complicate the inflation trajectory, temporarily pushing prices higher and creating further uncertainty around future policy moves.
Sector Highlights
Technology : The Nasdaq’s 6% weekly gain was driven by continued enthusiasm around artificial intelligence and cloud computing, signaling strong investor confidence in the tech sector’s long-term growth potential.
Aerospace : GE Aerospace stood out with a 1.2% gain, closing at a 52-week high of $221.58. This marked the stock’s fifth consecutive daily increase, significantly outperforming industry peers and reflecting strong fundamentals and demand outlook.
Economic uncertainty tied to the reemergence of tariffs has led many major companies to revise or withdraw earnings guidance. General Motors suspended a planned $4 billion share buyback, citing cost pressures, while Ford warned of a $1.5 billion profit impact. In the airline industry, United, Delta, and American Airlines all pulled their 2025 guidance. Consumer goods leaders like Procter & Gamble and PepsiCo also scaled back forecasts due to rising costs and cautious consumer behavior.
The Federal Reserve is facing a complex landscape. While inflation is easing, growth is expected to slow moderately through the rest of 2025. The labor market remains solid, but volatility in import data—affected by shifting tariff rules—is clouding the economic outlook. Policymakers remain cautious and are closely monitoring developments to determine appropriate next steps.
While the recent tariff truce and cooling inflation data offer some relief, the landscape remains dynamic. Investors should be prepared for continued market fluctuations as policymakers navigate the balance between inflation control and economic growth. Long-term fundamentals remain strong, especially in key sectors such as technology and aerospace, but uncertainty around global trade and fiscal policy will remain a critical influence in the weeks ahead.
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