Why Is the Stock Market So High Today?
The major stock indices all shot up on Wednesday following an announcement from President Donald Trump that there would be a 90-day pause on some tariffs.
A number of tariffs were paused for three months while reciprocal tariffs were reduced by 10%, effective immediately. This was announced by President Trump on Wednesday, and he said that the decision was made to benefit 75 countries that have reached out and negotiated with the United States over tariffs.
China was one of the countries that was excluded from this reprieve. They were hit with a 125% reciprocal tariff after China decided to raise tariffs on U.S products from 34% to 84%. That trade war will continue to hurt markets in China and the United States for the foreseeable future, but other countries have been more cooperative with the U.S. in its tariff policies.
As a result, the Dow Jones shot up by 7.9% on Wednesday. The S&P 500 climbed 9.5%, which was significant, because that is the highest increase this index has seen since 2008. The Nasdaq Composite, which is weighted in favor of technology stocks, increased by 12%. This particular index had its best day in 24 years thanks to the tariff pause.
The Fragile Market Situation
Right now, the stock markets are highly unpredictable, easily shifted by any news about tariffs, either good or bad. What we are expecting to happen in early premarket trading for Thursday is that the stock indices will slow down a bit. They will begin to compensate for Wednesday’s surge by still staying high but not as high as they were immediately following the tariff announcement.
If there is no further major tariff news for the next 30 days, that will allow the stock market to regain some of its lost ground and to focus more on input from traditional economic factors. It looks like the Trump administration is adopting a wait and see attitude with tariffs as well as the economy.
Stocks have climbed more than $1.8 trillion in value over the last 24 hours, and we could see a further climb in the next few days as the market continues to rally. As the focus shifts off tariffs, there will be more focus on the job market, inflation, and interest rates. These factors are likely to decide where the market heads for the near future.
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