US Stock Markets Reach New Heights
New York (AP) – On Wednesday, US stock markets continued their upward trajectory, setting new records. This came in the context of ongoing trade discussions between the globe’s largest and fourth largest economies, particularly focusing on Japan’s imports to the United States.
The S&P 500 climbed 0.8%, reaching an unprecedented high. The Dow Jones Industrial Average surged by 507 points, or 1.1%, while the Nasdaq Composite increased by 0.6%, hitting its own new milestone.
In Tokyo, stocks also rose significantly, with the Nikkei 225 index increasing by 3.5% after President Donald Trump announced a new trade framework. The plan involves a 15% tax on imports from Japan, which is a reduction from the previously proposed 25% that was slated to take effect on August 1.
Brian Jacobsen, the chief economist at Annex Wealth Management, commented, “This signals a market that is now more amenable to 15% tariffs than a year ago when such a rate would have caused shockwaves.”
Trump’s trade strategy involves imposing strict taxes on imports worldwide. This has the potential to push inflation higher for American households while possibly slowing down the economy. However, many tariffs are currently on hold to allow for negotiations that could result in lower tax rates. On Tuesday, Trump also announced a trade agreement with the Philippines.
Despite these pressures, the US economy seems to be holding up well. Interestingly, the existing tariffs may not be affecting consumer prices as severely as once anticipated. David Merricle, an economist at Goldman Sachs, noted that the impact of tariffs on consumer prices is tracking slightly lower than it did in 2019.
Still, the effectiveness of these tariffs is evident, as many US companies are reflecting positive results in their profits. For example, Hasbro faced a billion-dollar non-cash hit from tariff-related reviews, indicating that while short-term profits are impacted, they haven’t yet significantly affected overall sales profitability.
Even so, Hasbro’s shares dipped by 0.9% despite reporting better-than-expected earnings, primarily due to the substantial claims. Similarly, Texas Instruments reported results that surpassed expectations but witnessed a drop in stock value due to cautious guidance regarding future profits, leading to a 13.3% decline.
On the bright side, GE Vernova saw a significant 14.6% increase in stock, buoyed by stronger profits and raised forecasts in its electrification operations. They estimate that inflation driven by tariffs could range from $300 million to $400 million.
Lamb Weston indicated optimism about the demand for fries and similar products, despite economic uncertainties. They plan to cut costs, aiming to save at least $250 million by reducing their workforce by around 4% and implementing other measures.
In a different sector, some stocks surged as traders explored what could be the next “meme stock.” Krispy Kreme saw a sharp rise, gaining nearly 39% before closing with a 4.6% increase, while GoPro climbed 12.4%. However, other potential meme stocks like Opendoor Technologies, which had tripled earlier in the year, fell by 20.3%.
The S&P 500 ended the day up by 49.29 points at 6,358.91. The Dow closed at 45,010.29, up by 507.85, and the Nasdaq Composite finished at 21,020.02, increasing by 127.33.
Internationally, stock indexes across Asia and Europe climbed following Trump’s announcements about trade deals. Japan’s market experienced significant gains, though many automakers opted for caution and did not formally respond, preferring to assess the situation as Trump’s policies evolve. In Hong Kong, the Hang Seng rose by 1.6%, while France’s CAC 40 gained 1.4%.
In the bond market, the 10-year Treasury yield increased slightly from 4.35% to 4.38% on Tuesday.
