Stocks were on track on Friday days after President Trump unfolded tariffs in early April, and days after it was strengthened by sound reports on the labour market.
The S&P 500 rose 1.6% by Friday afternoon and has returned to where Chaos had been standing before it fell into the financial market since April 2nd.
The stock price rise on Friday followed a stronger report than expected in April. But the S&P 500 has been framed higher than a few days — profits on Friday will increase daily for the ninth in a row — Trump and his administration have raised hopes that trade tensions will be eased.
Earlier on Friday, China's Commerce Department said in a statement it was considering holding talks with the Trump administration, but only if Washington first cancels tariffs on Chinese products.
The two countries remain far from dealings that resolve the trade war between them, but even the prospects for consultations were sufficient to alleviate the worst fears that had grabbed investors a month ago.
“If the labor market is endured and the Trump administration returns to its worst tariffs, the economy could take away the deep recession,” said Jeffrey Roach, chief economist at LPL Financial.
Still, despite recent optimism and recovery, the S&P 500 was 7% below its recent high in mid-February. That has fallen by about 5% since Trump took office in January.
Questions remain as to whether Trump's tariffs could cause a sharp slowdown in economic growth. As a result, businesses may begin to reinforce employment, spending and investment amid uncertainty.
Trump has supported the most extreme tariffs in dozens of countries, but while many imports into the US now face at least 10% new taxes, products from China are taxed at least 145%. On Friday, regulations that allowed low-value shipments from mainland China and Hong Kong avoided closing tariffs entirely. Also, a new 25% tariff on imported auto parts is expected to take effect on Saturday. This is in addition to the 25% tax on imported vehicles that were already in effect in April.
Volatility over the last few weeks has highlighted the extent to which Wall Street sentiment is still being driven by concerns about economic fallout from Trump administration policies. The 90-day suspension of many tariffs announced by Trump on April 2nd will end in July.
“The damage to our economic momentum is already being done,” said Mike Sanders, bond director at Madison Investments. “Trades may come, but the real question is how long it takes for the data to reflect the harm.”
