On Tuesday, May 27, the easing of trade tensions boosted optimism on Wall Street. The S&P 500 index, which had just experienced its worst week since President Trump announced tariffs in early April, saw a strong rebound on Tuesday.
President Trump stated on Tuesday that trade negotiations between the United States and the European Union are progressing in a “positive” direction. The day before, he agreed to postpone the deadline for imposing a 50% tariff on the EU, and both major trading partners indicated that negotiations were back on track.
Monday was a holiday and the U.S. stock market was closed. When the U.S. stock market opened on Tuesday, there was a significant increase, with the Dow Jones Industrial Average rising by 740 points by the close of trading. The S&P 500 index also rose by over 2%, marking the largest single-day gain since May 12.
This surge was reminiscent of the performance on May 12 when the U.S. and China announced mutual tariff reductions, leading to a 2.8% increase in the Dow Jones index, driven by consumer cyclical stocks and technology stocks.
During Tuesday’s trading, the U.S. dollar strengthened while bond yields declined.
The fluctuating nature of tariff negotiations and preliminary agreements has left investors on edge. The market hopes that last week’s tariff threats were more of a negotiation tactic rather than a sign of a renewed trade war.
The Wall Street Journal reported that Eric Sterner, Chief Investment Officer at Apollo Wealth Management, stated: “The market is now breathing a sigh of relief, allowing investors to overlook the latest tariff threats.”
“We just need to overcome this uncertainty so that businesses and consumers can plan ahead,” he said.
Last Friday, President Trump threatened to impose a 50% tariff on the EU within a few days and warned Apple that iPhones manufactured overseas could face high tariffs, leading to a drop in Apple’s stock price.
Following a call with European Commission President von der Leyen over the weekend, Trump announced that he would delay the implementation of the new EU tariffs until July 9. The EU, in turn, stated that they would accelerate negotiations with the U.S. EU Trade Commissioner Maroš Šefčovič expressed the EU’s desire to avoid “mutual harm from tariffs”.
On Tuesday, Trump revealed on the social media platform Truth Social that the EU had called requesting to promptly determine a date for trade negotiation meetings with the U.S.
“This is a positive development, and I hope they eventually accept the demands I presented to China, opening up trade between European countries and the U.S.,” the President wrote.
The Financial Times reported that Caroline Shaw, Portfolio Manager at Fidelity International, stated: “This injects new momentum into the negotiations and prompts the EU to respond in a more proactive manner. The speed of reaching an agreement is crucial for the market.”
The Europe Stoxx 600 index rose by 1.3% this week, surpassing the decline seen after Trump first proposed a 50% tariff last Friday.
The German DAX index closed up 0.8% on Tuesday, reaching a historic high.