US stocks erased much of the losses from Trump’s tariffs with a big short squeeze.
SPX 500 – Daily Chart
The price of the SPX 500 had tumbled after failing to find support at the 5,721 level, where Trump’s election win sparked a rally. The support then played out perfectly with a move through 5,389 level heading rapidly to the 2022 high around 4,818.
Wall Street stocks surged after US President Donald Trump announced a 90-day pause in tariffs last week after markets erased trillions of dollars from global stock market valuations.
The policy changes also include a lowered overall tariff of 10% during the 90-day period, and an increase in tariffs on Chinese imports to 125%, from the 104% that went into effect overnight.
Benchmark US Treasury yields pared gains after the tariff announcement, following a government auction of $39 billion 10-year bonds. Strong demand was still present after a market rout that sent traders running to cash.
“It has been great news for the market… to see US bonds sell off has been very strange, amid a broader emphasis on taking risk off in portfolios. Seeing stress build in the credit market was really worrying. So today was a great relief,” Tom Bruce of Tanglewood Wealth Management said.
Bonds are always the safe haven in troubled times, but markets are worried about the US dollar’s long-term stability.
“It’s beginning to look like this thing has been all about China. Certainly, the big tariffs package just didn’t make sense to economists like me. It felt like they were creating maximum leverage by creating maximum chaos — classic game theory. So we needed a reprieve from that, and got one,” Bruce added.
The tariff slide has receded from markets, but the volatility was a warning that stocks are highly valued and at risk of a market turn.
