US Session Wrap-Up: Stocks to new highs despite Trump tariffs

Stocks were headed toward new record highs as investors overlooked President Donald Trump’s plans to impose additional tariffs on major US trading partners. Oil prices fell after news that Israel and Hezbollah had reached a ceasefire agreement.

Stocks continued to rise for the seventh consecutive day, marking the longest winning streak for the S&P 500 since mid-September. The index was on track for its 52nd record of the year. Microsoft Corp. boosted shares of software companies, which are less vulnerable to tariff risks, while automakers like General Motors and Ford were affected by Trump’s plan due to their exposure to Mexico and China. A drop in the broader stock volatility index suggested investor calm.

Trump promised to impose an additional 10% tariff on Chinese imports and 25% on products from Mexico and Canada. He stated that these measures were necessary to curb migration and illegal drugs crossing the US border.

While traders awaited the release of the Federal Reserve’s latest meeting minutes at 2:00 PM in Washington, Wall Street saw mixed economic data. Consumer confidence reached its highest level in over a year, while new home sales disappointed.

Long-term US interest rates rose by four basis points to 4.31%, following a successful $70 billion five-year bond auction. The dollar index increased by 0.4%, while the French bond risk index hit its highest level since the Eurozone debt crisis.

Dennis DeBuscher from 22V Research commented that linking tariffs to drugs and immigration, rather than trade policy and the economy, signals to investors that this is a negotiating tactic, not a policy tool.

Kenny Polcari from SlateStone Wealth added that Trump’s move was in line with his campaign promises, and investors welcomed the step.

While stocks surged, the bond market reaction was weak after its second-largest rise for the year.

At BMO Capital Markets, Ian Lyngen believed the weak bond market response might be due to the market already pricing in the renewed significance of “tariffs as trade policy” and recognizing that the tariff increase has a one-time effect on realized inflation.

Corporate News:

• Amgen Inc. fell after its experimental obesity injection failed to outperform competitors and showed high rates of gastrointestinal side effects.
• Eli Lilly & Co. rose after the Biden administration proposed a rule requiring the US government to cover obesity drug costs, potentially expanding access to millions of Americans.
• Kohl’s Corp. shares dropped to their lowest level since 2020 after the company lowered its annual sales forecast, signaling struggles in a tough retail environment.
• Best Buy Co. cut its annual sales forecast due to weak demand for electronics and appliances, signaling trouble for the retailer’s recovery efforts.
• JM Smucker Co. raised its earnings forecast due to high demand for frozen sandwiches like Uncrustables, which exceeded expectations, offsetting weakness in the recently acquired Hostess brand.
• Qualcomm Inc.’s interest in acquiring Intel Corp. cooled, raising questions about what would have been one of the biggest deals in the tech sector.
• Goldman Sachs and Morgan Stanley shares were deemed “unattractive” by analysts at HSBC, following the recent rally in banking stocks.
• Rivian Automotive Inc. received preliminary approval for a $6.6 billion loan to support its electric vehicle factory, which had been postponed earlier this year to save funds.
• Zoom Communications Inc. shares fell after the company provided a revenue forecast that disappointed investors expecting more growth from its expanded product portfolio.