
Mexico Tariff Delay Gives Hope – US Market Wrap
Wall Street traders attempting to keep up with every new headline regarding President Donald Trump’s tariff negotiations were met with a renewed bout of volatility across asset classes.
The S&P 500 pared most of its earlier slide, which had approached 2%. Following a conversation with his counterpart Claudia Sheinbaum, Trump agreed to delay 25% tariffs on Mexico for one month. The talks sparked a rapid currency turnaround, with the peso moving from worst to best performer among its major counterparts in a matter of minutes. The dollar nearly wiped out a rally that was on track to be the best since the pandemic began. The Canadian dollar recovered some of its losses.
The delay with Mexico reinforces the notion that Trump views tariffs as a negotiating tactic, but is still hesitant to inflict economic pain on Americans. His decision to declare an emergency and impose tariffs on Canada, Mexico, and China is the most significant act of protectionism by a US president in nearly a century.
One of the most significant uncertainties is how a resilient US economy will deal with the impact of a trade war, if it occurs. That concern was evident in the bond market, where short-term Treasury yields increased while longer-term yields fell.
The S&P 500 fell 0.8%. While automakers, chipmakers, and industrial shares all recovered from session lows, they still led losses. Defensive groups increased, highlighting the market’s desire for safety. The Nasdaq 100 dropped 0.8%. The Dow Jones Industrial Average fell 0.3%. A gauge of the “Magnificent Seven” megacap stocks fell 1.7%. The Russell 2000 dropped 1.3%. A UBS Group AG basket of stocks at risk from proposed tariffs fell 3.1%. The VIX, Wall Street’s favorite volatility gauge, surpassed 18.
The 10-year Treasury yield remained relatively stable at 4.53%. The Dollar increased 0.1%. The Mexican peso gained 1.3%. The Canadian dollar dropped 0.2%.