Stock Rally Gains Steam on Trade Deal Optimism & Earnings – US Market Wrap
A record-breaking stock rally gained traction as the United States reached a trade agreement with Japan, while speculation grew about a similar deal with the European Union. Treasuries halted a five-day rally, and the dollar fell as demand for safe-haven assets declined.
The S&P 500 reached all-time highs on news that the EU and the US are working toward an agreement that would impose a 15% tariff on most products. Alphabet reported higher-than-expected revenue late Wednesday, but said capital expenditures would be higher than previously forecast. Tesla’s earnings fell short of expectations.
Treasury 10-year yields increased four basis points to 4.39%. Bonds fell despite a strong $13 billion sale of 20-year securities, which tested the appetite for long-term debt. Japan’s 40-year government bond auction saw the lowest demand since 2011.
The EU and the US have accelerated talks in recent weeks to avoid a full-fledged trade war. According to reports, European officials are optimistic about reaching an agreement, but negotiations are still ongoing.
Trump’s top trade negotiators touted their approach to resolving grievances with Japan as a potential incentive for the EU.
Commerce Secretary Lutnick stated that Japan’s pledge of billions in US investments “could be” a model for the EU. Treasury Secretary Scott Bessent stopped short of saying the bloc can get the same deal.
