New York
CNN
—
On April 8, when stocks were on the verge of plunging into a bear market, few Wall Street experts were predicting that the market would hit a record high just 80 days later.
The market appeared set to do that Friday, until a late afternoon announcement from President Donald Trump that the US is ending trade talks with Canada sent a jolt to markets that caused a sell-off.
The S&P 500 was down 0.07%, on track to close below its all-time high, after it had gained as much as 0.76% and hit an intraday record high earlier.
The S&P 500 was trading at 6,137 as of 2:50 p.m. ET and would have to close at 6,144.16 or above to mark a record high.
The Nasdaq Composite was down 0.26%, set to close below its all-time high, after it had gained as much as 0.71% and hit an intraday record high earlier.
The Nasdaq has become synonymous with Big Tech, and the AI boom has fueled a tech rally in recent months. The smaller Nasdaq 100, made up of top tech stocks, set a record earlier this week.
The Dow rose 211 points, or 0.5%. The blue-chip index, dragged down by UnitedHealth, which has tumbled 40% this year, plus Apple, Merck and Nike, still has about 1,600 points left to gain before it hits its all-time high.
Stocks were off the highs they set earlier in the day after Trump’s post on Truth Social said the United States would set higher tariffs on Canada within the next week.
It’s been an incredible journey since mid-February. Trump alarmed traders with historic tariffs that economists said could reignite inflation and plunge the economy into a recession.
The Trump administration then doubled down on those tariffs, culminating in the president’s April 2 “Liberation Day” announcement. That sent tariffs for dozens of nations surging — some as high as 50%. US tariffs on China eventually eclipsed 145% for some products, effectively creating a blockade on America’s second-biggest trading partner.
On April 9, heeding warnings from the stock, currency and especially the Treasury markets, the administration paused its “reciprocal” tariffs for 90 days, sending markets surging. Last month, it reached frameworks for trade deals with the United Kingdom and China, giving investors a sense that the most punishing trade policies were in the past, and more trade deals could be forthcoming.
“The selloffs should never have happened,” said Art Hogan, chief market strategist at B. Riley Wealth Management. “There was no need for that. It was a completely manufactured crisis.”
Markets got another boost Friday after China signaled it would reopen its rare earth market to the United States, hours after White House officials said the two sides had reached a deal — a major breakthrough following weeks of negotiations.
Despite a 10% universal tariff that remains in place, in addition to 50% tariffs on steel and aluminum, and 25% tariffs on autos and auto parts, markets have largely looked past trade in recent weeks, focusing instead on other reasons for optimism or concern.
Treasury Secretary Scott Bessent on Friday said he believes trade negotiations with other countries could be “wrapped up” by Labor Day, providing a more relaxed framework for inking deals than the original July 9 deadline.
Bessent said in an interview on Fox Business that the United States has 18 “important trading partners” that it is seeking to make deals with. “If we can ink 10 or 12 of the important 18 … then I think we could have trade wrapped up by Labor Day,” he said, without specifying the countries.
A boom in AI, fueled by surging sales for Nvidia’s chips and a Republican-led effort to deregulate the industry, has been one of the primary catalysts that have fueled stocks and helped investors move beyond the trade war. Hopes for a rate cut from the Federal Reserve, backed by reasonably strong economic numbers and low inflation, have also helped stocks in recent months.
Markets had temporarily grown jittery after the House passed Trump’s sweeping tax cut and domestic policy agenda last month. But demand for Treasury bonds has remained surprisingly strong, giving investors confidence that foreign countries and investors will continue to support America’s debt, allowing the country to borrow unimpeded.
“Investors get the joke now,” said Hogan. “We’re going to hear something, whether it’s on Air Force One or on Truth Social, that we’re going to have to take with a massive grain of salt.”
Still, stocks face several challenges in the coming weeks and months ahead.
If Congress reaches a stalemate in the domestic policy bill, which includes a provision to raise the debt ceiling, America could once again come close to defaulting on its debt because it is unable to borrow enough money to pay back its creditors. And if few (or no) more trade deals are forthcoming, tariffs could rise again as soon as July 9 as the 90-day reciprocal tariff pause expires.
The prospect of war breaking out in the Middle East remains a concern after a fragile truce between Israel and Iran was reached this week. And existing tariffs threaten to raise prices in the coming months, which could hurt economic growth.
Stocks face less existential threats, as well. Valuations are surging well above earnings expectations. The S&P 500’s price-to-earnings ratio has surged past 23, a relatively high number that means stocks have become quite expensive compared to their profit expectations.
So, markets may be celebrating at 4 p.m. ET today. But it’s not clear how long the party will last.
