Stocks rally after electronics, smartphones get tariff exemption
Stocks surged for a second consecutive day as the Trump administration decided to exempt electronics like smartphones and computers from tariffs on imports from China. This move provided some relief to companies like Apple and Nvidia, which rely heavily on Chinese manufacturing for their products.
The S&P 500 climbed 0.8% to 5,406, while the Dow Jones Industrial Average rose 0.8% with a 312-point gain. The tech-heavy Nasdaq composite index also saw a 0.6% increase.
Tech stocks, including Apple, experienced notable gains on Monday. Apple, in particular, faced the possibility of significant price hikes on products like the iPhone due to the tariffs. However, President Trump’s exemption of electronics from the tariffs provided a temporary reprieve. Despite this, uncertainties remain as Trump denied exempting any products and hinted at imposing new tariffs on electronics components like semiconductors.
According to John Canavan, lead U.S. analyst at Oxford Economics, the lack of a clear trade policy path has created uncertainty in the markets. As long as this uncertainty persists, demand for risk assets is expected to suffer, leading to elevated volatility in the markets.
Apple’s shares rose by 2.2% to $202.52, contributing to the overall positive performance of the tech sector on Monday. Other sectors that outperformed included drug and biotech companies, banks, and insurers, as reported by financial data firm FactSet.
The exemption of electronics from tariffs came amidst escalating trade tensions between China and the U.S. China announced an increase in tariffs on U.S. goods, while Trump’s tariffs on Chinese imports also escalated. Despite this, Trump decided to pause tariffs on most other countries for 90 days following a global market downturn.
Economists are warning about the potential damage from the trade war, which could lead to a global recession. The ongoing friction between the two largest economies is causing concern among investors, who are looking for signs of flexibility from the White House on tariffs.
Chris Larkin, managing director of trading and investing at E*TRADE from Morgan Stanley, emphasized the need for continued flexibility on tariffs to sustain the market’s rebound. He also highlighted the high level of uncertainty and the possibility of elevated volatility if recession concerns are fueled by soft data.
As investors navigate through these uncertain times, staying informed and monitoring developments in trade policies will be crucial for making sound investment decisions.
