U.S. stocks jumped on Friday, marking another day of frenzy on Wall Street, as a slump in the U.S. dollar and other swings in financial markets suggested fears of an escalation in President Donald Trump's trade war with China remain high.
The S&P 500 rose 1.8% after swinging between gains and losses multiple times to cap a chaotic and historic week of monster swings. The Dow Jones Industrial Average went from an early drop of nearly 340 points to a gain of 810 before settling for a gain of 619 points, or 1.6%, while the Nasdaq composite jumped 2.1%.
Stocks jumped as pressure eased in the U.S. bond market, usually a duller corner of Wall Street, but which has shown enough worry this week to warrant the attention of investors and Mr. Trump.
The yield on the 10-year Treasury note rose above 4.58% this morning, up from 4.01% a week ago. That’s a big move for a market that typically measures things in hundredths of a percentage point. Such jumps can push up rates on mortgages and other loans to U.S. households and businesses, slowing the economy, and they can signal stress in the financial system.
But Treasury yields fell later in the day, with the 10-year yield falling to 4.48%. That's still higher than the day before, but not as shocking.
Susan Collins, president of the Federal Reserve Bank of Boston, told the Financial Times that the Fed would be “absolutely prepared” if markets got out of hand and “has the tools to deal with market functioning or liquidity issues if they arise.”
The jump in U.S. Treasury yields this week could be due to several reasons, which is unusual since yields typically fall when fear levels are high.
Investors outside the US may sell their US bonds because of the trade war, and hedge funds may sell everything they have to raise money to cover other losses.
Even more worryingly, Trump's rash moves to impose and remove tariffs could cast doubt on the United States' reputation as the world's safest place to store cash.
The U.S. dollar fell again against currencies ranging from the euro to the Japanese yen and the Canadian dollar on Friday.
This is despite the fact that gold, another asset that investors instinctively flock to in times of great fear, has risen and cemented its reputation as a safe haven.
The volatile trade began after China announced on Friday it would raise tariffs on American goods to 125% in response to Trump's tightening of imports from China.
A U.S. Treasury Department spokesman said in a statement announcing the new tariffs that the second round of U.S. tariffs on Chinese goods “was a numbers game with no practical economic meaning and will become a joke in the history of the global economy.”
“However, if the US insists on continuing to significantly infringe on China's interests, China will resolutely oppose it and fight to the end.”
Growing tensions between the world's two largest economies could cause widespread damage and lead to a possible global recession, even after Mr Trump recently announced a 90-day suspension of some of his tariffs on countries other than China.
All the uncertainty caused by the trade war is eroding the confidence of American consumers, which could impact their spending and hurt an economy that has grown at a steady pace this year.
A preliminary University of Michigan survey found that U.S. consumer sentiment is falling even more than economists had expected.
Study leader Joanne Xu said: “This decline, like last month, was broad-based and consistent across all ages, incomes, education levels, geographic regions and political views.”
According to Darrell Cronk, president of the Wells Fargo Investment Institute, “We are still in the early stages of a changing global trade regime, and while the 90-day pause on mutual tariffs has temporarily halted the market sell-off, it prolongs uncertainty.”
That's why many on Wall Street are bracing for more market turmoil.
The past week has started with huge swings in US stocks each day as rumours about a possible 90-day tariff suspension by Mr Trump have come and gone.
The US stock market then surged, posting one of its best days in history after Mr Trump took a break before ending the week with a sharp move.
Overall, the S&P 500 rose 95.31 points to 5,363.36 on Friday. The Dow Jones Industrial Average rose 619.05 to 40,212.71 and the Nasdaq Composite Index rose 337.14 to 16,724.46.
Friday's swings came after a series of stronger-than-expected earnings reports from some of the largest U.S. banks that traditionally kick off each earnings season.
JPMorgan Chase, Morgan Stanley and Wells Fargo reported better profits for the first three months of the year than analysts had expected. JPMorgan Chase rose 4%, Morgan Stanley added 1.4% and Wells Fargo lost 1%.
Another inflation report also came in better than expected, which could give the Federal Reserve more leeway to cut interest rates if it feels the need to support the economy.
But Friday's wholesale inflation report was backward-looking, measuring March price levels. The worry is that inflation will rise in coming months as Mr Trump's tariffs permeate the economy. And that could tie the Fed's hands.
A University of Michigan survey found that U.S. consumers are bracing for inflation of 6.7% next year, the highest forecast since 1981, and such expectations could create a feedback loop that pushes inflation higher.
On foreign stock markets, indices varied widely across the world.
Germany's DAX index lost 0.9% but London's FTSE 100 rose 0.6% after the government said Germany's economy, the world's sixth-largest, grew sharply in February.
Japan's Nikkei 225 index fell 3%, while Hong Kong's Hang Seng rose 1.1%.
Sourse: breakingnews.ie
