U.S. stock futures rose early Wednesday as traders hoped for a possible compromise on the Trump administration’s tariffs targeting goods from key trade partners. The Dow Jones Industrial Average rose 242 points, or 0.6%. The S&P 500 and Nasdaq Composite added 0.6% and 0.7%, respectively.
Commerce Secretary Howard Lutnick said Tuesday on Fox Business that the U.S. might meet Canada and Mexico somewhere to “work something out” on tariffs. Earlier in the day, U.S. levies on Canadian and Mexican imports took effect. Canada responded with duties of its own, while Mexico said it would unveil retaliatory measures over the weekend.
Those tariffs sent stocks tumbling on Tuesday. The blue-chip Dow tumbled 670.25 points, or 1.55%. The S&P 500 dropped 1.22%, and the Nasdaq Composite shed 0.35%.
The tech-heavy Nasdaq had dipped more than 2% at its lowest point and came within striking distance of correction territory, a term that refers to an index falling 10% from a recent peak. “The thing that we have emphasized over and over again is that Trump introduces uncertainty. We now are at a point where a single tweet or a single release of information can significantly change the interpretation of what markets look like,” said Michael Green, chief strategist at Simplify Asset Management.
Green added that a mounting trade war, exacerbated by retaliatory tariffs, could place a damper on the economy going forward, although it is still uncertain what the long-term prospects will look like. “You almost end up in a forced savings regime, which in turn negatively affects employment, negatively affects wealth, and that’s what markets are trying to price right now. We genuinely don’t actually know,” he told a financial news outlet.
President Donald Trump addressed the market’s stress over the tariffs, saying that a short-term hit from the levies was OK. “Tariffs are about making America rich again and making America great again. And it’s happening, and it will happen rather quickly,” he said.
Stocks rebound amid tariff compromise hopes
New economic releases on Wednesday morning that could shed light on the state of the U.S. economy include the ADP private payrolls report for February, as well as the purchasing managers’ index for last month. Companies due to report quarterly earnings on Wednesday include 3M.
European stock markets opened higher Wednesday, with Germany’s DAX index jumping 2.8% after the parties expected to form the next government agreed a deal that could lead to increased spending on infrastructure and defense. The U.K.’s FTSE 100 and France’s CAC 40 were 1.8% and 0.5% higher, respectively, with the pan-European Stoxx 600 index up by 1.2%. The CBOE Volatility Index, known as the VIX, has jumped above the 20 threshold during each of the last seven sessions as Trump’s trade war ramped up.
It’s the longest streak the index has traded above the 20 level on an intraday basis since mid-October. The VIX looks at prices of options on the S&P 500 to track the level of fear on Wall Street. The “flight to safety across financial markets” in reaction to the U.S. tariffs and weak economic data could turn out to be an overreaction if President Trump changes his mind, “but the downside risks to our upbeat forecasts for U.S. financial markets have increased,” according to Capital Economics in London.
“The ‘Trump trade’ and the wider optimism around the U.S. economy and financial markets has faded in short order.” The latest round of tariffs takes the effective U.S. tariff rate up to about 12%, the highest since the late 1940s, and the next scheduled round means the effective rate “may well rise much further,” wrote Jonas Goltermann, deputy chief markets economist. Downbeat economic numbers, “a broader reassessment of the near-term economic outlook in the U.S.,” policy uncertainty together with weaker confidence among businesses, consumers, and investors all combine to create “headwinds for equity markets,” Goltermann said. These are the stocks moving the most in after-hours trading:
– AeroVironment: The manufacturer of unmanned aircraft tanked 16%.
AeroVironment issued weak guidance for its full-year results, calling for adjusted earnings of $2.92 to $3.13 per share on revenue of $780 million to $795 million. – CrowdStrike: The cybersecurity stock tumbled 9%. The company sees its full-year revenue coming in between $4.74 billion and $4.81 billion, which encompasses the $4.77 billion consensus prediction, per FactSet.
– TJX Companies: The off-price retailer inched higher by less than 1%. Fourth-quarter earnings surpassed estimates, coming in at $1.79 per share, versus analysts’ call for $1.66 per share, per LSEG. Stock futures rose Tuesday night.
Dow futures added 275 points, or 0.7%, shortly after 6 p.m. ET. S&P 500 futures rose 0.7%, while Nasdaq 100 futures gained 0.8%.
