A robust rally in major technology stocks propelled Wall Street to a higher close on Wednesday, with the Nasdaq Composite reaching an all-time high. This surge helped the market recover most of its losses from earlier in the week. The S&P 500 rose 0.6%, marking its first gain this week, while the Dow Jones Industrial Average added 0.5%. The Nasdaq, heavily weighted with tech stocks, climbed 0.9%, surpassing the record high it set last Thursday.
Nvidia played a significant role in this rally, rising 1.8% and becoming the first public company to exceed a $4 trillion valuation. Its shares briefly topped $164 each, a remarkable increase from around $14 per share at the start of 2023. This tech upswing comes as Wall Street assesses the implications of President Donald Trump’s renewed push for higher tariffs on imported goods, aiming to secure new trade agreements globally.
Trade Tensions and Market Reactions
Wednesday was initially set as a deadline by Trump for countries to finalize trade deals with the U.S. or face substantial tariff increases. However, with only two trade agreements announced since April—one with the United Kingdom and another with Vietnam—the negotiation window has been extended to August 1. This phase of the White House’s trade strategy heightens the threat of more severe tariffs, which could impede global economic growth and increase recession risks.
On Tuesday, Trump announced plans to impose tariffs on pharmaceutical drugs at a “very, very high rate, like 200%.” He also intends to sign an executive order imposing a 50% tariff on copper imports, aligning with the rates on steel and aluminum. Copper prices eased on Wednesday after spiking the previous day, and shares in mining company Freeport-McMoRan fell 1.5%.
“I think most people are tired of tariff news and they’re starting to realize it just doesn’t matter much,” said Jay Hatfield, CEO of Infrastructure Capital Advisors. “We’re pretty bullish about earnings. I think the rest of the market is too.”
Corporate Earnings and Market Outlook
As the new tariff measures are not set to take effect until next month, Wall Street has a brief respite just as the next corporate earnings season is about to begin. Analysts predict that companies in the S&P 500 will deliver a combined 5% annual growth in second-quarter earnings, according to FactSet. This would represent the lowest growth rate for the index since the fourth quarter of 2023.
Delta Air Lines will kick off the earnings season on Thursday, with analysts anticipating a decline in the airline’s second-quarter profit compared to the previous year. Delta and other major U.S. carriers have reduced their flight schedules and forecasts this year due to consumer uncertainty over how Trump’s tariffs will impact their budgets.
Sector Performance and Global Markets
Gains in technology and communication services stocks overshadowed declines in energy and other sectors on Wednesday. Microsoft rose 1.4%, Meta gained 1.7%, and Alphabet, Google’s parent company, added 1.3%. Amazon also saw a 1.4% increase following the start of its extended four-day Prime Day event.
Overall, the S&P 500 increased by 37.74 points to 6,263.26, the Dow added 217.54 points to 44,458.30, and the Nasdaq gained 192.87 points to close at 20,611.34. In bond markets, the yield on the 10-year Treasury slipped to 4.34% from 4.40% late Tuesday. Overseas, European stock indexes closed higher after mixed results in Asian markets.
Corporate Developments and Future Implications
Amidst the trade discussions, corporate news emerged with Merck announcing its acquisition of Verona Pharma, a UK-based company specializing in respiratory diseases, in a deal valued at approximately $10 billion. If approved by Verona shareholders and UK regulators, Merck will gain access to Verona’s chronic obstructive pulmonary disease medication, Ohtuvayre. Following the announcement, Verona shares surged 20.6%, while Merck shares increased by 2.9%.
The announcement comes as investors continue to navigate the complex landscape of trade policies and their potential impact on the global economy. As the earnings season progresses, market participants will closely watch corporate performance and guidance, especially in light of ongoing trade tensions and economic uncertainties.
