U.S. Stocks Rally Amid Trade Uncertainty

U.S. stocks experienced a rebound on Friday, showing signs of recovery in morning trading. However, despite this uptick, Wall Street is poised to face a fourth consecutive week of losses, which would mark the longest losing streak for the market since August.

The S&P 500 index rose by one percent during morning trading, just a day after it closed more than 10 percent below its all-time record, indicating its first significant "correction" since 2023. The Dow Jones Industrial Average also saw gains, climbing 241 points, or 0.6 percent, as of 10:20 a.m. Eastern time, while the Nasdaq composite increased by 1.3 percent.

One source of uncertainty affecting Wall Street may have started to ease after the Senate took steps to prevent a potential partial shutdown of the U.S. government. A crucial deadline is approaching at midnight for decision-makers in Congress.

Historically, past government shutdowns have not drastically disrupted financial markets, as evidenced by a swift recovery in U.S. economic growth once funding was restored. Nevertheless, even the anticipation of reduced uncertainty can be beneficial at a time when the stock market is characterized by pronounced swings, not just from day to day but even hour to hour.

The most significant concern plaguing the market is U.S. President Donald Trump’s escalating trade war. Investors are left wondering how much economic strain Trump is willing to allow through tariffs and other contentious policies as he attempts to reshape the economic landscape of the country and potentially the world. The president has publicly asserted his dedication to bringing manufacturing jobs back to the U.S., reducing the government workforce, and implementing a series of fundamental economic changes.

Many U.S. households and businesses are already reporting a decline in confidence due to the prevailing uncertainty surrounding which tariffs will remain amidst Trump’s inconsistent announcements. This has fueled concerns about a potential reduction in consumer spending, which could diminish economic momentum.

Consumer sentiment appears to be worsening, as indicated by a preliminary survey released on Friday by the University of Michigan. This survey revealed a decline in consumer sentiment for the third consecutive month, primarily driven by concerns about the future instead of immediate conditions. While the job market and overall economy seem relatively stable, consumers are increasingly anxious about upcoming challenges.

"Many consumers cited the high level of uncertainty around policy and other economic factors," explained Joanne Hsu, director of the survey. The frequent fluctuations in economic policies make it difficult for consumers to plan for the future, regardless of their political preferences.

Further adding to the anxiety, consumers are anticipating higher inflation in the coming years. Expectations for long-term inflation rose sharply to 3.9 percent, up from last month’s 3.5 percent prediction. This increase marks the most significant month-over-month rise since 1993.

As a result of these growing fears, market participants are closely monitoring whether businesses are experiencing adverse effects due to declining consumer sentiment.

In company news, Ulta Beauty surged 8.7 percent when it announced stronger-than-expected profits for its latest quarter. Although the company’s forecasts for future revenue and profit fell short of analysts’ expectations, Chief Financial Officer Paula Oyibo emphasized a cautious approach as they navigate ongoing consumer uncertainty. Analysts noted that the forecasts appeared better than initially feared.

Support for the market also came from gains in major technology stocks and companies involved in artificial intelligence. Stocks in these sectors have recently faced significant pressure, as concerns emerged regarding their inflated values due to the AI frenzy. For example, Nvidia shares rose 3.1 percent, reducing its losses for 2025 to 11.2 percent.

Looking at international markets, stocks rose across much of Europe and Asia. In Hong Kong and Shanghai, stocks jumped 2.1 percent and 1.8 percent respectively, after the Chinese National Financial Regulatory Administration issued a directive encouraging financial institutions to support consumer finance, enhance credit card usage, and improve transparency in lending.

Economists stress that China needs to boost consumer spending to invigorate its sluggish economy, although many advocate for more comprehensive reforms such as increasing wages and enhancing social welfare.

In the bond market, Treasury yields experienced a slight increase as they attempted to recover from recent declines. The yield on the 10-year Treasury rose to 4.29 percent, up from 4.27 percent late Thursday and 4.16 percent at the start of the previous week.

Yields have been fluctuating since January, with previous highs nearing 4.80 percent. Economic concerns tend to drive yields down, while a lessening of these worries, or an increase in inflation fears, generally pushes yields up.

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