Stock Market Sees Big Gains as President Trump Delays Tariffs

It was a day of gains for many stocks on Thursday as Wall Street learned that President Trump had delayed tariffs on $250 billion of Chinese goods until October 15th.

Trump called this a “gesture of goodwill.” He tweeted on September 11th, “At the request of the Vice Premier of China, Liu He, and due to the fact that the People’s Republic of China will be celebrating their 70th Anniversary….” He added, “….on October 1st, we have agreed, as a gesture of good will, to move the increased Tariffs on 250 Billion Dollars worth of goods (25% to 30%), from October 1st to October 15th.”

Jim Cramer of CNBC’s “Mad Money” remarked, “I think the Europeans should be careful. The president is no fan of [Angela] Merkel, the president is no fan of the way that the Europeans have handled their auto tariffs and they could be next. If they continue to make it so the euro is being debased, they ought to be very careful. I think the president is itching for something against them … I don’t think he’ll call [ECB President Mario] Draghi a bonehead because he wants our Fed chief to do exactly what Draghi is doing and just stay in step. The problem is they have no growth whatsoever so they gotta do something. We have some growth.”

Jim Paulsen, chief investment strategist at Leuthold Group stated, “There are some other good things going on here. I think not only the good trade news, but the fact that bond yields have shown a propensity to rise again shows a big vote of confidence coming from the bond market, which is healthy for stocks too. Even this morning there is still a really close relationship between the direction of that 10-year yield and the direction of the stock market. Also, economic surprise indices around the globe have picked up. They certainly have here in the United States but they also have [picked up] in the emerging world, in China and Europe so that kind of fresh upside economic momentum is starting to cause recession fears to fade a bit, so I think it’s more than just about the trade news. … We might be starting on a little change of character not only in bond yields but also in leadership in the stock market.”

Sameer Samana, global equity and technical strategist at the Wells Fargo Investment Institute said, “At least on an expectation basis, it’s clear now to say that people probably got a little too ‘beared up.’ We were there in the fourth quarter of last year too and the way expectations work is eventually reality starts to outperform. The tricky part is unfortunately you do still have a lot of headwinds; a lot of the PMIs [purchasing managers’ indexes] and a lot of the business confidence is still very low, small-business confidence … ticked down, consumer confidence has started to roll over just a little bit, so we would probably be more in the cautious camp. There are some good things going on, but the market is also 200 points off its lows and you’ve got yields about 30 or so basis points higher, which has kind of been the April and July moves. It’s right in line with that. We would say at this point it’s probably a good time to rein in some of that stock exposure and maybe at least look at some of those longer duration fixed income instruments.”

American and Chinese negotiators are expected to meet in person in early October, before the tariffs head to 30 percent from 25 percent.