Stock Market Update

[BRIEFING.COM] The stock market is in rally-mode, propelled by momentum after yesterday's positive finish and pleasing developments related to global trade tensions. The Trump administration announced a trade deal with the UK, fueling optimism that deals will be reached with other countries and the economic impact of global tariffs may be less than feared.

Commerce Secretary Howard Lutnick said the 10% baseline tariff will remain in place (as expected), adding that the UK will purchase $10 billion worth of Boeing (BA 193.76, +8.27, +4.5%) jets.

During the Q&A with reporters, President Trump said the US is very close to making additional deals with other countries, specifying that tariffs on China "could be" lowered if this weekend's meeting goes well. Mr. Trump added he may speak with President Xi after the meeting.

The market is also enthused that the Trump administration will be revoking the "AI Diffusion" rule that was meant to curtail AI chip exports. Semiconductor-related stocks are outperforming the broader market in today's everything rally. The PHLX Semiconductor Index (SOX) shows a 2.4% increase from yesterday. 

The S&P 500 (+1.5%), the Nasdaq Composite (+2.0%), and the Dow Jones Industrial Average (+1.5%) all trade more than 1.5% higher than their prior closing levels. Today's advance has the S&P 500 about 30 points below its 200-day moving average (5,747). 

Ten of the 11 S&P 500 sectors are higher led by consumer discretionary (+2.4%), industrials (+2.3%), and energy (+2.2%). The risk-on sentiment in the market has defensive sectors bringing up the rear. The health care sector is alone in the red, down 0.1%, and the consumer staples sector shows the slimmest gain, up 0.2% from yesterday. 

Treasury yields are higher, but that hasn't disrupted the rally in stocks. The 10-yr yield is up eight basis points to 4.36% and the 2-yr yield is up six basis points to 3.85%.

The price action in Treasuries follows a preliminary Q1 productivity report that showed unit labor costs surging 5.7%; a New York Fed survey showing median inflation expectations unchanged at 3.6% for the one-year-ahead horizon and reaching 3.2% for the three-year-ahead horizon, which is the highest since July 2022; and a clear indication from Fed Chair Powell yesterday that the Fed remains in a wait-and-see mode when it comes to changing its policy setting.