Stocks Rise Anew, Bonds Fall on Trump Tariff Talk: Markets Wrap
(Bloomberg) — Stocks advanced while bonds and the dollar slipped as traders deemed the rejection of Donald Trump’s tariff program to be a potential stress on government finances that is unlikely to change the economy’s course.
About 320 shares in the S&P 500 rose. The president, rebuked by Supreme Court justices earlier in his bid to impose far-reaching tariffs, said he’ll impose a 10% global levy on trading partners, and claimed that various categories of his existing program remain in place. Still, uncertainties about any potential budget shortfall kept a lid the greenback and Treasuries.
“The Supreme Court did not overrule tariffs, they merely overruled a particular use of IEEPA tariffs,” Trump told reporters at the White House on Friday, referencing the emergency authorities that the high court found illegal. “Now I’m going to go in a different direction, probably the direction that I should have gone the first time.”
Asked if he would go to Congress, Trump said “I don’t need to” because the authorities he is seeking are already approved.
Ahead of the ruling, he warned that curtailing his tariffing power would unleash an economic crisis akin to the 1929 crash. Trump said it would mean forgoing trillions of dollars that could help pay off America’s huge public debt.
Thousands of companies and importers are set to launch what could be a prolonged battle to try to recoup as much as $170 billion in tariffs they’ve already paid to the US government. The top court was silent on the topic of refunds when it ruled Friday that Trump didn’t have legal authority to impose the duties under an emergency law.
Treasury Secretary Scott Bessent said that revenue collected from tariffs will be “virtually unchanged” in 2026, despite Friday’s Supreme Court ruling. He added the Trump administration will use other mechanisms to replace the measures, including authorities granted by Congress known as Section 122, 232 and 301 authorities.
“We are not revising our US economic outlook as we expect tariffs to remain through other avenues,” said TD Securities strategists.
The S&P 500 added 0.6%, with tech megacaps leading the charge. The Russell 2000 index of small firms fell. The US listed-options market was estimated to see $3 trillion of contracts by notional value roll off Friday, according to data compiled by Citigroup Inc.
The yield on 10-year Treasuries rose one basis point to 4.08%. The dollar slid 0.2%. An ETF tracking emerging markets hit all-time highs.
The assumption is that by eliminating the deficit-narrowing impact from the IEEPA tariffs, the US will need to borrow more over time, and that increases the probability that longer-dated coupon auction sizes increase sooner than previously expected, noted Ian Lyngen at BMO Capital Markets. The counterpoint is that Bessent has been adamant that the bill market will be the primary source for deficit funding until fiscal year 2027 at the earliest.
“We’re certainly open to the notion that coupon auction sizes will eventually increase,” Lyngen added. “That being said, we expect the US rates market to be in a decidedly different position once larger borrowing needs migrate out to the long bond.”
In addittion to the fact that the White House has devised an alternative to the IEEPA tariffs, Lyngen also noted that not all the tariffs were overturned, so there will continue to be some positive tax revenues from the trade war – at least for the time being.
“It also merits a nod to the potential impact on forward inflation expectations,” he said. “Tariffs were viewed as reflationary, the ruling should be considered forward disinflationary – breakevens were little changed, suggesting that the market isn’t focused on what the removal of tariffs potentially implies for consumer prices.”
Except for a knee-jerk drop in longer-term Treasuries following the court ruling, bond investors were quick to identify that, beneath the big headlines, the implications of Friday’s developments were largely already priced in, according to Will Compernolle at FHN Financial.
The 10-year yield should stay rangebound and trade between 4.02%-4.19% through next week — absent any big geopolitical surprises, he said.
“By this point policy shocks should be seen as part and parcel of the investing landscape — but they have often proved so short-lived in recent years that perhaps they don’t even need to be factored into longer term decision making, but rather taken advantage of tactically,” said Tom Garretson at RBC Wealth Management.
For now, Glen Smith at GDS Wealth Management and James Athey at Marlborough Investment Management said they would not be making any changes in reaction to the court decision.
“The market is uncertain about how to react given the lack of clarity on the exact details of the forthcoming executive order,” said Gennadiy Goldberg at TD Securities.
Neil Dutta at Renaissance Macro Research says the issue is more political than economic, at least right now.
“If Trump turns the trade knob back on, we get more uncertainty. If he decides to give in, then he is basically cooked politically,” he said.
In general, investor interest in both the Supreme Court review and tariffs overall appear to have waned in recent months, noted Michael Bailey at FBB Capital Partners.
Looking ahead, tariff policy is more likely to be recalibrated than repealed, according to Bret Kenwell at eToro.
“The best-case outcome is a framework that’s clearer and more consistent — and therefore less prone to headline-driven whiplash,” he said.
Earlier Friday, data showed the world’s largest economy grew at a weaker-than-anticipated pace combined with figures that underscored stubborn inflation pressures.
Inflation-adjusted gross domestic product increased an annualized 1.4% in the fourth quarter after rising 4.4% in the prior period. Overall, the economy expanded 2.2% last year. The Fed’s preferred measure of underlying inflation — the core personal consumption expenditures price index — rose 0.4% in December, the most in nearly a year. On an annual basis, the core PCE climbed 3%.
“Today’s economic data delivered a messy message,” said Art Hogan at B. Riley Wealth. “The confusing message from today’s data confirms the current Fed bias to take their time with monetary policy.”
Corporate Highlights:
Paramount Skydance Corp. said it has “no statutory impediment” in the US for closing its proposed $77.9 billion acquisition of Warner Bros. Discovery Inc., after it cleared a US antitrust hurdle. A Securities and Exchange Commission probe involving mobile advertising technology company AppLovin Corp. is “still active and ongoing,” the regulator said. The US Federal Aviation Administration’s oversight of United Airlines Holdings Inc.’s maintenance practices suffers from a lack of resources, meaning some safety risks remain, a government watchdog said. Lucid Group Inc. is slashing its workforce following a difficult 2025 for the electric vehicle maker, which struggled to boost production in a volatile auto market. Akamai Technologies Inc. gave an outlook for adjusted earnings that is weaker than expected for both the first quarter and the full year. Newmont Corp. — the world’s biggest gold miner — expects to churn out less bullion this year, partly due to planned upgrades at some of its managed mines and lower production at two ventures jointly owned with Barrick Mining Corp. The Missouri judge overseeing Bayer AG’s effort to resolve current and future Roundup lawsuits through a class-action case is known as a no-nonsense jurist who will closely scrutinize the proposed $7.25 billion settlement. Some of the main moves in markets:
Stocks
The S&P 500 rose 0.6% as of 3:35 p.m. New York time The Nasdaq 100 rose 0.7% The Dow Jones Industrial Average rose 0.4% The MSCI World Index rose 0.5% Bloomberg Magnificent 7 Total Return Index rose 1.3% The Russell 2000 Index fell 0.2% Currencies
The Bloomberg Dollar Spot Index fell 0.2% The euro rose 0.1% to $1.1785 The British pound rose 0.2% to $1.3486 The Japanese yen was little changed at 155.05 per dollar Cryptocurrencies
Bitcoin rose 1% to $67,577.71 Ether rose 0.8% to $1,964.02 Bonds
The yield on 10-year Treasuries advanced one basis point to 4.08% Germany’s 10-year yield was little changed at 2.74% Britain’s 10-year yield declined one basis point to 4.35% Commodities
West Texas Intermediate crude was little changed Spot gold rose 1.8% to $5,084.76 an ounce –With assistance from Chris Nagi, Denitsa Tsekova, Isabelle Lee and Vildana Hajric.
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