Wall Street piled back into stocks but sold Treasury bonds after the Supreme Court seemed to express doubt about the arguments underpinning President Donald Trump’s sweeping tariffs.
The Dow Jones Industrial Average rose 226 points, or 0.5%. The S&P 500 was up 0.4%. The Nasdaq Composite was gained 0.7%.
The major indexes rebounded from yesterday’s technology stock selloff after multiple Trump-appointed Supreme Court justices seemed skeptical over the president’s use of the International Emergency Economic Powers Act to impose tariffs on U.S. trading partners.
Odds the Supreme Court rules in favor of Trump’s tariffs plummeted to 27% on prediction market platform Polymarket. Odds were briefly north of 50% earlier in the morning.
“Trump’s tariffs were a major drag on Corporate America; scaling them back could boost earnings,” writes Mizuho’s Daniel O’Regan. “If IEEPA is struck down, the White House will need time to find new legal paths, reducing near-term tariff risk.”
The Federal Reserve could also lower interest rates faster if tariff-driven inflation is reduced, O’Regan writes. Of course, if the White House figures out a new path to roll out tariffs, it could add to uncertainty for companies.
The yield on the 2-year Treasury note rose to 3.63%, while the 10-year yield was up to 4.16%. That’s the highest the 10-year yield has been since Oct. 6. The 30-year yield spiked to nearly 4.74%, marking its largest one-day increase in yield since July 11.
“It was a bad day for treasuries,” writes Andrew Brenner, head of international fixed income at NatAlliance Securities.
He notes that it began with the stronger-than-expected ADP number. The Treasury Department’s quarterly refunding announcement didn’t help, and neither did a stronger than expected services survey from the Institute for Supply Management. Then came the Supreme Court hearing. Brenner notes tariff revenue has been viewed as a way to reduce the deficit.
“The next big event, if it happens, would be the reopening of the government,” Brenner writes. “While that would get us official numbers, it would not happen right away.”
The S&P 500 also closed above its 50-day moving average for a 131st consecutive trading day. That surpasses a 130-day stretch that ended March 9, 2011. It’s now the longest such stretch since the 149-day period that ended on Feb. 26, 2007.
Frank Cappelleri, founder of technical analysis firm CappThesis, tells Barron’s that it’s another sign of how persistent the index’s advance has been. Still, there have been times between now and 2011 that offered periods of low volatility despite the index moving below its 50-day moving average from time to time.
“What matters most is how well the market continues to handle the intermittent pullbacks,” Cappelleri says. “Thus far, every drawdown has been bought and, thus, the sell-offs have been contained. More importantly, each setback has resulted in a new bullish pattern being formed, which has kept this uptrend alive.”