Trump Announces "Tariff Freedom Day": S&P 500 Strongly Rebounds, Retail Investors Cause Significant Market Fluctuations

Taiwan • Business • 05/15 08:26
Trump Announces "Tariff Freedom Day": S&P 500 Strongly Rebounds, Retail Investors Cause Significant Market Fluctuations

On April 9, 2025, President Trump of the United States announced "Tariff Liberation Day," significantly lowering tariffs on Chinese goods and reached an agreement with China to suspend the trade war for 90 days. This policy shift caused market fluctuations, with the S&P 500 index initially dropping and then rising, resulting in an "artificial bull market." The CNN Fear and Greed Index surged to 70, indicating that market sentiment had shifted into the greed zone. This article examines the impact of the policy shift on the stock market and how retail investors dominated the market rebound.

Key Updates

05/16 02:58

In April, the US Producer Price Index (PPI) saw its largest decline in five years, putting pressure on technology stocks, leading to mixed results in the US stock market; the Taiwan stock market closed at 21,730 points, as foreign investors have been net buyers for ten consecutive days.

The U.S. Producer Price Index (PPI) fell by 0.5% in April, marking the largest monthly drop in five years, mainly due to a decrease in service prices, indicating a reduction in inflationary pressures. Following the release of this data, the U.S. stock market showed mixed performance, as the Dow Jones and S&P 500 rose, while the Nasdaq and Philadelphia Semiconductor Index fell. On the 15th, Taiwan's weighted index closed down by 52.62 points to 21,730.25, as foreign investors net bought for the tenth consecutive day, with a single-day net purchase of NT$7.534 billion, accumulating over NT$200 billion in net purchases over ten days.

05/16 02:58

U.S. stock futures fluctuate in early morning trading: Dow drops slightly by 17 points, Nasdaq and S&P both retreat.

On May 16, 2025 (local time in Taipei), in early trading, U.S. stock futures were volatile. The Dow Jones Industrial Average futures stood at 42,368 points, down 17 points or 0.04%; the S&P 500 futures were at 5,925.25 points, down 8 points or 0.13%; and the Nasdaq 100 futures were at 21,361.75 points, down 38.5 points or 0.18%. This was in contrast to the rise seen at 08:31, when futures for the three major indices saw a slight uptick. After a mixed performance in the previous trading day, investor sentiment was cautious.

05/16 01:24

JPMorgan CEO Jamie Dimon, in Paris, warns about recession risks, and the uncertainty surrounding US-China trade negotiations is impacting US stock performance.

On May 15, 2025, JPMorgan Chase's CEO, Jamie Dimon, warned at the Global Markets Conference in Paris that despite the easing of US-China tariff tensions, global economic uncertainties and recession risks still exist. Progress in the US-China trade negotiations has been limited, and market sentiment is cautious. On that day, the performance of US stocks was mixed, with the Dow Jones Industrial Average rising 271 points, the S&P 500 closing higher for the fourth consecutive day, while the Nasdaq and the Philadelphia Semiconductor Index experienced slight declines.

05/15 22:55

US stocks are mixed: Employment data is steady, IMF cuts global growth forecast; US-South Korea forex talks lead to Korean won fluctuations

On May 16, 2025, the major indices of the U.S. stock market had mixed performances, with the Dow Jones Industrial Average rising by 0.65% and the S&P 500 Index by 0.41%, while the Nasdaq Index fell by 0.18%. The U.S. non-farm employment report for April showed an increase of 177,000 jobs, with the unemployment rate remaining at 4.2%. The IMF downgraded the 2025 global economic growth forecast to 2.8%, citing U.S. tariff policies as the reason. The U.S.-South Korea foreign exchange policy talks led to fluctuations in the Korean won, and the appreciation of the New Taiwan dollar attracted attention, though the Taiwan-U.S. tariff negotiations did not address exchange rate issues.

05/15 21:23

U.S. stock market closed with mixed results: Cisco's stock rose as its financial forecast was revised upward, while UnitedHealth's stock plunged due to a judicial investigation.

On May 15, 2025, the U.S. stock market closed with mixed performance. The Dow Jones Industrial Average rose over 270 points due to Cisco's upward revision of its full-year forecast, while the S&P 500 Index increased for the fourth consecutive day. The Nasdaq Index edged down due to declines in tech stocks such as Amazon and Meta. Cisco's stock price jumped more than 5% on strong AI demand, while UnitedHealth tumbled 11% after reports of a criminal investigation by the U.S. Department of Justice, hitting a five-year low, making it the market's focal point.

05/15 08:26

Trump Announces "Tariff Freedom Day": S&P 500 Strongly Rebounds, Retail Investors Cause Significant Market Fluctuations

On April 9, 2025, President Trump of the United States announced "Tariff Liberation Day," significantly lowering tariffs on Chinese goods and reached an agreement with China to suspend the trade war for 90 days. This policy shift caused market fluctuations, with the S&P 500 index initially dropping and then rising, resulting in an "artificial bull market." The CNN Fear and Greed Index surged to 70, indicating that market sentiment had shifted into the greed zone. This article examines the impact of the policy shift on the stock market and how retail investors dominated the market rebound.

05/15 02:25

US stocks experience slight fluctuations: AI deal boosts tech stocks, the S&P 500 rises for six consecutive days, Treasury yields break through 4.5%

On May 14, 2025, the major U.S. stock indices were mixed. The S&P 500 index rose for the sixth consecutive day, boosted by the AI cooperation agreement between the U.S. and Saudi Arabia, as technology stocks performed strongly. The Nasdaq index also rose, while the Dow Jones index slightly declined. The yield on the 10-year U.S. Treasury note rose to 4.53%, indicating increased pressure in the bond market. Investors are focusing on the forthcoming economic data and remarks from Federal Reserve Chairman Powell to evaluate future policy directions.

05/14 18:56

U.S. stocks opened higher due to trade optimism: the pause in U.S.-China tariffs and easing inflation are boosting the three major indexes.

On May 14, 2025, the U.S. stock market continued its upward trend from earlier this week due to positive news such as the U.S.-China tariff suspension, cooling inflation data, and Trump's visit to the Middle East. The Dow Jones Industrial Average rose by 9.7 points, the S&P 500 rose by 10.2 points, and the Nasdaq rose by 64.6 points. Technology stocks performed strongly, particularly AI-related companies, leading to a positive shift in market sentiment.

05/14 18:27

European stock markets decline: Optimism regarding US-China trade relations diminishes, policy easing does not boost investor confidence

On May 14, 2025, major European stock markets ended lower as optimism among investors about easing US-China trade tensions waned. The London FTSE 100 index dropped 0.21%, the Frankfurt DAX index dropped 0.47%, and the Paris CAC 40 index fell 0.47% as well. Even though the Chinese Ministry of Commerce announced a temporary lift on export controls for 45 US entities, market reactions showed that this short-term policy relief did not boost investor confidence.

05/14 07:27

U.S. stock futures slightly rise: Dow Jones Industrial Average surpasses 42,200 points, indicating stable sentiment in Asian markets

On May 14, 2025, at 12:33 PM Taipei time, futures for the three major U.S. stock indices slightly increased. Dow Jones Industrial Average futures rose 21 points to 42,249, S&P 500 futures increased by 2.75 points to 5,907.25, and Nasdaq 100 futures went up by 20.5 points to 21,298.5. This indicates stable market sentiment during the Asian trading session, as investors focus on global economic and corporate earnings developments.

Trump's Policy U-Turn: From Toughness to Concession

The Trump administration initially imposed punitive tariffs of up to 120% on Chinese imports in early April, aiming to close the "de minimis" loophole and curb the influence of Chinese e-commerce platforms like SHEIN and Temu. However, with increasing pressure from blue-collar workers, business executives, and Republican allies, White House aides warned Trump that his "base was crumbling," ultimately prompting him to announce a significant tariff reduction on April 9 and reach a 90-day trade truce with China.

According to The Washington Post, Trump's policy shift was due to both political and economic pressures. Dockworkers and truck drivers expressed strong dissatisfaction with the rising costs caused by the tariff policy, while large corporations and Republicans were concerned about the economic toll of the trade war. Trump eventually relented, allowing officials to restart negotiations with China and signing an executive order to reduce the tariff rate on small packages from 120% to 54%, while canceling the planned increase of the fixed fee to $200 in June.

Stock Market Volatility: From Bloodbath to Artificial Bull Market

Following Trump's announcement of "Tariff Liberation Day," the market initially reacted sharply. The S&P 500 index plummeted on April 2, hitting a 52-week low of 4,835 points, and the Dow Jones index fell over 1,000 points in a single day. The market briefly entered a technical bear market, with investor panic spreading.

However, as Trump took to social media to declare "now is a good time to enter the market" and continued to release signals of tariff revisions and negotiation progress, retail investors began to enter the market en masse. According to data from Bank of America, institutional investors and hedge funds generally sold off during this period, while retail investors went long against the trend, leading to a rare phenomenon of retail investors squeezing Wall Street shorts.

This policy-driven rebound quickly pushed up the S&P 500 index. As of May 13, the S&P 500 had risen to 5,844.19 points, turning positive for the year and successfully breaking through the 200-day moving average (around 5,755 points), sending a strong bullish signal technically. The Nasdaq index rose 4.35% on May 13, reaching 18,708.34 points, while the Dow Jones index rose 1,161 points, closing at 42,410.10 points.

Technicals and Market Sentiment: Bullish Signals and Greed Index Surge

The technical rebound of the S&P 500 index has drawn market attention. According to Larry Tentarelli, a technical analyst at Blue Chip Daily Trend Report, breaking through the 200-day moving average is an "important technical buy signal," indicating a positive shift in market momentum. Adam Turnquist, chief strategist at LPL Financial, added that historical data shows the S&P 500's average gain over the 12 months following a break above the 200-day moving average is 8.6%.

In terms of market sentiment, CNN's Fear & Greed Index has rebounded significantly from the panic range in early April, reaching 66.1 by May 13, entering the "greed" zone. The index is calculated based on seven equally weighted indicators, with a range from 0 (extreme fear) to 100 (extreme greed), and the current reading indicates that investor sentiment has clearly shifted towards risk assets.

Additionally, the CBOE Volatility Index (VIX) has fallen from a high of over 50 in early April to just above 18, indicating a significant easing of market panic. Analysis from SentimenTrader points out that when the VIX falls from a high and the S&P 500 is more than 1% above the 200-day moving average, subsequent market returns are often significantly higher.

Retail-Driven Short Squeeze: Trump's Call Effect

Another notable feature of this rebound is the dominance of retail investors. According to AB Media, Trump posted on his social media platform before the policy announcement, stating "now is a good time to enter the market," sparking questions about potential "insider trading." He subsequently made multiple public calls encouraging investors to buy stocks, further boosting market sentiment.

At the same time, many Wall Street investment banks were generally bearish on the market at the start of the policy, leading to institutional positions being short, becoming targets for retail short squeezes. According to market observations, call option premiums were significantly higher than puts, indicating that the market expected a higher probability of an increase, further intensifying short-covering pressure.

S&P 500 Sector Performance and Capital Flows

In this rebound, the information technology, consumer discretionary, and communication services sectors performed the strongest. According to Yahoo Finance, retail and large tech stocks benefited from the optimistic sentiment of trade war easing, becoming the main targets for capital inflows. In contrast, utility stocks fell against the trend, suggesting an increased appetite for risk in the market.

Additionally, according to U.S. Treasury data, U.S. tariff revenue in April reached $16 billion, a 130% increase from March, indicating that the high tariff policy made a significant short-term contribution to government finances but also increased the burden on businesses and consumers.

References

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