US stocks advanced on Tuesday, buoyed by President Donald Trump’s announcement that he would delay imposing a 50% tariff on European Union imports.
The move, made over the Memorial Day weekend, helped markets recover some ground after last week’s losses.
The Dow Jones Industrial Average gained 318 points, or 0.8%. The S&P 500 rose 1%, and the Nasdaq Composite climbed 1.2%.
Trump said on Sunday that the tariff hike—originally scheduled to take effect on June 1—would be pushed back to July 9 following a request from European Commission President Ursula von der Leyen.
Good call with @POTUS. The EU and US share the world’s most consequential and close trade relationship. Europe is ready to advance talks swiftly and decisively. To reach a good deal, we would need the time until July 9.
The proposed levy, which Trump introduced last week, had weighed on investor sentiment amid renewed concerns over global trade tensions.
The rally came after a tough week for equities. The Dow, S&P 500, and Nasdaq had each dropped more than 2% last week amid fears that the escalating trade dispute could disrupt economic growth.
US markets were closed Monday in observance of Memorial Day.
JPMorgan warns of limited upside
JPMorgan remains cautious on US stocks. Fabio Bassi, the bank’s head of cross-asset strategy, said the S&P 500 may now be “rangebound, with limited short-term upside.”
He noted the index has already rallied to the bank’s bull-case target of 5,800, up 20% since its April 7 low, fueled by a rebound in sentiment after the so-called “liberation day” tariff shock.
“The revival of the ‘higher for longer’ narrative, coupled with reduced tariff concerns, is likely to constrain the expansion of equity leadership,” Bassi wrote.
He added that investors are expected to continue favoring high-quality growth stocks, leading to an “unhealthy concentration” within the tech sector and the so-called “Magnificent Seven.”
Bassi advised clients to hedge against potential downside by purchasing call options on the Cboe Volatility Index (VIX), a bet that market volatility could rise in the near term.
Meanwhile, expectations for interest rate cuts have been dialed back.
Traders now anticipate two Federal Reserve rate cuts in 2025, down from at least three expected at the beginning of the year, according to CME Group’s FedWatch tool.
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