⏫US100 Jumps 1% on Tariffs Hopes

Recent hearings at the U.S. Supreme Court concerning the tariff dispute introduced by the Trump administration could have a significant impact on financial markets and the ongoing dynamics of the Wall Street recovery. The core issue before the court involves the legality of imposing tariffs on select countries under the International Emergency Economic Powers Act (IEEPA).The Court has demonstrated clear skepticism regarding the President’s authority to apply tariffs this broadly, suggesting that a potential limitation on this practice is likely.

Positive Implications for Markets and Inflation

For equity investors, potential restrictions on tariffs are crucial as they could:

• Reduce Trade Tensions and Volatility: This would mitigate the risk associated with trade wars, which have been a significant driver of uncertainty and volatility in markets for several quarters. Limiting trade policy uncertainty could thus favor stabilization and eventual growth across indices, including the S&P 500 and Nasdaq.

• Ease Inflationary Pressure: A reversal to the pre-tariff status quo could help dampen domestic inflation, which might prompt the Federal Reserve to implement quicker and deeper rate cuts next year.

• Boost Corporate Margins: Reduced tariffs would lower costs for importing businesses, positively impacting their margins and overall earnings outlook. This improves investor sentiment, favoring increased buying activity in the stock market.

Technical Strength and Outlook

Although a final ruling from the Supreme Court is not expected until next year, the mere prospect of a trade policy slowdown is already perceived as a potential catalyst for Wall Street. Investors are closely monitoring the proceedings as they signal a reduction in geopolitical and trade risk, supporting more stable market growth.

The Nasdaq 100 (US100) is gaining nearly 1% from the market open (and nearly 2% from its intraday low). Technically, the market is showing a strong demand reaction at the 50.0% Fibonacci retracement of the last major uptrend. Should today’s candlestick close with a large body and a significant lower wick, it would, from a technical perspective, suggest a possible longer-term rebound, based on analysis of similar candles in recent months. The next target for buyers is to surpass the 26,000 point level.

While declaring Trump's tariffs illegal could lead to their re-imposition via other channels, the immediate market positivity is driven by the expectation of an illegality ruling. Conversely, commentary from Trump regarding the case may still pose a risk to indices.