U.S. and Chinese officials continued trade discussions in London for a second day on Tuesday. U.S. Commerce Secretary Howard Lutnick expressed optimism about the talks, stating they might conclude by Tuesday night but could extend into Wednesday if necessary. “I think the talks are going really, really well.
We’re very much spending time and effort and energy – everybody’s got their head down working closely,” Lutnick remarked. Traders are closely monitoring these discussions for signs of a deal that would avoid hefty tariffs on both sides. Both nations had previously agreed to a ceasefire on tariffs, which was seen as a significant breakthrough in trade negotiations after U.S. President Donald Trump’s proposal for broad and steep levies on imports.
Stocks have rallied so far in June, fueled by optimism about global trade discussions and strong market fundamentals. Robust corporate earnings and a resurgence in technology stocks, driven by a wave of artificial intelligence announcements, have powered gains. “Technically, shares have been on a nice run, eclipsing key levels to get back on track,” said Jay Woods, chief global strategist of Freedom Capital Markets.
“The rally looks like many other technology names that are aiming to reclaim old highs.”
Despite the positive momentum, some investors worry that existing tariffs might drive inflation higher in the near future, potentially impacting equities. “While the picture is not completely clear, enforceable tariffs exist,” said Mark Malek, chief investment officer of Siebert Financial. “The Fed is concerned that the real inflationary effects have not yet manifested.
Optimism in trade negotiations
We would expect tariff-driven inflation to show initial signs in sectors like autos, apparel, and foods.”
The major U.S. indexes closed higher on Tuesday. The Dow gained 105.11 points, or 0.25%, to end at 42,866.87.
The NASDAQ edged higher by 0.55%, closing at 6,038.81, while the S&P 500 advanced 0.63%, settling at 19,714.99. HSBC predicts that the path of least resistance is higher for global equities over the next three months, with U.S. equities likely moving higher to catch up with the rest of the world. However, the outlook beyond that period appears challenging.
“Medium term (6 months+), the risk/reward is looking more unbalanced,” strategist Alastair Pinder wrote in a Tuesday note. “With markets trading near their highs, recession fears largely priced out, and the structural pillars supporting U.S. exceptionalism at risk, uncertainties remain.”
Several stocks were notable movers on Tuesday. Topgolf surged by 5%, adding to a nearly 15% gain from the previous session.
Insmed jumped over 26% following positive results from a Phase 2b study. Conversely, J.M. Smucker saw a decline of more than 13% after missing fiscal fourth-quarter revenue expectations. OpenAI has finalized a deal with Alphabet’s Google Cloud to supply additional computing capacity for its existing infrastructure.
This move is expected to bolster OpenAI’s capabilities in training and running AI models.
