Wall Street Recovers After Early Losses Amid Escalating US-China Trade Tensions

Wall Street took a tiny rollercoaster ride for the week, and it wasn’t all good. After a dismal start on Friday, the markets were able to pull off a small recovery, closing the day with some positive momentum. The three big indexes—the S&P 500, Nasdaq, and Dow Jones Industrial Average—were all sporting small but solid gains, despite the ever-unfolding soap opera between the U.S. and China about trade.

Let’s just roll back and find out what transpired. The week began with the markets in shock following Thursday’s unexpected sell-off that had wiped out the majority of Wednesday’s rally’s good gains. The S&P 500 fell 3.46% on Thursday, and the Dow Jones experienced an astonishing fall of over 1,000 points—about 2.5%. The Nasdaq was not spared either, falling 4.3%. This sudden slump followed one of the best performances we’ve seen in the markets in a while. Just a day earlier, the S&P 500 had soared by a stunning 9.5%, and the Dow had rocketed up by more than 2,900 points. What sparked that rally? It was a brief 90-day limited reprieve from certain tariffs, declared by President Trump, that gave investors a fleeting ray of hope that trade tensions would ease.

But that optimism did not last. The volatility didn’t stay that way before it blew up once more, and market fear was quantified in the CBOE Volatility Index (VIX), or the “fear gauge.” The VIX spiked momentarily over 50, before it came back down to around 44, merely illustrating how uncertain things were.

What was everybody so scared of? Well, the big fear was a shift in U.S. tariff policy. The Trump administration chose to do away with country-specific tariffs and implement a sweeping 10% tariff across all countries except China. The real bombshell, however, came when China retaliated by slapping far higher tariffs on U.S. products. China’s new tariffs now amount to a whopping 145%, well above the previous 84% tariff. China’s finance ministry retaliated with a scathing comment, calling the U.S. move economically nonsensical and stating that it would “no longer make economic sense.”

Despite the jitters, Friday was optimistic about the markets. To every tariff rise, there was news of de-escalation as well. The European Union (EU) announced that its trade representative would travel to Washington on Sunday in an attempt to seal some deals, and that calmed things down a bit as well. That hope of negotiations provided some optimism in the market that things won’t go completely out of control and turn into an outright trade war.

At the close of the day, after all the ups and downs, the three big US indexes were poised to end the week on a high note. S&P 500 was poised to end the week with a robust 3.3% increase, the highest since November. Nasdaq was up close to 5%, and the Dow also was poised to increase by 2.7%. So even having a roller-coaster week, the investors were heading home with some decent returns.

And when it came to individual stocks, behemoths like JPMorgan Chase were shining. JPMorgan saw a robust 4% increase in its stock price after it topped expectations with its first-quarter revenue. Morgan Stanley and BlackRock, too, had their own green shoots with 1% and 1.3%, respectively, thanks to their robust earnings reports. Even with those, however, there was always a feeling of unease hanging around. JPMorgan CEO Jamie Dimon warned the US economy would most likely experience “considerable turbulence” in the near term. His statement provided a modest dose of reality check that showed the road to the recovery will not be always smooth as some had hoped.

Taking a step back, the rollercoaster of the past week is a testament to how anxious the market is. While Wall Street did recover somewhat from some of its early losses, the ongoing trade tensions between the U.S. and China still loom over the market like the sword of Damocles. Tariffs are bearing down on global trade, and no one really knows where it’s going from here.

Overall, it seems that while Wall Street was relatively immune this week, there is still quite a bit of uncertainty on the horizon. The United States-China trade war is far from finished, and with potential continued volatility on the way, investors will be certain to have their toes on the ground. The market can expect more ups and downs, but at present, the good conduct this week is an indication that at least for the time being, the bulls rule the market. The traders will, however, have to keep a very close eye on how the trade tensions are faring and whether it improves or deteriorates in the coming weeks.