Investors shift focus as court questions tariffs, fuelling rallies in key sectors and spotlighting AI momentum
A pivotal Supreme Court hearing on the legality of US President Donald Trump’s sweeping tariffs sent a ripple through US markets Wednesday, as investors recalibrated their expectations for trade policy and its impact on key sectors.
According to CNBC, the justices’ pointed questions about the administration’s authority under the International Emergency Economic Powers Act led traders to scale back bets that the tariffs would be upheld.
Shares of Ford and General Motors, both considered tariff-risk bellwethers, each rose more than 2 percent, while Caterpillar advanced about 4 percent in response to the court’s apparent skepticism.
The technology sector, a dominant force in recent market gains, saw a rebound led by Advanced Micro Devices (AMD), which closed up 2.5 percent after surpassing third-quarter earnings and revenue expectations.
Broadcom and Micron Technology also reversed prior losses, rising 2 percent and about 9 percent, respectively, as reported by CNBC.
Oracle and Alphabet joined the rally, while Meta Platforms advanced 1.4 percent, according to BNN Bloomberg.
Despite these gains, not all technology names participated in the upswing.
Palantir extended its losses, dropping more than 1 percent as valuation concerns lingered.
Super Micro Devices fell 11 percent on disappointing results, and Arista Networks declined nearly 9 percent following its quarterly report, as noted by CNBC.
Economic data provided further support for equities.
The ADP report showed private payrolls rose more than expected in October, and the Institute for Supply Management reported stronger-than-anticipated expansion in the services sector.
Bill Adams, chief economist for Comerica Bank, wrote that the survey “provides a reassuring sign that economic growth persisted in October despite the government shutdown”.
The S&P 500 has gained 19.6 percent over the past 12 months, fuelled by robust corporate earnings and investor enthusiasm for artificial intelligence, as reported by CNN.
However, the index’s gains have been concentrated in large technology firms, with Nvidia now accounting for 8 percent of the S&P 500’s market value.
An equal-weighted version of the index is up just 6 percent over the same period, highlighting the outsized influence of tech giants.
Amid these developments, the Federal Reserve’s next move remains in focus.
The central bank recently cut its benchmark rate for the second time this year, but inflation remains above its 2 percent target.
Wall Street has tempered expectations for another rate cut in December, with investors now forecasting a 63 percent chance, down from 90 percent prior to the last reduction, according to BNN Bloomberg.
Analysts remain divided on the market’s trajectory.
Ross Mayfield, investment strategist at Baird, remarked, “Ultimately you zoom back and you say, ‘All right, it’s an AI bull market.’” He expects the rally to continue but anticipates a potential correction of 10 to 15 percent in the next 12 months.
David Solomon, chief executive at Goldman Sachs, echoed this sentiment, suggesting a 10 to 20 percent drawdown is possible in the next one to two years, as reported by CNN.
As the market navigates record highs and shifting policy signals, Keith Lerner, chief market strategist at Truist, observed, “Despite all the shifting narratives, the key theme for this year is the dominance of tech and AI and the continued resilience of corporate America”.
