S&P500: US Indices Bounce Back from Correction Territory as Industrial Average Surges

US Markets Rally on Potential Tariff Adjustments

Stocks surged Monday with the Dow Jones Industrial Average climbing 489 points (1.2%) as reports emerged that President Trump may implement a more restrained approach to his reciprocal tariff plan.

The S&P 500 gained 1.5% while the Nasdaq Composite advanced 1.8%, both breaking four-week losing streaks. This rally marks a significant turnaround after weeks of market pressure, with investors responding positively to signals of a more measured trade policy approach.

Tech Sector Leads Gains

Tech stocks led the upward momentum with Tesla reversing its nine-week decline to jump more than 7%. Meta added approximately 4% while Nvidia rose nearly 2%.

These gains came as investor sentiment improved following Trump’s Friday comments suggesting potential “flexibility” in his tariff implementation strategy. The tech sector’s outperformance highlights the sensitivity of growth-oriented stocks to trade policy developments, as many tech companies maintain complex global supply chains.

Tariff Scope Potentially Narrowing

According to Wall Street Journal and Bloomberg reports, the administration may exclude certain industry-specific duties and exempt some nations entirely from the April 2 reciprocal tariff rollout.

Tobin Marcus of Wolfe Research noted that “omitting the sectoral tariffs from the April 2nd package significantly reduces both its aggregate scale and the maximum rate on targeted sectors,” though he still anticipates “a negative market reaction” when tariffs take effect.

The market’s current relief rally suggests investors are pricing in a more strategic approach to trade policy rather than across-the-board implementation.

Mixed Economic Indicators

Monday’s economic data presented a mixed picture, with S&P Global’s flash services index posting a stronger-than-expected 54.3 reading for March, up from February’s 51 and surpassing the 51.5 forecast. However, manufacturing declined to 49.8 from 52.7, falling below estimates and into contractionary territory.

Notably, input price inflation accelerated to a near two-year high, “often attributed to the impact of tariff policies,” according to S&P Global. This inflation spike signals potential margin pressure for companies unable to pass costs to consumers, with S&P noting that “competition limited the pass-through of higher costs to selling prices.”

Market Outlook

Despite the recent recovery, markets remain below their peaks, with the S&P 500 sitting 7.8% below its record high and the Nasdaq Composite 12% off its peak. Investors will closely monitor this week’s economic releases, including Tuesday’s consumer confidence data and Thursday’s jobless claims figures.

Federal Reserve Chair Powell’s recent assessment that potential tariff impacts would likely be “short-lived” has provided additional support to market sentiment, though manufacturing weakness and accelerating input costs warrant close attention in the coming trading sessions.

The divergence between services strength and manufacturing weakness suggests sector rotation opportunities may emerge as tariff policies evolve and their economic impacts become clearer.

More Information in our Economic Calendar.