Both the S&P 500 ETF (SPY) and the Nasdaq 100 ETF (QQQ) concluded the trading session in the green, signaling investor optimism ahead of a packed week for corporate earnings reports.
In a significant development on the trade front, President Trump recently announced a reduction of the tariffs imposed on Chinese goods. Initially set at 20% to address concerns about China’s role in the fentanyl crisis, the tariffs will now be halved to 10%. Trump indicated that he is open to eliminating the remaining tariffs entirely if China takes decisive action against the fentanyl trade. “As soon as we see that, we’ll get rid of the other 10%,” Trump stated while speaking to reporters aboard Air Force One.
Concurrent with these trade discussions, the ongoing government shutdown has reached its 31st day. In light of this stalemate, Trump has called for Senate Republicans to consider reforming the filibuster rule. In a post on Truth Social, he urged GOP lawmakers to utilize what he termed the ‘Nuclear Option’ to eliminate the filibuster, allowing legislation to pass with a simple majority. This, he argued, would enhance the likelihood of the government reopening.
Meanwhile, in the realm of monetary policy, Dallas Federal Reserve President Lorie Logan expressed skepticism regarding the need for a recent 25 basis points interest rate cut. She noted that with a balanced labor market and inflation rates still above the Fed’s 2% target, she is not inclined to support further rate cuts unless there is compelling evidence of rapidly declining inflation or a significant cooling of labor market conditions. Her stance resonates with that of Jeff Schmid, President of the Fed Bank of Kansas City, who cautioned against the potential long-term inflation implications of even a minor rate cut.
In investment trends, the National Association of Active Investment Managers (NAAIM) reported that its Exposure Index surpassed the 100 mark for the first time since July 2024. This increase reflects rising apprehensions about a potential bubble driven by artificial intelligence investments, particularly as major tech companies increase their stakes in the AI sector. Currently, the S&P 500 is trading near historic highs and holds a forward price-to-earnings (P/E) ratio of 23, significantly above its 20-year average of approximately 16.
On the market performance front, the S&P 500 (SPX) registered a gain of 0.26%, while the Nasdaq 100 (NDX) rose by 0.48%, suggesting a positive sentiment among investors navigating these economic developments.
