China-US trade agreement will help ease the impact of the supply chain
US Commerce Secretary Lutnick told the media on Thursday, June 26, that the China-US trade agreement had been signed and sealed two days ago, but he did not disclose the specific content of the agreement. US President Trump also mentioned the agreement at the White House event that day, saying "We just signed an agreement with China yesterday," but did not further explain the signing content.
The S&P 500 rose on Thursday and closed near a record high. Technology stocks strengthened under the leadership of chip stocks as investors continued to bet on the faster popularization of artificial intelligence. The main US stock indexes closed higher that day, with the Dow Jones Industrial Average up 404 points, or 0.94%; the S&P 500 rose 0.9% to 6143.70 points, close to the historical closing high of 6144.15 points; the Nasdaq Composite Index rose 0.97% to 20167.91 points.
Large technology companies led the market to rebound from the trough of the tariff-induced plunge in April, and their rapid recovery has prompted some investors to re-enter the market.
Several economists told Caixin that the US economic data is not ideal, but investors are now entering a special context, that is, risks always exist and the fear brought by these risks must be overcome.
As geopolitical risks have subsided, investors' attention has turned to the state of the US economy, and the news is not optimistic. According to the final revised data released on Thursday, the US gross domestic product (GDP) shrank by 0.5% on an annualized basis in the first quarter, the first contraction since 2022. In the revised data released in May, GDP shrank by 0.2% from January to March, which was a reversal of the 2.4% economic growth in the last three months of 2024.
The decline in real GDP in the first quarter was mainly reflected in: imports increased sharply by 37.9%, the fastest growth since 2020, resulting in a decline of nearly 4.7 percentage points in GDP; government spending fell by 4.6% year-on-year, the largest decline since 1986. These unfavorable factors were partially offset by the recovery of investment. Among all the data, the performance of personal consumption is particularly noteworthy. In the initial report, personal consumption grew by 1.7%, but it had fallen to 1.2% in the first revision, and the final value was significantly lowered to only 0.5%, the weakest quarterly performance since the outbreak of the new crown epidemic.
The number of Americans continuing to apply for unemployment benefits rose to a three-and-a-half-year high, indicating that the US job market is slowing down. On Thursday, according to data released by the US Department of Labor, the number of Americans continuing to apply for unemployment benefits rose to 1.974 million in the week of June 14, higher than the market expectation of 1.95 million, the highest level since November 2021, and has continued to rise sharply in the past month and a half, reflecting the extended unemployment time of the unemployed.
However, as of the week of June 21, the number of first-time unemployment claims fell to 236,000, lower than the expected 243,000. The "four-week moving average" used to smooth short-term fluctuations also fell to 245,000.
In a speech to lawmakers this week, Federal Reserve Chairman Jerome Powell took a wait-and-see approach to future interest rate decisions, saying the strategy was appropriate until there was a clearer picture of the impact of aggressive U.S. tariffs on the overall economy. The stance triggered further criticism from Trump, who has been calling for lower interest rates.
On the policy level that the market is paying attention to, the stock market is capturing all the possible good news.
July 9 is the 90-day deadline for the U.S. government to suspend the so-called "reciprocal tariffs." Investors have also been encouraged by the parties stepping up their efforts to secure a trade deal with the United States before the looming tariff increase. Recent statements from the White House indicate that the Trump administration may postpone the deadline. On Thursday, June 26, Eastern Time, White House Press Secretary Levitt declared that the July 9 deadline for trade negotiations was not of vital significance. "The deadline is not important," she said.
U.S. President Trump announced the so-called "reciprocal tariffs" on April 2, triggering a plunge in U.S. financial markets. Under pressure from many parties, Trump announced on April 9 that he would suspend the imposition of high "reciprocal tariffs" on some trading partners for 90 days, but maintain a "baseline tariff" of 10%, and threatened US trading partners to complete negotiations with the US before July 8.
After Levitt made the above remarks, the US stock market continued to rise during the midday trading session on Thursday, and the three major US stock indexes rose by at least 0.9% during the session.
In addition, US Commerce Secretary Lutnick also said on the same day that when the Big Beautiful Tax Bill is implemented, approved by Congress and signed into law by Trump, Trump's telecom card will be ushered in. US Treasury Secretary Bensont said that he asked Congress to delete Article 899, the controversial "capital tax" clause, from the "Big Beautiful" tax bill. The US Treasury Department announced that it had reached an agreement with the Group of Seven (G7) allies. After the US agreed to cancel the "retaliatory tax" proposal in Article 899 of Trump's tax case, US companies will be exempted from some taxes levied by other countries. This also eased Wall Street's previous concerns.
