Gains on Tech Results, Tariff Shock Eases

U.S. equity futures surged on Thursday, lifted by strong earnings from tech giants and renewed optimism surrounding a potential easing of trade tensions under the Trump administration.

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Futures tied to both the S&P 500 and Nasdaq 100 climbed over 1%, following a positive after-hours performance by Microsoft Corp. and Meta Platforms Inc. Both companies exceeded Wall Street’s expectations in their latest financial results, suggesting that consumer demand remains resilient despite ongoing concerns over tariffs.

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Microsoft reported revenue that beat analyst forecasts, while Meta also posted sales figures above expectations, reassuring investors that their advertising and tech services remain in demand. This upbeat sentiment carried over from Wednesday's volatile session, when the S&P 500 reversed a steep intraday loss of more than 2% to finish the day with a slight 0.2% gain.

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Thursday’s gains weren’t limited to the U.S. Equity markets in Japan and Australia also posted moderate increases. However, trading activity was subdued across much of Asia due to public holidays in several countries, including Mainland China, Hong Kong, Singapore, and India.

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Currency markets saw the yen weaken for a third consecutive day after the Bank of Japan decided to keep its benchmark interest rate steady at 0.5%. The central bank also extended its timeline for reaching its 2% inflation target, now aiming for consistency by fiscal 2027. This cautious outlook led to modest declines in U.S. Treasury prices during Asian trading, while the dollar strengthened against a basket of major currencies.

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Investor sentiment toward U.S. equities improved notably on Wednesday after President Donald Trump’s trade representative signaled that the administration is preparing to announce the first set of trade deals aimed at lowering proposed tariffs. Trump admitted that the broad tariff strategy could become a political liability, but emphasized he would not finalize any agreements just to calm the markets.

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Gareth Nicholson, Chief Investment Officer for International Wealth Management at Nomura, described the market’s reaction as a “great tactical rally” and emphasized the importance of agility in the current investment climate. “This is a market for investors to be very nimble,” he said during an interview on Bloomberg Television.

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Earlier on Wednesday, markets were weighed down by discouraging economic data showing that the U.S. economy had contracted for the first time since 2022. That initial selloff was reversed in part by reports that the U.S. government has been actively engaging with Chinese officials through various diplomatic channels. Meanwhile, some investors are now betting that the Federal Reserve may soon ease interest rates to support the economy and prevent a deeper downturn.

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According to Fawad Razaqzada of City Index and Forex.com, weaker-than-expected economic data could speed up the Fed’s decision to cut rates. He also noted that Trump may be more inclined to relax tariff policies in light of economic softness, potentially expediting trade negotiations. “The Fed is now more likely to step in sooner with its rate cuts to support an ailing economy,” Razaqzada said.

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The Bank of Japan’s updated economic projections added to the cautious global outlook. The central bank cut its forecast for domestic economic growth in the current fiscal year to just 0.5%, reflecting concerns about a potential global slowdown fueled by ongoing trade disputes.

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On the commodities front, oil prices remained stable during Asian trading hours after falling below $60 per barrel on Wednesday — the lowest level in three weeks. The decline was prompted by signs that the OPEC+ alliance, led by Saudi Arabia, may increase output for an extended period. Meanwhile, gold prices slipped as traders evaluated the implications of the Fed’s likely interest rate path amid a weakening economic picture under the Trump administration’s trade policies.

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In geopolitical news, the U.S. and Ukraine reached an agreement on access to Ukraine’s natural resources, offering some reassurance to Kyiv, where officials had worried about losing U.S. backing in peace negotiations with Russia.

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Louis Navellier, Chief Investment Officer at Navellier & Associates, stressed that the trajectory of financial markets will largely depend on how trade negotiations unfold in the coming weeks. “If we get a series of announcements soon of trade agreements reached, optimism will rise, and the Fed will likely cut soon,” he said. “If things drag out for weeks and months, the damage to supply chains and inevitable near-term inflation could cause shouts of stagflation and be very bearish for stocks.”

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