The stock market got a much-needed breather this week. Investors had been holding their breath ahead of a July 9 tariff deadline that could have sparked fresh trade fights. However, the pressure eased when President Trump extended the deadline to August 1. Stocks jumped on the news.
The rally came fast. Just earlier in the week, the market had dipped on fears that new tariffs might hit U.S. imports from Asia and Europe. But the delay gave investors time to exhale. With trade tensions cooling, at least for now, the stock market found its footing again.
U.S. Stocks Rebound After April Slump
Since April 8, the S&P 500 has surged about 26 percent. That is a big turnaround from the slump triggered by Trump's April 2 tariff warning. Back then, worries over higher import costs and global pushback spooked markets.
What is driving the bounce? A mix of retail investors jumping in and companies buying back their own shares. Big institutions are still playing it safe, staying underweight in equities. But smaller players have kept the rally alive, betting that cooler heads will prevail.
Freepik / When the White House said talks with countries like Vietnam, India, and Japan were ongoing, investors took notice.
Trump’s trade team has had mixed luck. Some partners are open to deals. Others are digging in. But extending the deadline sent a signal that more talks, not more tariffs, are the priority for now. That is all the stock market needed to hear.
Sentiment Feels a Lot Like 2020
Even with stocks climbing, investor behavior still feels cautious. Analysts say it is similar to what we saw in 2020 after the pandemic crash. Back then, markets bounced back fast, but many investors were slow to re-enter.
Now, the same hesitancy is back. Yes, stocks are rising. But big funds aren’t chasing the rally. Instead, they are watching for signs that this bounce has staying power. The tariff deadline extension helped, but long-term confidence still needs more fuel.
With the tariff crisis delayed, attention is shifting. Q2 earnings season is kicking off, and inflation data is just around the corner. Both will shape expectations for the Fed’s next move. If earnings come in strong and inflation stays tame, that’s a win for stocks.
But any surprise spike in prices or weak corporate numbers could shake things up. The stock market loves stability. And right now, stability means no tariff hikes, solid earnings, and a Fed that doesn’t spook the bond market.
Freepik / Tech names have been the big winners from this rally. Investors are chasing growth, and the tariff delay gives them one less thing to worry about.
Big names like Apple, Nvidia, and Microsoft saw gains right after the extension news.
On the other hand, solar stocks took a hit because Trump also floated cutting tax credits for green energy. Investors in that space are nervous. Even if tariffs hold off, new tax changes could still hurt the sector, keeping solar stocks on edge.
The New Red Line for Investors
The new deadline matters. August 1 is now the date everyone is watching. If trade talks go south before then, the market could take another hit. But if negotiations make progress, the rally could continue.
Investors know this is temporary relief. The real test will come when Trump decides whether to impose new tariffs or cut a deal. Until then, expect markets to react to every new headline from Tokyo, New Delhi, or Brussels.