The Dow Jones Industrial Average rose on Thursday, bouncing back from earlier drops caused by new tariff threats from President Donald Trump. These included significant tariff hikes on imports from countries like South Korea and Japan, along with a 50% tariff on copper and goods from Brazil. Retaliatory tariffs are delayed until August 1, with the possibility of further postponement. Market optimism is driven by stable economic conditions, indicated by limited inflation from the new tariffs and positive trends in US jobless claims.

Jobless Claims Boost Economic Outlook

US Initial Jobless Claims came in better than expected at 227,000, down from 233,000. This stability supports a positive economic outlook, with the Labour Department’s weekly claims data reflecting labor market trends, even though it can be unpredictable. Federal Reserve officials are considering cutting rates as trade policies shift under Trump’s guidance. While President Trump pushes for rate reductions, Fed Chair Powell is taking a cautious stance in this complicated trading environment. The Dow Jones gained ground, returning to higher levels during the week and hinting at possible record highs above 45,000. The US dollar’s performance remains sensitive to labor data, which shapes investor sentiment regarding its strength. The Dow recovered earlier losses, mainly due to a temporary relief from delayed retaliatory measures. Early in the session, tariff increases—especially on imports from Asia and Latin America—set a cautious tone. However, when reciprocal actions were postponed, investors started buying cautiously. The delay until at least August provides some breathing room, but it doesn’t set a clear long-term direction.

Market Resilience and Economic Signals

The market did not react with celebration but acknowledged that the situation did not worsen. While stocks showed resilience, the broader focus now is whether this sense of stability will last. The limited inflation impact from tariffs has eased some worries. Pricing pressures remain manageable, allowing traders to handle position risks without making immediate adjustments. The copper tariff may affect materials and industry hedges in the future, but its impact will likely unfold more slowly than initial reactions suggest. The Labour Department’s jobless claims report remains significant, not just for its absolute figures but for how they deviate from predictions. A drop to 227,000 claims indicates a healthier hiring environment than anticipated. When these trends align over time, they provide a solid foundation for investments in rate-sensitive sectors. Derivatives linked to interest rate forecasts should now expect that rates will remain steady rather than undergo drastic changes. Powell’s recent comments show his hesitation to quickly respond to political pressure. His efforts to maintain balance may increase daily market volatility, particularly in the Treasury curve’s front end. Traders focusing on shorter durations should be vigilant about the pace and clarity of his future remarks. For now, the Fed is unlikely to make quick decisions without stronger supporting data. We are keeping an eye on the Dow at the 45,000 level as a key psychological marker. While it could reach that level, it won’t change hedging strategies in volatility-linked instruments. Option writers, especially those exposed to short delta, may want to reassess their risk in case of a sharp market shift related to commodity price changes after the copper tariff is implemented. Currency traders are wisely focusing on employment data as one of the few reliable indicators in this news-driven cycle. Demand for the US dollar remains sensitive to even slight changes in expectations, especially when contrasting central bank messages arise globally. Staying long on supportive labor data makes sense now, but unwinding positions may happen quickly due to tightening correlations across assets. In summary, the market isn’t in a frenzy. It seems to be adopting the view that immediate worst-case scenarios might not unfold. Option spreads and futures trends reflect this sentiment, and if corrections do happen, they are likely to be driven by profit-taking or adjustments in yield curves, not panic. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now