- S&P 500 erased double-digit losses within 9 weeks of tariff shock
- Corporate earnings grew 13% despite trade policy uncertainty
- Federal Reserve rate cuts countered recession fears in bond markets
Four days after President Trump's April tariff escalation, U.S. equities faced their steepest decline since 2020. The S&P 500 plummeted nearly 12%, wiping out $4 trillion in market value. Yet by June, markets staged a historic reversal fueled by three critical developments.
The administration's 90-day tariff pause on April 9 triggered an unprecedented 9.5% single-day rally. Analysts noted the Treasury yield curve stabilization played equal importance to Trump's policy shift. When 10-year bond yields stopped their freefall, it signaled institutional confidence returning,said Northlight's Chris Zaccarelli.
Corporate America delivered an unexpected lifeline. Despite CEOs withdrawing annual guidance, 75% of S&P companies exceeded Q1 profit forecasts. Tech giants Microsoft and Meta led with 18% earnings growth, proving digital infrastructure demand remained tariff-resistant.
The Federal Reserve's strategic rate cuts created breathing room. Though initially criticized as political accommodation, December 2024's 75-basis-point reduction preceded crucial manufacturing sector stabilization. Atlanta Fed data shows equipment spending rose 3.1% post-cut.
Regional impacts revealed stark contrasts. Midwestern manufacturers like Deere & Co saw 22% inventory surges, while West Coast tech exporters maintained normal operations. United Airlines' dual recession/non-recession forecast models became an industry template for risk management.
Market psychology shifted focus from sentiment surveys to concrete data. April's 177,000 job additions and 3.9% unemployment rate outweighed consumer confidence declines. The hard numbers firewall held,noted JP Morgan's chief strategist.
As the 90-day tariff pause enters its final month, options markets price in 58% volatility odds. With China negotiations stalled, analysts warn the recovery remains tariff-tethered. The S&P's 7% gap from record highs lingers as a cautionary buffer.