Wall Street's roller coaster: Optimism on tariffs lifts stocks, but uncertainty lingers

2 minutes read

24 April 2025

Wall Street's roller coaster: Optimism on tariffs lifts stocks, but uncertainty lingers

Following weeks of turmoil, US equities made a resounding recovery this week. Expectations of easing US-China trade tensions and encouraging corporate earnings drove a broad-based rally. But under the surface, analysts caution that the market's next direction hinges on more than encouraging headlines.

Trade thaw talk sparks market rebound

Wall Street surged as Treasury Secretary Scott Bessent called the US-China trade war “unsustainable” and predicted a de-escalation in the coming months. His remarks, delivered at a private JPMorgan event, helped the Dow jump over 1,000 points and pushed the S&P 500 and Nasdaq up more than 2.5% each. Investors, battered by Monday’s steep sell-off, rushed back in.

“The roller coaster continues,” said Ryan Detrick, chief market strategist at Carson Group. “Some thawing of aggression between the US and China, thanks to Bessent’s comments, helped push things higher”. The optimism was palpable as all three major indexes logged their best day in two weeks.

But the rally lost steam late in the session as doubts resurfaced about the pace of negotiations and the White House’s stance on Federal Reserve policy. “Washington recognizes that the uncertainty surrounding tariffs is detrimental to the markets, and perhaps we can expect some positive news regarding trade soon,” Detrick added.

Earnings season: optimism confronts caution

Strong first-quarter earnings also underpinned the rally. Experts now predict S&P 500 earnings to increase 8.4% during January to March, up from 8% at the beginning of April. Household names such as Coca-Cola and Kroger reached all-time highs, with consumer sectors exhibiting resilience.

Yet, experts are cautious. Irene Tunkel, chief strategist at BCA Research, warned, “Our research indicates that tariffs could reduce the S&P 500’s net margins by two percentage points.” She added, “Investors are now prioritizing corporate outlooks over earnings as they attempt to assess the implications of tariffs on various companies and sectors”.

JPMorgan’s Mislav Matejka echoed this, saying, “Weekly earnings revisions have turned negative again in both the US and Europe, and we foresee this trend continuing.” Lower earnings forecasts typically compress price-to-earnings multiples, which could weigh on stocks in the months ahead. A bar chart comparing the performance of the Dow Jones, S&P 500, and Nasdaq indices, with Nasdaq showing the highest increase. The chart is visually styled with light blue bars on a dark purple background, with the Winvesta logo in the top right corner.

Technical hurdles and the path forward

Despite the bounce, the S&P 500 struggled to break above the key 5,500 level, a mark technical strategists call a “line in the sand”. JC O’Hara, chief technical strategist at Roth, noted that only a close above this threshold would signal a constructive trend. For now, the market remains stuck below its March lows.

“There’s more to come unless you see a change in the next few weeks, and that’s not going to have an immediate impact on the market,” said Schut, chief officer at Mutual Wealth Management. With the Federal Reserve unlikely to cut rates anytime soon and trade negotiations still in the early stages, investors will have to be patient.

Once the dust settles, the Wall Street message is clear: hopefulness regarding tariffs and earnings can drive rallies, but sustained gains will hinge on genuine movement on trade and unambiguous signals from policymakers. Volatility, meanwhile, is the new norm for the time being.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Winvesta. We advise investors to check with certified experts before making any investment decisions.