The Dow Jones Industrial Average (DJIA) saw a notable gain on Thursday, climbing more than 650 points, or 1.6%, at its peak after the Trump administration announced a preliminary trade deal with the United Kingdom (UK). While the deal, which is still unsigned, will maintain a 10% tariff on most UK imports, markets viewed the news as a signal that the Trump administration may gradually reduce its tariffs over time. However, the optimism was short-lived, with the major equity index retreating to near its opening level of 41,370 by the close of the session.
Investor sentiment remains focused on the ongoing US-China trade war, which has imposed steep import taxes of 145% on most Chinese goods. Despite hopes for a swift resolution, progress on addressing these tariffs remains slow. President Trump has stated that he is not inclined to reduce the tariffs on Chinese imports, while the Chinese government has been slow to initiate trade talks. A preliminary meeting between the two nations’ delegates is scheduled for this weekend in Switzerland, but both sides have tempered expectations for immediate progress.
Trade Deal Uncertainty and Tariff Deadlines Loom
The July 9 deadline for the Trump administration’s self-imposed “pause” on its controversial “reciprocal tariffs” is approaching, and while markets remain hopeful that new trade deals will mitigate the impact of these tariffs, progress has been sluggish. Despite President Trump’s earlier claims of negotiations with over 200 countries, tangible progress has been minimal. The UK trade deal announced on Thursday remains unofficial, with Trump suggesting that it could be finalized in the coming weeks.
Thursday’s rally briefly pushed the Dow Jones above its 200-day Exponential Moving Average (EMA) near 41,600 for the first time since early April. The index has rebounded more than 14% since bottoming out near 36,615 in April. However, the Dow Jones is still in the process of recovering from the earlier tariff-induced decline that took it as low as 42,175.
Technical Outlook: Caution Ahead
While the Dow has nearly regained its losses from the tariff-induced sell-off, the overall bullish momentum remains cautious. Technical indicators are currently in overbought territory, signaling that the battle with the 200-day EMA may not be over yet. Investors will be watching closely for any developments regarding trade talks and tariff resolutions, as these factors will continue to play a significant role in shaping market sentiment.
