Key Takeaways
- The U.S. Supreme Court struck down President Trump’s global tariffs in a landmark 6-3 decision, ruling that the International Emergency Economic Powers Act (IEEPA) does not authorize the executive branch to impose such duties.
- Major U.S. stock indexes surged on the news, with the S&P 500 (SPY) rising 0.7% and the Nasdaq 100 (QQQ) gaining 0.9% as trade-related uncertainty eased.
- Interest rate expectations shifted significantly, with traders now pricing in the first Federal Reserve rate cut for July rather than earlier in the year.
- Economic data for February showed a slowdown in growth, as Manufacturing PMI fell to 51.2 and Michigan Consumer Sentiment missed estimates at 56.6.
- Atlanta Fed President Raphael Bostic warned that labor supply remains constrained by immigration changes and that businesses are increasingly cautious due to the rise of AI tools.
The U.S. Supreme Court delivered a major blow to the administration's trade policy on Friday, ruling that the President lacks the authority under the International Emergency Economic Powers Act (IEEPA) to levy global tariffs. The 6-3 decision clarifies that the federal law, typically reserved for national emergencies, does not grant the executive branch the power to bypass Congress on trade duties. The ruling is expected to have immediate implications for global supply chains and international trade relations.
Wall Street reacted with a relief rally following the decision. The S&P 500 (SPY) climbed as much as 0.7%, while the Nasdaq 100 (QQQ) recovered from early opening losses to trade up 0.9%. Investors appear to be betting that the removal of broad tariffs will dampen inflationary pressures and reduce costs for multinational corporations.
In the commodities and fixed-income markets, the reaction was more nuanced. Spot Gold pared its earlier gains, trading up 0.5% at $5,023.45/oz, while Spot Platinum surged 3% to $2,133.04/oz. Meanwhile, short-term interest-rate futures fell as market participants adjusted their outlook for monetary policy. Traders now see the Federal Reserve waiting until July to implement its first rate cut, a delay from previous expectations.
Economic data released Friday morning added to the complex market backdrop. The S&P Global Manufacturing PMI for February came in at 51.2, trailing the 52.4 estimate. Services PMI also missed expectations at 52.3. Furthermore, Michigan Consumer Sentiment for February landed at 56.6, down from the previous reading of 57.3, suggesting that high prices and economic uncertainty continue to weigh on American households.
Federal Reserve official Raphael Bostic provided additional context on the labor market, noting that sectors such as agriculture and hospitality remain exceptionally tight. Bostic stated that changes in immigration have "dented" the labor supply, contributing to lower monthly job growth. He also observed that employers are becoming more cautious about hiring as they evaluate whether AI tools will ultimately complement or replace human workers.
Despite the legal setback regarding tariffs, the administration is moving forward with direct diplomacy. A White House official confirmed that President Trump is scheduled to travel to China from March 31 to April 2. This upcoming visit will be closely watched by markets to see if a new trade framework can be established following the Supreme Court's intervention.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.