Trade Court Ruling Creates Chaos, but Is It Really Just a 'Nothing Burger'?
Tariffs are not going away as there are several workarounds for the Trump administration. Meanwhile, can Nvidia's earnings be the catalyst for the AI sector and the Mag 7?
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The S&P 500 is trading about 1.2% higher on Thursday morning but off its overnight highs, following a federal trade court ruling against President Trump’s "Liberation Day" tariffs. The Court of International Trade ruled that Trump doesn’t have emergency economic power to impose certain types of tariffs.
The trade court ruling creates tremendous uncertainty, as billions of dollars in tariffs have already been collected, and most of the trade deal negotiations are based on the assumption that Trump has this broad tariff power. There will be new announcements about tariffs coming quickly and will likely cause choppy reactions.
While there are still many questions about how this will unfold, Goldman Sachs GS calls it a "nothing burger." Sector-based tariffs, such as those on steel and automobiles, are unaffected, and there is an alternative provision that allows for 15% tariffs for 150 days without any formal investigations. That provides a stopgap while the Trump administration appeals the federal trade court ruling.
The jump on the tariff headlines continues to erode, but the market is also celebrating a better-than-expected earnings report from Nvidia NVDA. Nvidia suffered from some trade restrictions on sales to China, but demand for its products remains very strong, and there are numerous price target increases from analysts.
Citigroup C raised its target price on Nvidia to $180 from $150 and noted the strong sales and margins on Blackwell chips. Citi believes that with margins expanding, Nvidia should break out of its recent trading range.
The question now is whether Nvidia can be a catalyst for the entire AI sector and the Magnificent Seven stocks in particular. In the early going Thursday, the Mag 7 names are trading up 2.5%, which is driven not only by Nvidia but by the trade court ruling.
Market conditions are very fluid, and we will have to watch the price action to see if investors are embracing a more bullish narrative. There were signs that the market was about to roll over during the past week, before the delay on tariffs on the European Union and optimism about Nvidia provided a boost to prevent technical damage from building.
The bulls now have additional ammunition, but they need to keep the momentum going and suck in more skeptics and bears from the sidelines.
At the time of publication, Rev Shark had no positions in any securities mentioned.
