S&P500: Tariff Strike-Down Lifts Sentiment in US Indices Amid New Stagflation Signals

• GDP growth of 1.4% significantly missed the 2.5% estimate, with the Commerce Department attributing roughly 1% of the shortfall to a government shutdown.
• PCE inflation held steady at 3%, keeping it above the Fed's 2% target and lowering June rate-cut odds to 46.8% from 50.2%.
• The tariff ruling is viewed as bullish because it removes cost burdens on importers, reduces earnings uncertainty, and creates disinflationary pressure that gives the Fed more room to cut rates.

Market Summary: Supreme Court Tariff Ruling Reverses US Stock Decline

Key Developments

U.S. stock markets reversed early losses and turned positive Friday after the Supreme Court struck down President Trump's emergency tariffs in a 6-3 decision. The ruling removed significant cost burdens and uncertainty from corporate earnings while easing inflationary pressures, potentially giving the Federal Reserve greater flexibility for rate cuts.

Economic Data Concerns

Earlier in the session, major indices opened lower following disappointing economic reports:

• GDP Growth: Q4 GDP increased just 1.4%, substantially below the 2.5% forecast. The Commerce Department attributed approximately 1% of the shortfall to the government shutdown.
• PCE Inflation: The Personal Consumption Expenditures index held steady at 3%, remaining above the Fed's 2% target and dampening June rate cut expectations.
• Fed Rate Cut Probability: CME FedWatch Tool data showed June rate cut odds falling to 46.8% from 50.2% Thursday.

Market Implications

The combination of weak growth and persistent inflation has raised stagflation concerns among investors. While no panic selling has emerged, the scenario of slowing economic expansion alongside elevated inflation presents challenges for both corporate earnings and monetary policy.

Technical Analysis

The S&P 500 continues struggling below its 50-day moving average at 6,932.62 and the 6,897-6,932 retracement zone. A breakthrough could trigger upside momentum toward resistance levels at 7,007, 7,027, and 7,043. Failure to break above the 50-day MA could push the index back toward major support between 6,759-6,813.

The Supreme Court's tariff decision provided critical relief, though underlying economic fundamentals remain concerning for near-term market direction.