Trump's Policy Victory Ignites Market Rally as Supreme Court Rejects Tariff Authority

The Supreme Court delivered a significant blow to President Trump’s trade agenda Friday, issuing a landmark 6-3 ruling that stripped the executive branch of the constitutional authority to unilaterally impose tariffs. This court victory catalyzed a broad market rally, with major U.S. equity indices posting solid gains as investors digested the ruling that the emergency law cited by the administration does not grant the president power to bypass Congress for establishing trade taxes.

Equities Surge on Policy Clarity

The policy clarity triggered an immediate market response. The S&P 500 Index advanced +0.43%, the Dow Jones Industrial Average climbed +0.33%, and the Nasdaq 100 Index rose +0.60% on the trading day. U.S. equities responded positively as market participants welcomed the Supreme Court’s decision to curtail the executive branch’s unilateral tariff-setting authority, viewing it as a reduction in policy uncertainty.

Trump’s rally in equities reflected relief over the tariff dispute’s judicial resolution, though the broader economic backdrop remained complicated. The market’s enthusiasm was tempered by mixed signals from the macroeconomic data flow.

Economic Headwinds Emerge Despite Policy Win

Underlying economic fundamentals presented a more cautious picture despite the Trump-driven policy victory. U.S. Q4 GDP growth disappointed forecasters, expanding only +1.4% on an annualized quarterly basis, significantly weaker than the anticipated +2.8% increase. This sharper-than-economic slowdown suggested momentum may be cooling in the world’s largest economy.

Inflation pressures persisted despite hopes for Fed policy flexibility. The Q4 core PCE price index, the Federal Reserve’s preferred inflation gauge, advanced +2.7% year-over-year, exceeding expectations of +2.6%. The December core PCE rose +0.4% month-over-month and +3.0% year-over-year, both above consensus forecasts of +0.3% m/m and +2.9% y/y respectively.

Consumer spending showed modest resilience. U.S. December personal spending increased +0.4% month-over-month, topping the expected +0.3% gain, while December personal income met expectations at +0.3% m/m.

Manufacturing activity contracted unexpectedly. The February S&P manufacturing PMI declined -1.2 points to 51.2, falling short of expectations for no change at 52.4. This weakness in industrial activity added to concerns about economic deceleration across different sectors.

Interest Rate Market Stabilizes on Mixed Signals

Treasury markets absorbed the economic data with a cautious tone. March 10-year T-notes traded lower by -2 ticks, with the 10-year yield climbing +0.8 basis points to 4.075%. Bond investors balanced hawkish inflation signals against dovish GDP weakness and manufacturing softness.

The Fed funds futures market reflected relatively low expectations for near-term rate cuts. Swaps were pricing in only a 6% probability of a -25 basis point rate reduction at the next FOMC policy meeting scheduled for March 17-18.

European government bond yields moved in the opposite direction. The 10-year German bund yield fell -1.1 basis points to 2.732%, while the 10-year UK gilt yield matched a 14-month low of 4.336%, down -2.2 basis points. Eurozone manufacturing showed strength, with the February S&P manufacturing PMI rising +1.3 points to 50.8, representing the fastest expansion pace in 3.5 years and exceeding expectations of 50.0.

The UK manufacturing PMI unexpectedly advanced +0.2 points to 52.0, marking the highest level in 1.5 years and defying forecasts for a decline to 51.5. UK January retail sales excluding auto fuel surged +2.0% month-over-month, significantly outpacing expectations of +0.3% m/m and marking the largest monthly increase in 20 months. German January producer prices declined -3.0% year-over-year, representing the steepest drop in 1.75 years and below the expected -2.2% decline.

Earnings Season Propels Selective Stock Movement

With more than three-quarters of S&P 500 companies having reported quarterly results, earnings emerged as the primary driver of individual stock performance. The earnings calendar revealed resilience in corporate profitability, with 74% of the 418 companies that reported beating Wall Street expectations. According to Bloomberg Intelligence analysis, S&P 500 earnings growth is tracking toward +8.4% expansion in Q4, marking the tenth consecutive quarter of year-over-year earnings growth. Stripping out the Magnificent Seven mega-cap technology stocks, Q4 earnings growth moderated to +4.6%.

Losers in the Trump Rally

Shares of alternative asset managers experienced significant selling pressure. Blue Owl Capital fell more than -8%, compounding Thursday’s -5% decline, after announcing restrictions on withdrawals from one of its retail-focused private credit funds. Ares Management, Blackstone, Apollo Global Management, and TPG Inc all declined more than -1% to -3%, reflecting broader investor concerns about private credit fund stability.

GRAIL Inc collapsed more than -47% after disclosing that its multi-cancer early detection screener failed to achieve its primary efficacy endpoint of statistically significant reduction in combined Stage III and IV cancer detection.

Technology sector weakness emerged as Akamai Technologies declined more than -9%, leading S&P 500 losers after issuing full-year adjusted EPS guidance of $6.20 to $7.20, substantially below the consensus estimate of $7.35.

Copart led Nasdaq 100 decliners, falling more than -7% after reporting Q2 revenue of $1.12 billion, disappointing against the consensus expectation of $1.17 billion. Walmart slipped more than -2% to lead Dow Jones Industrial Average losers after HSBC downgraded the retail giant to hold rating from buy. Newmont, the mining company, declined more than -2% after forecasting 2026 gold production will fall approximately -10% to 5.3 million ounces.

Winners Extend Rally

RingCentral led gainers, surging more than +32% after reporting Q4 adjusted earnings per share of $1.18, surpassing the consensus of $1.13, and providing full-year adjusted EPS guidance of $4.76 to $4.97, topping the expected $4.73.

Comfort Systems USA jumped more than +5%, leading S&P 500 gainers after Q4 revenue came in at $2.65 billion, exceeding the consensus estimate of $2.34 billion. Live Nation Entertainment climbed more than +4% following Q4 revenue of $6.31 billion, surpassing expectations of $6.11 billion. Floor & Decor Holdings advanced more than +5% after reporting Q4 adjusted EPS of 36 cents, beating the 34-cent consensus. Workiva Inc gained more than +5% on full-year total revenue guidance of $1.04 billion, topping the expected $1.02 billion. Guardant Health added more than +2% after issuing full-year revenue guidance of $1.25 billion to $1.28 billion, exceeding the consensus estimate of $1.24 billion.

Global Markets Navigate Trump Policy Shift

International equity markets displayed mixed reactions to the U.S. policy resolution. Europe’s Euro Stoxx 50 index moved higher, advancing +0.41%. Japan’s Nikkei Stock 225 closed lower by -1.12%, suggesting divergent regional sentiment. China’s Shanghai Composite remained closed for the week-long Lunar New Year holiday period.

The Supreme Court’s Trump tariff rejection provided near-term policy visibility but left broader economic questions unresolved. Investors continued monitoring both corporate earnings resilience and the Federal Reserve’s inflation-fighting credibility as March policy meetings approached.