US stock index futures were firmer in early trade on Wednesday as investors responded to positive trade news. After the close last night, President Trump announced via his social media site, Truth Social, that the US had completed a “massive deal” with Japan.
The agreement includes 15% tariffs on Japanese exports to the US, which was significantly lower than the 27.5% tariff originally threatened by the Trump administration. President Trump added that Japan had also agreed to US investments totalling $550 billion.
This marked a significant milestone in ongoing global trade negotiations and boosted hopes that agreements could now be reached with other significant trading partners, most notably South Korea and the European Union.
Yesterday, the S&P 500 notched another record close, eking out a gain of 0.1%, and extending further its bullish run. The Dow outperformed, ending the session 0.4% higher. But the NASDAQ Composite, which has led for much of the recent rally, took a breather, closing down 0.4%. There was some evidence of sector rotation, with healthcare up and IT down.
Source: TradingView
The healthcare sector (along with energy) has underperformed this year as giant tech has led the stock market advance. Yesterday saw evidence of a slight rebalancing, although investors remain wary of the healthcare sector due to uncertainty over the regulatory environment and on global trade in general.
While yesterday’s shift suggests that investors are seeking out sectors which are less overvalued than tech, it is too early to say if this is the start of a bigger trend. While a broadening of bullish interest looks positive, it could also signal that investors are starting to look more deeply at valuations.
Some have concluded that the big tech plays are trading at heights where the atmosphere is somewhat thin. This could be tested tonight when two major ‘Magnificent Seven’ constituents, Alphabet and Tesla, report after the close.
