US stock markets experienced a significant rise on Wednesday, following the announcement of a trade deal between the United States and Japan. This development has sparked optimism for additional tariff agreements as investors await earnings reports from Tesla and Alphabet, two prominent companies in the tech sector.
The Dow Jones Industrial Average surged over 1.1%, translating to an increase of approximately 450 points, narrowly missing a record closing point for 2025. The S&P 500 saw a nearly 0.8% uptick, while the Nasdaq Composite, which is heavily weighted toward technology stocks, rose by around 0.6%. Both of these indices had previously reached all-time highs.
Under the newly established trade agreement, the US will impose a 15% tariff on imports from Japan, a reduction from the anticipated 25% duties that were set to take effect next week. In exchange, Japan is expected to facilitate $550 billion in US investments. President Trump described the deal as beneficial for all parties involved.
This breakthrough in negotiations has fueled optimism that the US can finalize additional trade deals ahead of the August 1 deadline for major tariffs. While discussions with the European Union and India have faced delays, there are indications that a deal with the EU is progressing, and Treasury Secretary Scott Bessent has highlighted developments in talks with China.
Economic analysts suggest that if average tariffs stabilize around 15%, the impact on the global economy would be manageable, potentially mitigating negative repercussions.
In related earnings news, Tesla reported a slight miss in both earnings and revenue for the second quarter but reaffirmed plans to produce a more affordable model by 2025. Conversely, Alphabet surpassed expectations in its earnings, thanks to robust performance in its advertising and cloud services. However, the company indicated an increase in its capital expenditure forecast to $85 billion, up from a previous estimate of $75 billion.
Investors remain hopeful as these developments unfold, indicating that the stock market may continue to respond positively to ongoing trade negotiations and robust corporate earnings.