Dow rallies as markets cheer US-Japan trade agreement

Stocks rallied in early-morning trading on Wednesday, with the Dow Jones Industrial Average adding more than 200 points at the open.

Investors appeared to welcome President Donald Trump’s announcement that the U.S. had reached a trade deal with Japan.

The Dow Jones Industrial Average rose nearly 240 points, and the S&P 500 inched higher by 0.4% to extend gains at its record highs. Optimism of potentially more trade agreements ahead of Trump’s Aug. 1 tariffs deadline also saw the Nasdaq Composite edge up, adding a modest 0.16% in early trading.

‘Never been anything like it,’ Trump boasts

With corporate earnings, spotlighted by Tesla (TSLA) and Alphabet (GOOGL, GOOG), set to hit the market after the bell, early cheers had futures across the major U.S. indices flashing rising green.

Upbeat sentiment on Wall Street carried through the Asia and European sessions, investors are envisioning the U.S.-Japan deal as a huge one. 

In addition to the 15% tariff on Japanese imports, Trump’s administration managed to secure a $550 billion Japanese investment in the U.S. 

“There has never been anything like it,” Trump said of the deal in a Truth Social post. “Perhaps most importantly, Japan will open their Country to Trade including Cars and Trucks, Rice and certain other Agricultural Products, and other things. Japan will pay Reciprocal Tariffs to the United States of 15%. This is a very exciting time for the United States of America, and especially for the fact that we will continue to always have a great relationship with the Country of Japan.”

The news came as markets weighed the potential impact of fresh trade tensions as the looming Aug. 1 deadline first approaches. However, with U.S. officials noting a likely extension of the Aug. 12 deadline for China, this latest move injects a sense of bullishness for investors.

Experts take amid the Japan trade deal

Stocks have shown resilience over the past few months amid tariff uncertainty. Investors also weathered a geopolitical storm in the Middle East. However, none of the headwinds that followed Trump’s so-called “Liberation Day” tariffs have entirely derailed bulls, with U.S. stocks marching to record highs.

Corporate earnings have so far provided buyers with upside fuel, even as more clarity on the tariffs’ impact will become clearer with the release of Google-parent Alphabet’s and electric vehicle giant Tesla’s quarterly earnings reports.

Mohamed El-Erian, president of Queen’s College at Cambridge University and chief economic advisor at Allianz, has nonetheless cautioned investors to beware of what’s happening in the bond market. 

“While media attention is rightly focused on the Japan-U.S. trade deal, don’t overlook what is happening to the long end of the Japanese bond market where, driven mainly by fiscal concerns, yields continue to climb,” El-Erian noted via X. “With what is a correlated, rather than coordinated, fiscal expansion in the three largest advanced economies — the US, Germany, and Japan — global bond markets have a lot of issuance to digest in the period ahead.”