Stocks Rally Amid Tariff Exemption News for Automakers

NEW YORK, March 5, 2025 — U.S. stocks staged a significant rebound on Wednesday, recovering after consecutive losses, following the White House’s announcement of a one-month tariff exemption for automakers compliant with the United States-Mexico-Canada Agreement. The Dow Jones Industrial Average surged 515 points, or 1.2%, ending a rough week for investors who had seen their confidence shaken by President Donald Trump’s tariff policies.

The S&P 500 was up 1.2%, and the Nasdaq Composite increased by 1.4%, as investor sentiment improved in light of the news. White House Press Secretary Karoline Leavitt stated that the exemption was aimed at ensuring that automakers such as General Motors, Ford, and Stellantis do not face an economic disadvantage ahead of Trump’s planned reciprocal tariffs set to go into effect on April 2.

“This exemption serves as a clear indication that the administration is receptive to market pressures,” said Ross Mayfield, investment strategy analyst at Baird. “This should offer some reassurance to investors looking for stability amid the volatility caused by tariff discussions.”

Despite the positive rally, concerns continued to linger as Trump emphasized potential tariff-related discussions during a call with Canadian Prime Minister Justin Trudeau. The market was further unsettled by a report from the Federal Reserve noting rising concerns among businesses regarding the effects of tariffs.

The ADP’s report indicated a disappointing 77,000 private-sector jobs added in February, further fuelling concerns about an economic slowdown. David Kostin, chief U.S. equity strategist at Goldman Sachs, noted that investors may need to consider companies with stable earnings that are likely to see minimal fluctuations in this turbulent environment.

“The market seems to be rotating towards more defensive-oriented stocks, particularly in healthcare and consumer staples,” Kostin stated in a CNBC interview. “Investors should look for companies that remain insulated from the market’s big developments.”

In the context of the broader economic landscape, the services sector reported solid growth in February, with an index reading from the Institute for Supply Management indicating continued expansion. This report helped momentarily boost market confidence, though it contrasted with weak employment data earlier in the week.

As the market adjusts to these complex dynamics, many analysts are urging cautious optimism. Ed Yardeni, president of Yardeni Research, predicted a 35% chance of a recession in the near future, acknowledging rising tariffs as potential inflation catalysts.

“While the current climate has raised uncertainty, I maintain that the fundamental equities market will continue to recover,” he said.

Meanwhile, individual investors seem to be losing confidence, as JPMorgan reported a significant outflow of $1.2 billion from the U.S. equity market in the early hours of Tuesday, highlighting a growing wariness toward market volatility.

Overall, while the one-month tariff exemption provided a temporary boost, the underlying economic indicators and growing uncertainty about future tariff actions continue to challenge investor stability. The Dow, S&P 500, and Nasdaq indices remain about 1% down for the week, with fluctuations expected as upcoming data and policy decisions unfold.