Wall Street rallies on earnings and Fed hope, even as Trump stokes tariff tensions with EU

US President Donald Trump has toughened his stance in trade negotiations with the European Union

Markets are threading a fine line—optimism from solid earnings and economic readings supports the rally, but downside risks persist from geopolitical trade tensions, earnings season and cautious Fed expectations. On July 18, the S&P 500 closed higher for the third straight session, supported by stronger-than‑expected economic data and solid corporate earnings. Meanwhile, the Nasdaq Composite also surged to new record highs, buoyed by tech and utility stocks.

Dow Jones Industrial Average ended slightly lower to flat, as gains in some sectors were offset by weakness in others.

Utilities led gains among S&P sectors, up ~1.8 percent — a sign of the “bond‑proxy” trade. Crypto-linked stocks like Coinbase and Robinhood climbed ~4 percent after the US House passed stablecoin regulation bills. Energy & industrials also received support from Chevron’s completion of its $55 billion Hess acquisition, driving Hess shares higher.

Remarks from Fed Governor Christopher Waller kept hopes alive for a September rate cut, though July cuts seem unlikely.

US President Donald Trump has toughened his stance in trade negotiations with the European Union, now demanding that any agreement include minimum tariffs of 15 to 20 percent, according to sources quoted by Financial Times.

This marks a sharp escalation from the earlier proposal of maintaining a 10 percent baseline tariff on most goods — a framework that had been under discussion in recent weeks. The move appears to be a strategic effort to gauge the EU’s tolerance for economic pressure.

Despite recent EU efforts to ease tensions by offering a reduction in car tariffs, Trump is reportedly unmoved and willing to proceed with maintaining 25 percent duties on automobiles, as originally planned.

Following meetings in Washington, EU trade commissioner Maroš Šefčovič gave EU ambassadors a downbeat assessment of the negotiations, two sources briefed on the meeting said.

European Markets

European markets closed higher shrugging off earlier concerns about U.S. tariff threats. Positive eurozone economic data and optimism about trade negotiations boosted investor sentiment.

The FTSE 100 in London reached a record high, despite broader European losses earlier in the week, driven by stronger-than-expected Chinese GDP data and reduced fears of immediate tariff impacts.

Stoxx 600 gained about 0.5 percent, marking its second consecutive weekly win, as investors welcomed strong Q2 earnings (notably from Vestas and Saab).

DAX (Germany) ended slightly lower, down about 0.3–0.4 percent, weighing on the broader European equity landscape.

CAC 40 (France) was up roughly 0.01–0.4 percent, soaring early on earnings strength before flattening by close.

IBEX (Spain) edged down around 0.04 percent for the day while FTSE MIB (Italy) gained approximately 0.46 percent