[New York Stock Market] Trump’s "Tariff Flexibility" Remarks Spur Late Rally on 'Four Witching Hour'

The three major U.S. stock indices in New York all closed higher on the 21st (local time). Despite starting the day lower amid the highly volatile 'Quadruple Witching Day,' the indices rallied late in the session after President Donald Trump left room for negotiation by indicating a flexible stance on tariffs.

The blue-chip-focused Dow Jones Industrial Average (Dow) closed up 32.03 points (0.08%) at 41,985.35. The large-cap S&P 500 index rose 4.67 points (0.08%) to 5,667.56, and the tech-heavy Nasdaq index gained 92.43 points (0.52%) to finish at 17,784.05.

The market started the day weak, seemingly affected by heightened geopolitical tensions after Israel warned it might permanently annex part of the Gaza Strip. Israel’s Defense Minister warned that if the Palestinian militant group Hamas continues to refuse to release hostages, Israel would permanently occupy part of Gaza territory. Additionally, he ordered further ground troop advances in Gaza.

The volatility was also influenced by 'Quadruple Witching Day,' when individual stock futures and options, as well as index futures and options, expire simultaneously. According to Goldman Sachs, options worth approximately $4.7 trillion expired on this day, including $2.8 trillion in S&P 500 options and $645 billion in single-stock options.

However, bargain buying emerged, pushing the market into positive territory by the close. Notably, President Trump’s mention of a possible flexible approach ahead of the reciprocal tariffs taking effect on April 2 influenced the late rally. Speaking to reporters, Trump said, "Many people are asking me if they can get tariff exemptions," adding, "If I give it to one, I have to give it to all," expressing a negative stance. However, he also said, "There will be flexibility, but basically it’s reciprocity," and emphasized, "Flexibility is an important word," suggesting room for negotiation.

Persistent Uncertainty and Geopolitical Tensions

Market attention is focused on April 2. Emmanuel Cau, Head of European Equity Strategy at Barclays, said, "Tariff concerns are likely to limit stock gains until April 2," adding, "If the worst-case scenario of a full 25% tariff is realized, downside risks cannot be ignored."

Megan Hormann, Chief Investment Officer at Verdence Capital, stated, "Even after April 2, it remains unclear what the secondary effects of tariffs on the economy will be," and added, "From an inflation perspective, it’s uncertain whether this will be a one-time shock to prices or if such events will continue to recur."

Austin Goolsby, President of the Federal Reserve Bank of Chicago, said that if retaliatory tariffs from other countries follow, the Fed could respond, but noted, "Imports account for only 11% of GDP, so one-time tariffs that do not trigger retaliation and do not exceed the initially applied scope are more likely to have a temporary impact on inflation."

John Williams, President of the Federal Reserve Bank of New York, said the current moderately restrictive monetary policy stance is appropriate given the strong labor market and inflation still slightly above 2%, cautioning that "there is significant uncertainty and many scenarios could unfold depending on trade policy, geopolitical, and other developments."

Fed Governor Christopher Waller emphasized that the Fed’s quantitative tightening (QT) policy is sufficient at the current level and there is no need to slow its pace.

According to the CME FedWatch Tool, the probability that the federal funds rate will remain unchanged through the end of June has dropped to 22.1%. The probability of a 25 basis point cut has risen from 62.5% to 67.3%.

The market is closely watching the February Personal Consumption Expenditures (PCE) data to be released on the 28th. The core PCE price index, which excludes volatile food and energy prices, is the Fed’s preferred inflation gauge. Ahead of this, the Consumer Confidence Index, to be released on the 25th, is also being closely monitored.

By sector, real estate and materials fell more than 1%, while communication services rose more than 1%.

U.S. aircraft manufacturer Boeing shares rose more than 3% after news that it was selected as the U.S. government’s next-generation advanced fighter jet contractor. Conversely, Lockheed Martin shares, a partner in the government’s advanced fighter jet program, fell nearly 6% on the news.

U.S. logistics giant FedEx lowered its earnings outlook for the third consecutive quarter citing a weak U.S. economy and uncertainty, causing its shares to drop more than 6%.

Sportswear company Nike’s CFO said that considering the impact of U.S. tariffs, inventory, and consumer sentiment, fourth-quarter fiscal year (March-May) sales are expected to decline by the mid-teens percentage, leading to a drop of over 5% in its stock price.

Among the 'Magnificent 7,' all except Nvidia rose. Tesla rebounded sharply by 5.27%.