[New York Stock Market] S&P and Nasdaq Hit Record Highs on U.S.-Japan Trade Deal... "Agreement with EU Also Near"

US and Japan Reach Trade Agreement the Previous Day
Japan to Invest $550 Billion in US and Open Rice and Auto Markets
US to Lower Reciprocal Tariffs on Japanese Goods from 25% to 15%
FT: "US and EU Close to 15% Tariff Agreement"
Big Tech Earnings Season Begins with Alphabet and Tesla

All three major U.S. stock indexes closed higher on July 23 (local time) in New York. The rally followed the previous day's announcement that the Donald Trump administration had reached a trade agreement with Japan. Optimism over further trade deals spread throughout the market, pushing the S&P 500 and Nasdaq indexes to new all-time highs. Reports that a trade agreement between the United States and the European Union (EU) was imminent also boosted investor sentiment.

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On this day at the New York Stock Exchange, the blue-chip Dow Jones Industrial Average rose 507.85 points (1.14%) to close at 45,010.29. The large-cap S&P 500 index climbed 49.29 points (0.78%) to 6,358.91, while the tech-heavy Nasdaq index gained 127.33 points (0.61%) to finish at 21,020.02, both setting new record highs.

The U.S.-Japan trade agreement was a key driver of the market's gains. The previous day, Japan had pledged to open its rice and auto markets and to launch a $550 billion investment program in the U.S., while the U.S. agreed to lower reciprocal tariffs on Japanese goods from 25% to 15%. In particular, the U.S. halved tariffs on Japanese automobiles from 25% to 12.5%, and with the existing 2.5% tariff added, a total rate of 15% will be applied.

There was also news that a U.S.-EU trade agreement was close to being finalized. The Financial Times (FT), citing multiple sources, reported that the U.S. and EU were nearing a deal to impose reciprocal tariffs of 15% on EU products. This would maintain the current level, which combines the U.S.'s existing average tariff of 4.8% on EU goods with a 10% base tariff imposed globally since April. For automobiles, a reduction in tariffs from the current 27.5% to 15% is reportedly under discussion.

With about a week left before the expiration of the mutual tariff suspension on August 1, optimism is growing over the possibility of additional trade agreements. The U.S. has already concluded negotiations with five countries: the United Kingdom, Vietnam, Indonesia, the Philippines, and Japan. The U.S. is also set to hold high-level trade talks with China in Stockholm, Sweden, on July 28-29, where the extension of tariff reduction measures will be discussed. Previously, the two countries had agreed to lower the ultra-high tariffs imposed on each other by 115 percentage points for 90 days, resulting in the U.S. applying a 30% tariff on Chinese goods and China applying a 10% tariff on U.S. goods.

Louis Navellier, founder and Chief Investment Officer (CIO) of Navellier & Associates, commented, "So far, President Trump's tariff strategy has been very encouraging," adding, "It has generated significant revenue, attracted large-scale investment into the U.S. to avoid tariffs, and has not yet caused the disruption and inflation that pessimists feared." He also noted, "The stock market is not reflecting any fear of such negative outcomes."

Ian Lyngen, Managing Director and Head of U.S. Rates Strategy at BMO Capital Markets, said, "As the August 1 deadline approaches, investors have been encouraged by the recent trade negotiation announcements," and analyzed, "Progress in the trade war is providing clarity and helping the market adapt to the new global trade environment going forward."

Investors were also awaiting the earnings results of Google parent company Alphabet and Tesla, which were to be released after the market closed. Alphabet reported second-quarter revenue of $96.43 billion and earnings per share (EPS) of $2.31, beating market expectations of $94 billion and $2.18, respectively. Tesla, on the other hand, posted revenue of $22.5 billion and EPS of $0.40, falling short of analysts' forecasts of $22.74 billion and $0.43. As the performance of big tech companies is expected to influence the future direction of the stock market, investors paid close attention to the results of both companies.

U.S. Treasury yields are on the rise. The yield on the benchmark 10-year U.S. Treasury note rose 4 basis points (1 bp = 0.01 percentage point) from the previous session to 4.38%, while the yield on the 2-year Treasury note, which is sensitive to monetary policy, climbed 5 basis points to 3.88%.

By stock, Kohl's, a U.S. department store chain that has emerged as a "meme stock" (a stock that gains popularity online), surged 37.6% the previous day but closed down 14.2% on this day. Other meme stocks, GoPro and Krispy Kreme, jumped 12.4% and 4.6%, respectively. Alphabet, which announced its earnings after the market closed, fell 0.31% in regular trading, while Tesla rose 0.14%.