Duties, AI, the risk of war and the Fed's no worries: the S&P 500 posted its best weekly gain since January

U.S. stocks rose on Friday, February 20, after the U.S. Supreme Court found the duties imposed by Donald Trump last April to be illegal. This potentially provides a respite for companies facing rising costs from those duties and eases concerns about persistently high inflation that continues to weigh on the U.S. economy, CNBC wrote. Friday's result helped the S&P 500 and Nasdaq post their best weekly gains since early January.

- Broad market index S&P 500 rose by 0.7% on February 20. 330 shares included in the index, Bloomberg notes. At the end of the week, the S&P 500 added about 1%, while the previous two weeks ended in the negative.

- The Nasdaq Composite index of the technology sector rose 0.9% for the day. At the end of the week, it added more than 1% and interrupted a five-week series of declines, writes CNBC.

- The blue-chip index Dow Jones Industrial Average increased by 0.47% - or almost 231 points. At the same time during the day, the index at the moment, on the contrary, declined by 200 points after the publication of data on GDP. Over the week, the Dow rose by about 0.1%.

- The yield on the 10-year Treasury note rose one basis point to 4.08%. The dollar declined by 0.2%.

On Friday, the Supreme Court ruled Donald Trump's 2025 trade duties illegal. According to the court, the US president exceeded his authority. In response, Trump said he would impose new 10 percent "global duties". "I will now go in a different direction, probably the direction I should have gone from the beginning," CNBC quoted Trump as saying at a White House press conference following the court's decision. - "I will choose the path I could have taken originally, and it's even tougher than our original option.

Analysts estimate that the U.S. budget may have to return from $170 billion to $250 billion to importers, and the legal battle will drag on for years. The Supreme Court was silent on the issue of duty refunds in its ruling, Bloomberg notes. Uncertainty over a possible budget deficit on Friday kept the dollar and Treasury bonds from rising, the agency said.

U.S. Treasury Secretary Scott Bessent said revenue from customs duties will remain "essentially flat" in 2026 despite the Supreme Court ruling.

Pressure on the market in the first half of the day was exerted by data on US economic growth. GDP in the fourth quarter increased by 1.4%. This is significantly lower than the expected 2.5%, according to a survey by Dow Jones, notes CNBC. In the third quarter, growth was 4.4%, noticeably higher than forecasts. According to the Commerce Department, the main factor was the record-long government shutdown. The federal shutdown, which lasted through the first half of the fourth quarter, reduced the economy's growth rate by about 1 percentage point.

In addition, the Personal Consumption Expenditures (PCE) price index, the Fed's favorite indicator, showed that inflation remained stable in December. Core PCE excluding volatile food and energy prices was 3%, in line with expectations but still well above the Fed's 2% target.

During the week, trading was influenced by investors' concerns about a possible war between the US and Iran, which caused the price of Brent crude oil to rise above $72 per barrel and reach a six-month high. In addition, investors have not fully recovered from the "soft-apocalypse" - a sell-off of shares due to concerns about the impact of artificial intelligence on the business of companies. Walmart 's market-important earnings report showed its profit outlook for the year worse than Wall Street's expectations, despite strong results for the fourth quarter of 2025.

- "We are not revising our outlook for the U.S. economy as we expect the duties to be maintained in other ways," Bloomberg quoted TD Securities strategists as saying.

- "It's now up to the lower courts to determine what to do with those who have already paid the fees and how the government will refund large sums," Michael Brenner, senior research analyst and asset allocation strategist at FBB Capital Partners, told CNBC. - If the refunds take place, it will actually be a form of economic stimulus."

- Once the effects of the deficit reduction provided by Trump's duties are removed, the U.S. will have to borrow more over time, raising the likelihood of an earlier-than-expected increase in coupon bond offerings with longer maturities, said BMO Capital Markets' Ian Lingen.

- "The stock market reaction to the Supreme Court's decision on duties has been fairly subdued, as the administration has reasonable workarounds in place to bring the effective rate back almost to its previous level, explained Bloomberg Intelligence senior U.S. equity strategist Michael Kasper. - Nevertheless, there is a reassessment going on beneath the surface. Prices for exports from countries that haven't negotiated with the administration are likely to fall - Trump's short-term workarounds involve a single, non-discriminatory rate. This makes clear beneficiaries of a sector with significant dependence on countries like China." Kasper also noted that small-cap stocks, which have been hit hardest by the duties due to less pricing power than their larger competitors, could receive moderate support if the resulting effective rates are below pre-intervention levels of the U.S. justice system.

This article was AI-translated and verified by a human editor