U.S. equities moved higher after the Supreme Court struck down most of President Donald Trump’s sweeping tariff policy under the International Emergency Economic Powers Act, delivering a significant shift in the trade-policy landscape. The ruling, which stated that the law “does not authorize the President to impose tariffs,” helped lift investor sentiment by reducing uncertainty around corporate cost pressures and inflation persistence.

The S&P 500 advanced 0.6%, the Nasdaq Composite climbed 0.8%, and the Dow Jones Industrial Average added 142 points, recovering from earlier losses tied to disappointing economic data. Markets interpreted the ruling as near-term relief for import-heavy companies that had faced elevated input costs under the tariff regime.

Trade Policy Reset and Corporate Relief

The Supreme Court decision removes a layer of uncertainty that has weighed on multinational retailers and manufacturers. In response, President Trump indicated he would pivot to imposing a new 10% global tariff through alternative legal channels, signaling that trade tensions are not entirely resolved.

Nevertheless, investors welcomed the immediate rollback of steeper duties. Shares of Amazon rose 2%, reflecting optimism that reduced tariff burdens could stabilize pricing dynamics. Analysts have noted that up to 70% of Amazon’s goods are sourced from China, making it particularly sensitive to import taxes. Retailers such as Home Depot and Five Below also traded higher, benefiting from similar cost-exposure relief.

From a strategic perspective, tariff elimination reduces the risk of margin compression and may help temper inflationary spillovers into consumer prices. However, uncertainty remains regarding whether previously paid tariffs will be refunded, a factor that could function as an unexpected fiscal stimulus if resolved favorably for businesses.

Economic Data Paints a Mixed Picture

While equities reacted positively to the legal development, macroeconomic data released earlier in the session underscored ongoing fragility. Fourth-quarter GDP expanded at a 1.4% annualized rate, well below the 2.5% expected and sharply slower than the prior quarter’s 4.4% pace.

According to the Commerce Department, a prolonged government shutdown shaved roughly one percentage point from economic growth, distorting headline figures. Meanwhile, the personal consumption expenditures (PCE) price index — the Federal Reserve’s preferred inflation gauge — showed core inflation holding steady at 3%, still above the Fed’s 2% target.

This combination of moderating growth and sticky inflation complicates monetary policy expectations. Markets continue to assess whether easing tariff pressures could reduce inflation momentum enough to support rate-cut discussions later this year.

Market Momentum and Investor Psychology

With Friday’s advance, the S&P 500 is on track for a weekly gain of approximately 1%, while the Nasdaq is poised to snap a five-week losing streak. The Dow remains marginally positive for the week.

The market reaction illustrates a familiar pattern: when structural policy risks diminish, investors rotate back into growth and consumer-exposed sectors. However, underlying economic softness and unresolved trade policy adjustments suggest volatility may persist.

Looking ahead, attention will turn to how the administration implements alternative tariff measures, whether refund mechanisms emerge, and how inflation data evolve in coming months. If reduced trade friction materially eases cost pressures without reigniting demand-driven inflation, equities could find further support. Conversely, renewed tariff escalation or sustained inflation could quickly temper the rally. For now, the Supreme Court ruling has injected fresh optimism into markets navigating a delicate balance between slowing growth and policy recalibration.