Stocks are at record highs as Wall Street faces major tariff test

It’s the start of a highly anticipated week on Wall Street as traders await announcements about the Trump administration’s plan for tariffs.

US stocks opened lower on Monday. By mid-morning, the Dow was down 220 points, or 0.49%; the S&P 500 fell 0.4% and the tech-heavy Nasdaq Composite was 0.6% lower.

Stocks dipped as Wall Street digests the Trump administration’s plan to announce new trade deals — or notify countries of new tariff rates. President Donald Trump on Sunday said the White House would send “tariff letters” to countries on Monday at noon.

Trump had told reporters on Friday the letters would detail new tariff rates, which would go into effect on August 1.

US stocks have rallied in recent weeks as investors have bet the worst of the tariff confusion is in the past. As Trump’s self-imposed July 9 deadline for trade deals — the conclusion of a 90-day pause that began April 9 — approaches, Wall Street is cautiously optimistic.

Mohit Kumar, chief strategist and economist for Europe at Jefferies, said in a note he does not think the July 9 deadline will have a “material impact” on markets.

“It will create near-term uncertainty and prompt some profit taking given current valuations and positioning. But the letters are meant as an incentive for other countries to agree to come to a deal quickly and we see more trade deals being signed in the coming weeks,” Kumar said.

A dip in stocks should be seen as a buying opportunity, Kumar said.

Test at record highs

The S&P 500 has notched four record highs since June 27. Stocks have pushed higher as economic data has been stronger than expected, helping assuage concerns about the impact of the early stages of Trump’s tariff campaign.

“The renewed optimism appears to have been buoyed by a series of data points that have seemingly quelled some of the worst investor fears,” Brian Belski, chief investment strategist at BMO Capital Markets, said in a July 3 note. “For instance, cooler-than-anticipated CPI numbers continue to suggest a muted tariff impact, for now at least.”

Belski said he thinks trade deals will be announced in the coming weeks, providing “more clarity for both investors and businesses and likely keep[ing] the uptrend in stocks intact.”

Treasury Secretary Scott Bessent told CNBC on Monday he expects “several announcements in the next 48 hours.” Bessent had told CNN’s Dana Bash on Sunday that tariff rates would “boomerang” higher on August 1 if trade deals were not completed.

Risk to the downside

While many investors expect stocks to grind higher, others warn that there is complacency in markets.

Scott Wren, global market strategist at Wells Fargo Investment Institute, said in a note he thinks the Wall Street consensus is “overly optimistic on the tariff outlook.”

Wren said there is concern that as tariff rates settle, the economy will begin to slow and consumer spending might pull back.

“Our feeling is that stocks are ahead of themselves, and as a result, we are looking to trim positions in markets and sectors we find to be overvalued,” he said, mentioning US small cap stocks and consumer discretionary sectors in the S&P 500 that have performed well in recent months.

Trump on Sunday also announced an additional 10% tariff on any countries aligning with BRICS — an economic bloc including founding members Brazil, Russia, India, China and South Africa.

Gold prices fell 0.8% on Monday as investors sold safe havens. The US dollar index, which measures the dollar’s strength against six major foreign currencies, gained 0.2%.

The S&P 500 and Nasdaq are at record highs, and the Dow is just a few hundred points away from hitting an all-time high.

“If we’ve learned anything over the last three months, it’s that you know the situation is very fluid and can change with very little notice,” Jim Baird, chief investment officer at Plante Moran Financial Advisors, said.

This is a developing story and will be updated.