Dow Jones climbs back to its peak as trade deal hopes brighten market sentiment

The Dow Jones Industrial Average surged on Wednesday, reaching its highest level in five months and inching closer to its all-time peak above the 45,000 mark. This sharp rise came amid growing optimism that the U.S. is making meaningful progress on trade agreements with both the European Union and Japan—sentiment that breathed new life into equity markets after months of tariff-driven turbulence.

From beneath the weight of persistent tariff threats, a shift in tone from the White House is beginning to emerge. According to reports from the Financial Times, the Trump administration and the EU are slowly moving toward a framework that could lift most of the proposed U.S. tariffs on European goods. While details remain scarce, the mere suggestion of progress has been enough to buoy investor confidence midweek.

Still, contingency plans remain in motion. European diplomats have indicated that EU member states are preparing to vote Thursday on a retaliatory tariff package targeting $109 billion worth of American goods. These tariffs—set to activate by August 7—would take effect if no agreement limiting U.S. tariffs to below 30% is reached. EU Trade Commission spokesman Olaf Gill emphasized the bloc’s preference for a negotiated outcome but acknowledged that “anti-coercion tools” are ready if talks collapse.

Meanwhile, trade developments with Japan added a fresh twist. A preliminary deal unveiled this week includes mutual 15% tariffs on all Japanese imports to the U.S. While the news initially sparked short-term optimism, analysts warn of long-term structural disadvantages for American firms—particularly those operating in the steel and copper industries, which are already burdened by existing 50% tariffs and face new fixed levies on imported metals.

This blend of cautious optimism and lingering risk did little to slow the equity rally. Investors appear increasingly selective in their response to geopolitical headlines, focusing instead on signs of de-escalation and potential agreements. As a result, the Dow Jones powered past short-term resistance, aiming squarely at the psychological 45,000 zone.

Technically, the index remains above its 50-day EMA near 43,365—a dynamic support level that may anchor any short-term pullbacks. On the upside, the November 2024 high at 45,071 marks the final hurdle before a breakout into uncharted territory. A clear breach of this level could set the stage for a sustained bullish move, while a failure to hold above 45K may trigger consolidation.

In short, markets are betting that deals, not threats, will define the coming phase. And for now, the Dow Jones stands as a barometer for this evolving geopolitical and economic narrative—one where optimism, however fragile, is taking the lead.