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By Stephen Culp
NEW YORK (Reuters) -Wall Street edged higher and the dollar gained ground on Friday after U.S. President Donald Trump hinted he would be flexible regarding a new round of tariffs expected to be imposed early next month.
Even so, lingering economic uncertainties and churning geopolitical tension kept investors cautious.
All three major U.S. stock indexes reversed their losses after Trump's announcement, but their gains were held in check by weakness in economically sensitive sectors, such as chips, materials and small caps.
All three indexes registered weekly gains.
Gold was off sharply from its all-time high but remained above $3,000 per ounce, a level it breached last week for the first time.
"Clearly these are challenging times for investors," said Terry Sandven, Chief Equity Strategist at U.S. Bank Wealth Management in Minneapolis. "With volatility and uncertainty on the rise, angst is swaying sentiment, while tariffs and their associated implications are rattling consumer and investor confidence."
Chicago Federal Reserve President Austan Goolsbee and New York Fed President John Williams said it would be premature to gauge the economic effects of U.S. President Trump's tariff actions, and the central bank has time to determine the direction of its monetary policy.
A spate of central bank policy meetings held investors' focus for much of the week, with the Fed, the Bank of Japan and the Bank of England all holding rates steady.
The common theme among monetary policymakers was caution, with most adopting a "wait and see" stance toward Trump's tariffs and trade policy, which has fostered what Fed Chair Jerome Powell called "unusually elevated" uncertainty.
Investors await clarification on details of Trump's reciprocal tariffs expected to take effect on April 2.
Israeli airstrikes on Gaza and a huge blast from a Ukrainian drone attack on a Russian military airfield also dampened risk appetite and raised the appeal of safe-haven assets.
"The number of factors that have the potential to impact investor sentiment has risen and this is fueling uncertainty," Sandven added. "Global tensions are heightened, valuation is elevated, and company guidance is measured."
"That’s the teeter-totter we’re seeing in the broader market."
Adding to the turmoil, Britain's Heathrow Airport was shut due to a huge fire at a nearby electrical substation. Markets watched for financial fallout from the detention of Turkish President Tayyip Erdogan's main political rival. Eyes were also on Germany's massive fiscal stimulus package, on track to pass the Bundesrat upper house of parliament on Friday.