U.S. stocks staged a powerful intraday reversal on Friday after the Supreme Court delivered one of the most consequential rulings of the Trump presidency — striking down the sweeping tariffs the administration had imposed under emergency powers law. The ruling, handed down in a 6-3 decision, sent markets sharply higher, erasing steep morning losses that had been triggered by weaker-than-expected economic growth data.
The Dow Jones Industrial Average gained 130.43 points, or 0.26%, to close at 49,525.59 after falling more than 200 points earlier in the session. The S&P 500 rose 0.66% to 6,907.34, while the tech-heavy Nasdaq Composite surged 1.11% to 22,935.19, led by gains in major technology and e-commerce names.
A Historic Court Decision
The Supreme Court struck down President Donald Trump’s far-reaching global tariffs on Friday, handing him a significant loss on an issue crucial to his economic agenda. The majority found that the Constitution “very clearly” gives Congress the power to impose taxes, which include tariffs. “The Framers did not vest any part of the taxing power in the Executive Branch,” Chief Justice John Roberts wrote.
In a 6-3 decision in Learning Resources, Inc. v. Trump, the Court sided with lower courts that found Trump had improperly used the International Emergency Economic Powers Act (IEEPA) to justify tariffs tied to national emergencies, including fentanyl trafficking and international trade deficits.
Chief Justice Roberts was joined by Justices Neil Gorsuch and Amy Coney Barrett — two of Trump’s own Supreme Court picks — alongside the three liberal justices. Justice Brett Kavanaugh, Trump’s other appointee, wrote the main dissent, joined by Justices Clarence Thomas and Samuel Alito.
Sector-by-Sector Reaction
Markets turned broadly higher after the midday ruling, with advancers outpacing decliners as tariff-sensitive sectors led the rebound. Consumer discretionary led the advance, rising 1.8%, followed by technology and communication services. Energy stocks also gained as oil prices climbed on Iran tensions. Defensive sectors like utilities and consumer staples lagged.
The Nasdaq’s 1.11% gain ended a five-week losing streak, as megacap technology stocks rallied. Amazon surged more than 2%, Alphabet gained nearly 4%, and Meta advanced 2% as investors priced in reduced cost pressures from the tariff reversal. Semiconductor stocks were mixed, with AMD rising 1.1% while Intel fell 1.9%.
Retail-heavy ETFs like the SPDR S&P Retail ETF (XRT) briefly surged 1.8% in the immediate aftermath of the ruling, with companies most affected by import duties leading the charge. Apparel and footwear names were among the biggest initial movers. Nike popped immediately on the headline — up about 4.4% at the highs — but gave back most of the gains.
Furniture companies also surged. Wayfair rose more than 5%, and RH gained 4%.
Small-cap stocks, which are more sensitive to domestic economic conditions, outperformed with the Russell 2000 rising 1.2%.
Bond Market and Currency Reaction
The yields on U.S. Treasury bonds jumped across maturities. Yields on the 10-year bond, which mortgage rates often track closely, rose to 4.09%. The 30-year Treasury yield rose to 4.74%. The U.S. dollar initially jumped against other currencies, such as the British pound, euro, and Japanese yen, but turned lower as investors continued to digest the ruling.
Gold and silver dropped sharply after the announcement but quickly rebounded, remaining higher on the day overall.
Wall Street Analysts Weigh In
Market strategists offered cautiously optimistic — but measured — takes on the ruling’s long-term implications.
Glen Smith, Chief Investment Officer at GDS Wealth Management, said the ruling “may very well be the catalyst that the stock market needs to move out of the narrow trading range that it has been in so far in 2026.” He added that tariff uncertainty “has now been lifted” and was “not surprised” by the market’s initial muted reaction, given that investors had expected a ruling at some point.
Wedbush analyst Dan Ives said the ruling should be favorable for tech stocks, noting that with approximately $133.5 billion in tariff revenue potentially up for grabs in refunds, the decision would act as a net positive for the sector.
Keith Lerner, Chief Investment Officer at Truist Wealth, acknowledged the new uncertainty created for businesses, particularly around how previously collected tariffs will be handled. However, he expects the decision is not a game changer and that investors will shift attention to Nvidia earnings next week and upcoming economic data releases.
Economist David Pearce warned that even if the administration replicates the overall level of tariffs through other means, the by-sector and by-country implications could look very different, “which will create another bout of trade policy uncertainty for business, investors, and households.”
The $175 Billion Refund Question
The ruling has set off what Evercore analysts described as a potentially “chaotic” refund process. “The process of sorting out refunds will likely take months and be a legal and bureaucratic morass in its own right,” Evercore said in a note.
The Supreme Court’s move sets a new boundary for what policies presidents can impose without congressional approval, and its ruling might give way to a potentially chaotic refund process that could see billions of dollars returned to businesses that paid tariffs the Court now deems illegal.
GDP Data Adds to Morning Pressure
Before the ruling lifted sentiment, Wall Street had been rattled by sobering economic data. The Commerce Department reported that fourth-quarter GDP grew at an annualized rate of just 1.4%, well below the 2.5% forecast by economists polled by Dow Jones. The department attributed approximately one percentage point of the shortfall to the record-breaking 43-day government shutdown that occurred during the quarter. The third-quarter GDP advance had been a robust 4.4%, making the sharp deceleration particularly concerning for investors already worried about the economic outlook.
PCE data also showed prices rose 0.4% in December over the previous month, with core PCE — the Fed’s preferred gauge — also rising 0.4% on the month, a step up from the prior month’s 0.2% growth.
Despite the data, traders’ expectations for Fed rate cuts did not change dramatically. Traders are still mostly betting the Fed will lower rates at least twice by the end of 2026, according to data from CME Group, though some shifted bets for the timing of the first cut to slightly later in the summer.
What Comes Next
Top administration officials have said they expect to keep the tariff framework in place under other authorities, though alternative laws carry greater limitations on the speed and severity of the president’s actions.
The ruling applies to tariffs imposed under IEEPA beginning in February 2025, including levies on China, Canada, and Mexico tied to fentanyl trafficking, and the broader “Liberation Day” reciprocal tariffs announced April 2, 2025, covering more than 100 countries. The decision does not affect tariffs imposed under other laws, such as Section 232 of the Trade Expansion Act of 1962 covering steel, aluminum, lumber, and automobiles.
With Nvidia earnings approaching next week, the Fed’s next policy meeting on the horizon, and an administration signaling it will pursue alternative tariff authorities, markets remain in a state of watchful optimism — buoyed by today’s ruling, but far from convinced that trade turbulence is over.
