Tariff news turbocharges auto stocks
- Japanese auto stocks jumped after reports of trade deal
- Biggest one-day gain for TM in 17 years
- Similar moves sometimes marked short-term highs
Reports on Wednesday that the US and Japan had hammered out a trade deal that included reduced tariffs on Japanese auto imports were followed by hard-to-miss market moves. US-listed shares of Toyota (TM), Honda (HMC), and Mazda (MZDAF) all posted double-digit percentage gains, with TM rallying to a 10-week intraday high of $194 on its heaviest volume of the past three months:
Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)
While Morgan Stanley & Co. analysts noted that, if the deal sticks, Wednesday’s news would be a positive for Japanese automakers,1 it’s reasonable to ask how much of that positivity was priced in by Wednesday’s gains, especially in the near term.
For example, TM’s 13.6% rally was its biggest one-day gain since October 2008, and one of only five 10%-or-larger moves since 2000. Even 5%-or-larger up days have been fairly rare for TM—47 instances since 2000. The stock’s performance after these up days tended to be on the weak side:
1. In more than half of the cases, TM was lower five, 10, 15, and 20 trading days later.
2. This relative weakness was most apparent after five days, when TM was lower 29 of 47 times (62%), with a median return of -1.2%.2
That tendency for softness after the big up days may take on greater significance for some traders in light of the stock’s slightly longer-term price history:
Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)
This weekly chart shows yesterday’s rally pushed TM toward a potential resistance level—the top of a broad trading range that has captured most of its price swings since last August.
Finally, while Wednesday’s news was a positive development in the larger tariff context, it’s important to remember that the 15% proposed levy on Japanese auto imports—while lower than the 25% level announced on April 2—will still be much higher than it was previously.
Market Mover Update: While acknowledging risks, including a potential rise in longer-term interest rates and seasonal stock-market weakness, Morgan Stanley & Co. strategist argue that “earnings momentum, positive operating leverage and cash tax savings are underappreciated tailwinds” for US stocks. While anticipating the potential for consolidation in the third quarter, they think the current environment is one in which “dips are meant to be bought.”3
Today’s numbers include (all times ET): weekly jobless claims (8:30 a.m.), new home sales (10 a.m.), EIA Natural Gas Report (10:30 a.m.).
Today’s earnings include: AAmerican Airlines (AAL), Boyd Gaming (BYD), Dover (DOV), Honeywell (HON), Intel (INTC), Keurig Dr. Pepper (KDP), Union Pacific (UNP), Verisign (VRSN).
Click here to log on to your account or learn more about E*TRADE's trading platforms, or follow the Company on Twitter, @ETRADE, for useful trading and investing insights.
1 MorganStanley.com. Media Reports Agreement between US and Japan to Lower Automobile Tariffs. 7/23/25.
2 All figures represent Toyota (TM) daily prices, 2010-2025. Supporting document available upon request.
3 MorganStanley.com. Weekly Warm-up: Stay Bullish While Acknowledging the Risks. 7/21/25.