SPY & QQQ Defy Gravity: U.S.-Canada Trade Collapse Meets Inflation Surge—Why Markets Didn’t Blink

Wall Street’s darlings SPY and QQQ just shrugged off a double-whammy—failed trade talks and hotter inflation. Here’s the dirty secret behind their resilience.

The Setup: When diplomacy fails, algorithms win. The ETFs barely fluttered as U.S.-Canada negotiations cratered and CPI printed red-hot. Classic ‘bad news is good news’ theater—until it’s not.

The Punchline: Liquidity heroin strikes again. With the Fed’s balance sheet still bloated like a post-Thanksgiving whale, traders keep front-running the next bailout. ‘Free markets’ haven’t priced risk since 2009—why start now?

Cynical Bonus: Another day, another ‘resilient’ market propped up by central bank fairy dust. But hey—at least your passive ETF keeps climbing. Until it doesn’t.

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Following Canada’s decision to proceed with its digital services tax on U.S. technology companies, Trump announced a halt to all U.S.-Canada trade discussions. The tax charges a 3% fee on all U.S. tech revenue above C$20 million, or about $14.6 million, collected from Canadian users.

“We will let Canada know the Tariff that they will be paying to do business with the United States of America within the next seven day period,” said Trump on Truth Social.

Trump also said that the U.S. WOULD no longer consider removing sanctions on Iran following a speech from Iranian Supreme Leader Ayatollah Ali Khamenei. Khamenei downplayed the damage of the U.S. strikes on three of Iran’s nuclear sites and said that the country had delivered a “slap to America’s face.”

Meanwhile, the Core personal consumption expenditures (PCE) index, the Fed’s preferred gauge of inflation, showed a monthly rise of 0.2% and a yearly rise of 2.7%. Economists were expecting growth of 0.1% and 2.6%, respectively. Furthermore, April’s core PCE was revised upward to 2.6% from 2.5%. Core PCE excludes food and energy prices from the regular PCE index given their volatility.

Shifting gears to more optimistic news, Trump is preparing executive orders to support AI development, according to Reuters. The orders could include green-lighting the construction of AI data centers on federal land and easier grid access for new energy projects, said sources close to the matter.

What’s more, consumer sentiment could be in the early stages of a recovery. The June Index of Consumer Sentiment ROSE by 16% month-over-month to 60.7, reversing six consecutive months of declines. Economists were expecting 60.5, with a higher figure representing a more positive economic outlook. At the same time, fears over tariff-driven inflation and economic uncertainty still persist.

“Despite June’s gains, however, sentiment remains about 18% below December 2024, right after the election; consumer views are still broadly consistent with an economic slowdown and an increase in inflation to come,” said Survey of Consumers Director Joanne Hsu.

The S&P 500 finished with a 0.52% gain while the Nasdaq 100 closed higher by 0.39%.