On Tuesday, Wall Street’s primary indexes experienced an upswing, with the S&P 500 and the Dow reaching their highest points in over a month, as investors evaluated Donald Trump’s initial moves as U.S. president and expressed relief that his second term did not commence with sweeping tariff hikes.
Trump refrained from detailing any specific strategies regarding universal tariffs and extra charges on key trade partners, as previously indicated. However, he mentioned that he was contemplating duties on Canadian and Mexican products, potentially starting on February 1.
Despite ongoing investor hesitance surrounding tariffs and the risk of a global trade conflict exacerbating inflation, brokerage Goldman Sachs has decreased its prediction for the likelihood of universal tariffs this year to 25%, down from 40% as projected in December.
“There was definitely a sense of relief and a slight surprise that tariffs weren’t included in the initial executive actions taken yesterday,” stated Carol Schleif, chief market strategist at BMO Private Wealth. “Markets are jumping to the conclusion, likely correctly, that the administration will adopt a more nuanced stance.”
Investors are optimistic that the new administration will utilize the threat of tariffs as a bargaining tool and will approach tariffs “with a scalpel rather than a sledgehammer,” according to Schleif.
Last week marked the largest weekly percentage increases for the S&P 500 and Dow since early November, driven by robust bank earnings and indications of easing underlying inflation.
Schleif also highlighted a healthy expansion of the market rally on Tuesday, with the smaller, more domestically oriented Russell 2000 index (.RUT) outperforming larger-cap indexes, achieving a 1.7% rise and reaching a high not seen in over a month.
At 2:11 p.m. EST (1911 GMT), the Dow Jones Industrial Average (.DJI) increased by 466.30 points, or 1.07%, to 43,954.13, the S&P 500 (.SPX) rose by 52.48 points, or 0.88%, to 6,049.14, and the Nasdaq Composite (.IXIC) climbed 150.74 points, or 0.77%, to 19,780.94.
Ten of the eleven industry indexes within the S&P 500 saw gains, with utilities (.SPLRCU) emerging as the top performer, increasing by 1.97%, followed closely by industrials (.SPLRCI), which experienced a 1.94% rise. The standout in industrials was 3M (MMM.N), which surged 5.5% after reporting positive fourth-quarter earnings.
Although the technology sector (.SPLRCT) posted a modest gain, major player Apple (AAPL.O) fell by 3.8% after brokerage Jefferies downgraded its rating to “underperform.”
The only sector that experienced a decline was energy (.SPNY), down by 0.7%.
Automaker shares, which are particularly vulnerable to tariff changes due to their extensive supply chains, rose. Ford saw a 2% increase, while General Motors (GM.N) experienced a 5.6% gain following a rating upgrade from Deutsche Bank.
During Trump’s earlier administration’s first year, the S&P 500 (.SPX) gained 19.4%. Over his entire four-year term, the benchmark index rose nearly 68%, although it faced periods of volatility, partly due to a trade conflict with China.
Nevertheless, inflation remains above the Federal Reserve’s 2% target, raising concerns that the new administration’s policies might hinder the central bank’s pace of easing monetary policy.
Economists anticipate that the Federal Reserve will maintain borrowing costs at their current levels during its meeting next week, and traders expect the first interest rate cut to arrive in June, based on CME Group’s FedWatch tool.
In other stock movements, Walgreens (WBA.O) plummeted 13.8% after the Justice Department accused it of distributing illegal prescriptions for addictive painkillers and other medications.
Conversely, Moderna (MRNA.O) saw a gain of over 6% after securing $590 million from the U.S. government to expedite the development of its bird flu vaccine.
On the New York Stock Exchange, advancing stocks outnumbered decliners by a ratio of 4.32 to 1, with 216 new highs and 33 new lows.
On the Nasdaq, 3,109 stocks advanced while 1,269 declined, resulting in a 2.45-to-1 ratio favoring advancing issues. The S&P 500 achieved 39 new 52-week highs with no new lows, while the Nasdaq Composite noted 109 new highs and 68 new lows.
