Market Optimism Grows as Trump’s Trade Policy Takes Shape
As President Donald Trump settles into office, investors are cautiously optimistic about his executive orders, particularly those related to trade policy. Despite lacking concrete plans for universal tariffs and surcharges on close trade partners, Trump hinted at imposing duties on Canadian and Mexican goods as early as February 1.
Tariff Uncertainty Weighs on Investors
While investors remain wary of Trump’s tariff policies, which could spark a global trade war and fresh inflation pressures, brokerage Goldman Sachs has lowered its forecast for a universal tariff this year to 25% from about 40% seen in December. This shift in sentiment has led to a mixed reaction in the market, with some sectors experiencing significant gains while others falter.
Stock Market Performance
As of 09:57 a.m., the Dow Jones Industrial Average rose 258.04 points, or 0.59%, to 43,745.87, while the S&P 500 gained 26.73 points, or 0.45%, to 6,023.39. The Nasdaq Composite also saw a modest increase, gaining 13.90 points, or 0.07%, to 19,644.10. The small-cap Russell 2000 index, which is more domestically focused, rose 1% to touch a one-month high.
Sector Performance
Nine of the 11 S&P 500 sectors experienced gains, with real estate leading the way with a 1.4% increase. However, Apple slid 3.7% after brokerage Jefferies cut its rating on the iPhone maker to ‘underperform’. Automakers General Motors and Ford, which are heavily reliant on international trade, edged up 1.6% and 0.8%, respectively, while Tesla dropped 3.1%.
Market Analysts Weigh In
“It’s impossible to know exactly what the Trump administration will do…in the past, tariff rhetoric turned into trade deals that turned into negotiating tactic and it was never universally applied. So, I think the market right now is taking a wait-and-see attitude towards that,” said Art Hogan, chief market strategist at B Riley Wealth.
Historical Context
During Trump’s first administration, the S&P 500 rose 19.4%, while the benchmark index rose nearly 68% through his first term. However, this growth was accompanied by bouts of volatility, largely stemming from a trade war with China.
Economic Outlook
Last week, the S&P 500 and Dow registered their biggest weekly percentage gains since early November, driven by strong bank earnings and signs that underlying inflation was cooling. Nevertheless, inflation remains above the Federal Reserve’s 2% target, fuelling concerns that Trump’s policies could delay the central bank’s pace of monetary policy easing. Economists expect the Fed to leave borrowing costs unchanged when it meets next week, with traders anticipating the first interest rate cut in July.
Notable Earnings
3M rose 4.5% after posting upbeat fourth-quarter profits, while Charles Schwab surged 7% after the brokerage firm’s profit rose 44% in the fourth quarter. Conversely, Walgreens fell 12.3% after the Justice Department accused the pharmacy operator of filling unlawful prescriptions for addictive painkillers and other drugs. Moderna also saw a significant gain, rising 9.3% after securing $590 million from the U.S. to hasten development of its bird flu vaccine.
Market Breadth
Advancing issues outnumbered decliners by a 4.14-to-1 ratio on the NYSE and by a 2.15-to-1 ratio on the Nasdaq. The S&P 500 posted 32 new 52-week highs and no new lows, while the Nasdaq Composite recorded 78 new highs and 33 new lows.
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