Market Optimism Returns as Trump Unveils Policy Moves
Dow Jones Leads the Charge
US stocks surged on Tuesday, driven by investor optimism as President Donald Trump unveiled his first policy moves. The Dow Jones Industrial Average led the way, rising approximately 1% following solid earnings from 3M Company. The benchmark S&P 500 and Nasdaq Composite also saw significant gains, up around 0.7% and 0.4%, respectively.
Earnings Season Heats Up
3M Company’s shares jumped over 5% after the company issued optimistic full-year guidance, making it the top performer within the Dow. Meanwhile, Charles Schwab’s earnings soared nearly 50% as trading activity climbed by double digits. D.R. Horton also beat expectations despite a soft housing market, with earnings per share of $2.61, surpassing consensus expectations.
Trade and Tariffs Take Center Stage
Investors are bracing for volatility as Trump pushes ahead with executive orders and actions, with energy and trade at the forefront. The president’s announcement of potential 25% duties on Mexico and Canada starting February 1 sent ripples through the market. Chinese stocks saw only slight gains, indicating investors remain cautious about a potential trade war.
Interest Rates and Currency Markets
The 10-year Treasury yield fell about 4 basis points to around 4.57% on Tuesday, recovering from a deeper drop in Asia trading. The US dollar has been volatile since Trump’s inauguration, retreating from near two-year highs before regaining some losses after the president’s tariff announcements.
Looking Ahead
The next batch of quarterly earnings will provide more insight for investors, with Netflix expected to deliver strong results. Meanwhile, the housing market remains a concern, with D.R. Horton’s weaker-than-expected home orders highlighting the challenges faced by builders.
Expert Insights
Mohamed El-Erian, chief economic adviser at Allianz, notes that the dollar’s gains and losses signal a new normal for markets, with both upside and downside risks existing. Morgan Stanley strategist Michael Zezas and economist Michael Gapen also caution that Trump’s back-and-forth rhetoric “reminds us that vigilance is warranted as the US policy path could evolve quickly.”
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