NEW YORK — On Monday, U.S. stock markets experienced an upswing as investors responded positively to President Donald Trump’s recent tariff comments.
The S&P 500 index saw an increase of 0.7%, recovering from a previous week marked by concerns about how the proposed tariffs could elevate inflation and affect economic stability. The Dow Jones Industrial Average rose by 167 points (0.4%), while the Nasdaq composite surged by 1%, bolstered primarily by gains from major tech companies, including Nvidia.
The bond market exhibited stability, with Treasury yields showing only minimal fluctuations despite Trump’s announcement over the weekend regarding plans to introduce 25% tariffs on all steel and aluminum imports later this week.
The uncertainty surrounding tariffs has been a pivotal factor in Wall Street’s recent movements, with analysts suggesting that further volatility is likely. The price of gold, traditionally a safe haven during troubled market times, surged to above $2,930 per ounce, reaching new heights. Nevertheless, Trump’s history of retracting previous tariff threats indicates that these announcements may serve more as negotiation tactics than as definitive long-term policies.
The administration has already implemented a 10% tariff on China, which may result in a bifurcation of industries into winners and losers without dragging the entire stock market down, according to market strategists at Morgan Stanley. A widespread influence on the market would only be plausible if tariffs were to be steadfast across various nations, including potential 25% tariffs on Mexico and Canada.
Shares in American steel and aluminum manufacturers surged, reacting to the expectation that these tariffs could bolster their profit margins, while the broader S&P 500 maintained relative composure. Notably, Nucor’s shares jumped 5.6%, Cleveland-Cliffs soared by 17.9%, and Alcoa increased by 2.2%.
Conversely, companies reliant on steel for their production processes experienced more modest shifts. General Motors saw a drop of 1.7%, Caterpillar decreased by 0.2%, and Ford’s stock remained unchanged.
Additionally, quarterly earnings reports from major U.S. corporations also influenced market dynamics. For instance, McDonald’s stock rose by 4.8%, despite reporting earnings and revenue for the end of 2024 that fell slightly short of analysts’ forecasts. Investors remained hopeful thanks to robust performance from McDonald’s restaurants outside the U.S., particularly in markets like the Middle East and Japan.
Big Tech continued to drive the S&P 500 upward, with Nvidia gaining 2.9% and Broadcom rising by 4.5%. Last month’s market pressures stemming from a Chinese competitor’s advancements in artificial intelligence did cause concerns; however, major U.S. firms have indicated their commitment to investing heavily in AI technologies. This has eased concerns about crippled future spending within the sector, at least for the time being.
The overall S&P 500 increased by 40.45 points to reach 6,066.44, while the Dow Jones Industrial Average climbed by 167.01 to settle at 44,470.41, and the Nasdaq composite saw an upswing of 190.87, concluding at 19,714.27.
In the bond market, the yield on the 10-year Treasury held steady at 4.50%, the same as it was on Friday. Meanwhile, the yield on the two-year Treasury, which closely aligns with predictions for Federal Reserve interest rate movements, dipped slightly to 4.27% from 4.29%.
The Fed has reduced its principal interest rate on several occasions towards the end of the previous year; however, there is now a noticeable shift in trader expectations regarding further cuts in 2025, largely due to concerns over rising inflation from potential tariffs. While lower rates can invigorate the economy and asset prices, they can also contribute to heightened inflation.
Within the week, Fed Chair Jerome Powell is set to testify before Congress, where he may provide further insight into future Fed actions. In December, indications of limited rate cuts shifted the market downward, and some analysts believe additional cuts might not occur at all this year.
Inflation reports due this week could further influence Fed decision-making, with economists anticipating that consumer prices, including essentials like eggs and gasoline, increased by 2.9% in January compared to the previous year.
In international markets, stock indexes across various European and Asian exchanges experienced gains. Tokyo’s Nikkei 225 remained relatively stable following the announcement of a record current account surplus for Japan last year.
