NEW YORK — On Tuesday, an air of tranquility returned to Wall Street as U.S. indexes climbed, driven primarily by a positive earnings report from Palantir Technologies, a company thriving amid the artificial intelligence surge.
The S&P 500 experienced a boost of 0.7%, rebounding from a volatile session driven by concerns surrounding possible trade wars stemming from President Donald Trump’s tariff policies, which could adversely impact global economies, including that of the U.S.
The Dow Jones Industrial Average increased by 134 points, equivalent to a 0.3% rise, while the Nasdaq composite surged ahead with a 1.4% gain. President Trump announced Monday that he would delay the imposition of tariffs on imports from Canada and Mexico for an additional month, with the decision regarding Canada unveiled after the market closed that day. This fueled Wall Street’s optimism that Trump may be employing the tariffs primarily as a negotiation tactic rather than setting them as enduring policies.
Investor sentiment leans towards the notion that Trump is likely to avoid severe repercussions on the financial markets, a vital indicator of his performance, viewing the stock market as reflective of his administration’s success.
Nevertheless, the possibility of a trade war looms, with analysts cautioning that further market fluctuations could be anticipated due to the seriousness of Trump’s threats. Bank of America strategists, led by Mark Cabana, suggested in their report that the equity market serves as a performance metric for the administration. They urged caution, emphasizing that the recent tariff disturbances revealed the transactional nature of Trump’s policies, stating, “nothing is settled until it is final.”
Trump continues to advocate for a 10% tax on goods imported from China, which has reportedly retaliated by announcing tariffs on certain U.S. products and launching an antitrust investigation into Google. However, the 15% tariff on U.S. coal, liquefied natural gas products, and a 10% tariff on crude oil, agricultural machinery, and large-engine cars will be delayed until Monday, allowing for potential negotiations between Trump and Chinese President Xi Jinping.
Market experts believe that tariffs on China may persist longer compared to those on other trading partners, reflecting Trump’s intent to delineate the U.S. from its geopolitical rival more comprehensively. As for U.S. allies like Canada, Mexico, and the European Union, concessions rather than counter-tariffs could be the likely outcome, according to Thierry Wizman of Macquarie.
Despite the ongoing investigation by China into Google, shares of Alphabet, Google’s parent company, rose by 2.5% following the release of its latest earnings report after market hours. Other stocks that had experienced significant declines the day prior due to tariff anxieties showed stability. Automakers, heavily invested in Mexico for production, saw notable recoveries, with General Motors climbing by 1.4% and Ford Motor up by 2.7%.
Investor focus also shifted back to earnings reports for U.S. companies that were overshadowed by earlier tariff concerns. Palantir Technologies showcased a remarkable jump of 24%, emerging as a primary driver of the S&P 500, following a quarterly profit that outperformed analyst expectations and optimistic revenue forecasts from CEO Alexander Karp, who termed his company as being at the “center of the AI revolution.”
On the other end of the spectrum, pharmaceutical giant Merck experienced a 9.1% decline despite surpassing sales and profit predictions for the recent quarter, as its forthcoming revenue guidance was below analyst expectations due to delays in distributing one of its leading products to China.
The S&P 500 concluded the day with a rise of 43.31 points to reach 6,037.88. The Dow Jones Industrial Average added 134.13 points, finishing at 44,556.04, while the Nasdaq composite increased by 262.06 to end at 19,654.02.
In the bond market, there was a slight decrease in Treasury yields following a report indicating less upward pressure on inflation from the U.S. job market. Advertisements for job openings dropped below economists’ projections at the end of December, hinting at a slowing but still robust job market.
The yield on the 10-year Treasury bond fell to 4.51% from 4.56% late the previous day. Concurrently, the two-year yield, closely aligned with Federal Reserve interest rate expectations, dipped to 4.21% from 4.25%.
Globally, London’s FTSE 100 index experienced a minor drop of 0.1%, while other prominent European markets enjoyed slight increases.
In Asia, Hong Kong’s Hang Seng index surged by 2.8%, alongside a 1.1% gain for South Korea’s Kospi, indicating a positive trend in the region’s markets.