US Stocks Rise Amidst Tariff Delays and Inflation Concerns

US stocks gained momentum on Thursday as President Donald Trump's plans for reciprocal tariffs were met with a delay in implementation. Markets also absorbed news of rising wholesale inflation, suggesting that the Federal Reserve's task of curbing inflation is not yet complete.

The Dow Jones Industrial Average (^DJI) gained over 0.7%, while the S&P 500 (^GSPC) rose over 1%, closing at 6,115.06, just shy of its record close of 6,118.71. The tech-heavy Nasdaq Composite (^IXIC) climbed more than 1.5%, driven by strong performances from Nvidia (NVDA) and Tesla (TSLA).

Tariffs and Negotiations

The market took Trump's announcement of "fair and reciprocal" tariffs on US trading partners in stride. However, the immediate implementation of these tariffs was put on hold, providing wiggle room for negotiations. Trump stated, "I will charge a reciprocal tariff, meaning whatever countries charge the United States of America, we will charge them."

Inflation and Interest Rates

The Producer Price Index (PPI) for January showed an increase in wholesale inflation, following a similarly hot consumer inflation report that had dampened optimism for an interest rate cut. The PPI's 0.4% increase and 3.5% year-over-year rise highlighted the Fed's ongoing challenge in bringing inflation down to 2%.

Earnings Season

Earnings season continues, and the majority of S&P 500 companies that have reported so far have exceeded expectations. Robinhood (HOOD) shares soared after beating fourth-quarter profit estimates, while Reddit (RDDT) shares fell due to a miss in user growth.

Airbnb and Meta

Airbnb (ABNB) shares rose over 15% after the company surpassed Wall Street's expectations for revenue and earnings per share in the fourth quarter. Meta (META) extended its winning streak to 19 consecutive trading sessions, rising less than 1% on Thursday.

Market Rotation

The market is showing signs of rotation, with a broader group of stocks outperforming the index in 2025. This trend differs from the past two years, where a small number of tech stocks dominated the market.

Interest Rate Hike Outlook

Wall Street is considering the possibility of an interest rate hike from the Federal Reserve later in 2025 or in 2026. RBC Capital Markets head of US rates strategy, Blake Gwinn, believes that while a hike is a "plausible" scenario, it is unlikely to be triggered by Trump's tariffs.

Arm and Chip News

Arm stock jumped over 7% after the Financial Times reported that the company plans to release its own AI chip, with Meta as one of its first customers.

Mortgage Rates

30-year mortgage rates inched lower to 6.87%, the lowest level in 2025. However, they remain within a narrow range after reaching a high of 7.04% in mid-January.

Inflation Insights

Economists found positive news for markets in the details of the CPI and PPI readings, indicating a potential slowdown in price increases. The "core" PCE index, which excludes food and energy, is estimated to have risen 2.6% in January, down from 2.8% in December.