Stocks Swing as Trump's Tariffs Threaten Mexico, Canada

New York - A day of relative tranquility in markets transformed into volatility ahead of the close on Thursday as President Donald Trump's announcement of proposed 25% tariffs on Mexico and Canada sent currencies of both nations plummeting. Stocks initially faltered before recovering from the late-session shock, while Apple's financial results hinted at potential further market turbulence after hours.

Key Points

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* The Nasdaq 100 ETF (QQQ) fluctuated after hours as Apple's stock price exhibited extreme volatility. In regular trading, equities were driven higher by a surge in consumer spending.
* The Mexican peso depreciated by 1.1% and the Canadian dollar fell as much as 1.2% after Trump's tariff announcement, which is scheduled to take effect on Saturday.
* Oil futures experienced a brief spike, rising up to 1.5% from their settlement price, but the gains evaporated quickly as Trump indicated that he would decide on whether to include crude in the tariffs later that evening.

Sector Performance

* While tech stocks faced renewed pressure, economically sensitive sectors of Wall Street, such as small caps, outperformed. The S&P 500's equal-weighted index, which gives equal weight to large and small companies, climbed 1%, fueling hopes for a broader market rally.
* This would help mitigate concerns surrounding the "concentration risk" posed by the tech megacaps that have come to dominate benchmark indexes.

Earnings and Economic Data

* The bulk of S&P 500 earnings growth continues to be driven by tech megacaps, but the pace of growth is projected to slow to its lowest rate in almost two years.
* Upbeat outlooks from industry heavyweights such as Tesla, Meta, and IBM bolstered trading. However, disappointing forecasts from prominent companies like Microsoft and UPS have also been met with sell-offs.

Market Indices

* S&P 500: +0.5%
* Nasdaq 100: +0.5%
* Dow Jones Industrial Average: +0.4%
* Russell 2000: +1.1%
* 10-Year Treasury Yield: Little changed at 4.52%

Economic Outlook

* The US economy expanded at a solid pace in late 2024, driven by consumer spending.
* Experts believe the economy is on firm footing heading into 2025, which should support risk assets.
* Weekly jobless claims data declined unexpectedly, signaling labor market strength.
* The Federal Open Market Committee opted to leave interest rates unchanged, indicating a patient approach to fighting inflation.

Corporate Highlights

* An American Airlines regional jet collided with a military helicopter near Washington, leaving no survivors.
* Southwest Airlines forecasted rising costs, citing heavy labor expenses.
* The FTC is investigating potential collusion between Uber and Lyft to limit driver pay in New York City.
* The Justice Department is seeking to block Hewlett Packard Enterprise's acquisition of Juniper Networks due to antitrust concerns.
* Caterpillar warned of slightly lower revenues in 2025.
* Mastercard exceeded earnings estimates with revenue diversification efforts.
* Rogers Communications surpassed analysts' expectations in the fourth quarter.

Key Events This Week

* US personal income and spending, PCE inflation, employment cost index - Friday