U.S. Stocks Rise Amid Trade Tension

U.S. stocks closed higher on Tuesday as investors assessed China's retaliation to President Trump's latest tariffs amid concerns about a potential trade war.

The Dow Jones Industrial Average (^DJI) gained 0.2%, the S&P 500 (^GSPC) climbed 0.7%, and the Nasdaq Composite (^IXIC) jumped 1.2% after a sell-off on Monday.

China Retaliates with Tariffs

Beijing swiftly responded to Trump's 10% levies on Chinese imports by imposing tariffs on U.S. coal, liquified natural gas, crude oil, farm equipment, and autos. These retaliatory measures raise the risk of escalation and could damage both economies.

Trump Postpones Tariffs on Mexico and Canada

Trump announced a 30-day pause on 25% tariffs against Mexico and Canada, citing ongoing trade talks. This move eased some market uncertainty.

Tech Stocks Lead Gains

Alphabet (GOOG, GOOGL) shares rose 2% on anticipation of its fourth-quarter earnings report after the bell. The focus is on the company's AI investments and response to DeepSeek's cheaper AI models.

Other tech stocks that contributed to the Nasdaq's rise include Apple (AAPL), Amazon (AMZN), Microsoft (MSFT), and Nvidia (NVDA).

Palantir Soars on Earnings Beat

Intelligence software company Palantir (PLTR) surged 25% after exceeding quarterly and annual revenue forecasts. The company attributed its growth to strong demand for its AI products.

Oil Pares Losses

Oil prices recovered after initially falling on China's retaliatory tariffs. West Texas Intermediate (CL=F) and Brent (BZ=F) pared losses as investors weighed the potential impact of the trade war on demand.

Job Openings Decline

The Labor Department reported that job openings declined in December, indicating a slight cooling in the labor market. The JOLTS report showed that 7.6 million jobs were open, down from 8.15 million in November.

Spotify Turns Profit

Spotify (SPOT) reported its first full-year profit and exceeded revenue expectations in its fourth-quarter results. The audio giant also gained subscribers despite recent price increases.

Europe Stocks Subdued

European stocks traded sideways on Tuesday as investors monitored the U.S.-China tariff exchange and awaited corporate earnings. The Stoxx 600 (^STOXX) hovered around the flatline, with gains in Paris and losses in London.