U.S. Stocks Climb Amid Trade War Concerns

U.S. stocks closed higher on Tuesday, predominantly driven by gains in technology shares, as investors assessed China's retaliation to President Trump's latest tariffs and the potential risks of a trade war. The developments were accompanied by the release of fresh jobs data, indicating a decline in job openings in December.

The Dow Jones Industrial Average (^DJI) gained approximately 0.3%, while the S&P 500 (^GSPC) rose by about 0.7%. The tech-heavy Nasdaq Composite (^IXIC) saw a surge of nearly 1.4%, partly recovering its losses from the previous trading session.

China Retaliates to Tariffs

Beijing swiftly retaliated on Tuesday to Trump's imposition of additional 10% tariffs on Chinese imports, which went into effect at midnight. China responded with tariffs of 15% on U.S. coal and liquified natural gas, starting February 10th, and 10% duties on imports of crude oil, farm equipment, and some automobiles. These tit-for-tat measures escalate the risk of a trade war that could harm both the U.S. and Chinese economies. However, some market analysts believe China's response displayed restraint and created an opportunity for compromise, as seen in previous U.S. tariff postponement deals with Mexico and Canada.

Trade War Developments

Adding to the optimism, Trump announced that he would accelerate talks with Chinese President Xi Jinping. On Monday, he stated that these discussions would occur "probably over the next 24 hours" instead of later in the week. The two leaders did not speak on Tuesday, but U.S. officials indicated a call could take place the following day.

The U.S. dollar index (DX-Y.NYB) weakened by approximately 0.9% as concerns eased somewhat. Meanwhile, China initiated an antitrust investigation into Alphabet's (GOOG, GOOGL) Google, adding Calvin Klein owner PVH (PVH) and biotech company Illumina (ILMN) to its "unreliable entities list."

Strong Earnings Reports

Amid China's investigation, investors paid close attention to Alphabet's earnings, with the company being the latest of the "Mag 7" firms to report. Shares declined around 7% in after-hours trading after revenues for its crucial cloud business fell short of expectations, while spending exceeded estimates.

Other prominent companies also released their financial results after the bell. Chipotle's stock dipped due to missing same-store sales, while shares of AMD (AMD) rose following positive guidance that allayed concerns about an AI chip slowdown. Social media giant Snap (SNAP) saw its stock surge double digits after beating top and bottom-line expectations and providing revenue guidance for the first quarter that surpassed analysts' forecasts.

Labor Market Data

Job openings declined in December to 7.6 million, more than analysts had predicted, reaching their lowest level since September. Economists, however, contended that the release's details generally aligned with the "broadly stable" labor market described by Federal Reserve Chair Jerome Powell during his recent press conference on January 29th.

The ratio of job openings to unemployed workers has remained around 1 to 1 for over six months, indicating a substantial cooling from the robust labor market of 2022 while still presenting a relatively positive employment picture.