US Stocks End Higher as Tech Leads Amidst Trade War Jitters
US stocks closed higher on Tuesday, led by the technology sector, as investors assessed China's immediate retaliation to President Donald Trump's latest tariffs and the potential risks of an escalating trade war. Market participants also消化ed fresh employment data, which revealed a steeper-than-expected decline in job openings in December. Investors remain alert to any signs of a cool-down in the labor market, given the Federal Reserve's deliberations on future interest rate adjustments amidst persistent inflation.
Market Performance
The Dow Jones Industrial Average (^DJI) gained around 0.3%, the benchmark S&P 500 (^GSPC) advanced approximately 0.7%, while the tech-heavy Nasdaq Composite (^IXIC) jumped close to 1.4% to recover some of Monday's losses.
Trade War Developments
Beijing reacted swiftly to Trump's imposition of additional 10% levies on Chinese imports, effective at midnight on Tuesday. China retaliated by imposing tariffs of 15% on US coal and liquefied natural gas, starting February 10, along with 10% duties on imports of crude oil, farm equipment, and some automobiles. These tit-for-tat measures heighten the risk of an escalation into a trade war that could harm both of the world's largest economies. However, some on Wall Street view the Chinese response as showing restraint, opening the door to potential compromise, as seen in recent US tariff suspension deals with Canada and Mexico.
Earnings Reports
Alphabet (GOOG, GOOGL), the parent company of Google, saw its shares drop around 7% in after-hours trading after revenue from its cloud business, a key driver, missed expectations, while spending surpassed forecasts.
Chipmaker Advanced Micro Devices (AMD) witnessed a rise in its stock price in after-hours trading after the company released a positive sales forecast, alleviating concerns about a slowdown in the AI chip industry.
Social media giant Snap (SNAP) experienced a double-digit surge in its stock price after exceeding expectations on both its top and bottom lines and providing optimistic revenue guidance for the first quarter.
On the other hand, Chipotle (CMG) stock declined in after-hours trading due to a lower-than-expected increase in comparable sales.
Labor Market Data
The latest Job Openings and Labor Turnover Survey (JOLTS) showed a steeper-than-anticipated reduction in job openings to 7.6 million in December, marking the lowest level since September. Economists emphasized that the details of the report align with the "broadly stable" labor market described by Federal Reserve Chair Jerome Powell in his recent press conference. The ratio of job openings to unemployed workers has been steady around 1 to 1 for over six months, indicating a significant moderation from the robust labor market of 2022 but still presenting a relatively solid employment picture.
Other Highlights
• Disney (DIS) is set to report its fiscal first quarter earnings on Wednesday, with investors anticipating updates on its streaming business and performance of recent theater releases.
• Robinhood (HOOD) was forced to retract its initial foray into sports betting due to a request from the Commodity Futures Trading Commission (CFTC).
• Fox (FOXA) announced plans to launch its own streaming service by year-end, targeting the changing media landscape where consumers are increasingly opting for streaming options.
• Vaccine stocks Moderna (MRNA), Pfizer (PFE), and BioNTech SE (BNTX) declined after news of Robert F. Kennedy Jr.'s advancement in the nomination process for the head of the Health and Human Services Department.
Conclusion
US stocks closed higher on Tuesday, with tech stocks driving the rally, as investors digested ongoing trade war developments and fresh employment data. The market remains vigilant about the potential impact of tariffs on Big Tech and the labor market's trajectory. Investors will continue to monitor company earnings reports and economic indicators for further insights into the overall market outlook.