US Stocks Surge on Reciprocal Tariff Delay and Inflation Data
US stocks posted gains on Thursday as President Donald Trump announced plans for reciprocal tariffs while delaying their implementation, and investors parsed the latest inflation report. The Dow Jones Industrial Average (^DJI) jumped over 0.7%, or more than 350 points, while the S&P 500 (^GSPC) climbed over 1% to close at 6,115.06, just shy of its record close of 6,118.71. The tech-heavy Nasdaq Composite (^IXIC) rose more than 1.5%, boosted by rallies in Nvidia (NVDA) and Tesla (TSLA).
Trump's Tariff Announcement
Markets initially reacted positively to Trump's announcement that he would impose "fair and reciprocal" tariffs on all US trading partners. However, the actual measure signed by the President delayed the implementation of these tariffs, potentially allowing countries time to negotiate before they take effect.
Inflation Data Digested
Meanwhile, the January Producer Price Index (PPI) showed that wholesale inflation remains elevated, following a similar trend in the Consumer Price Index (CPI) for the month. This news tempered optimism for an interest rate cut.
Earnings Season Continues
Earnings season progressed solidly, with the majority of S&P 500 companies reporting beats so far. Robinhood (HOOD) shares soared after the company beat profit estimates, while Reddit's (RDDT) stock tumbled due to disappointing user growth.
Airbnb's Revenue Beat
Airbnb (ABNB) stock soared over 15% after the company exceeded Wall Street's revenue and earnings per share expectations in the fourth quarter. Revenue reached $2.48 billion, surpassing estimates of $2.42 billion, while earnings per share of $0.73 topped the expected $0.59.
Meta's Winning Streak Continues
Meta (META) closed higher for the 19th consecutive trading session, adding less than 1% on Thursday. This marks a 24% gain for the stock year-to-date.
Focus on Stock Picking
The broader market beyond the "Magnificent Seven" tech stocks has shown signs of improvement in 2025, with 48% of S&P 500 companies outperforming the index so far. This suggests that investors are taking a more selective approach to stock picking.
Interest Rate Hike Outlook
While there is increasing speculation about a potential interest rate hike from the Federal Reserve in the back half of 2025, experts believe that tariffs are unlikely to trigger such a move. The Fed is reportedly more concerned about mass deportations leading to a shrinking labor force and higher wages.
Arm's Chip Launch
Arm stock rose more than 7% on reports that the company will launch its own AI chip, with Meta as one of its first customers. The Financial Times cited sources indicating that Arm could unveil the chip as early as this summer.
Mortgage Rates Inch Lower
30-year mortgage rates dipped slightly this week to 6.87%, providing some relief for potential homebuyers. However, rates remain elevated after reaching a year-to-date high of 7.04% in mid-January.
Positive Signs in Inflation Data
Despite the hot inflation readings, economists found some positive news for markets and the Federal Reserve in the details. They argue that underlying price increases likely decreased in January, suggesting that inflation may be gradually moving towards the Fed's 2% target.
Tech Gains Led by Nvidia and Tesla
Shares of Nvidia (NVDA) and Tesla (TSLA) were major drivers of the tech sector's rise on Thursday, gaining over 3% and 4%, respectively.
Musk Threatens to Withdraw OpenAI Bid
Elon Musk has threatened to withdraw his $97.4 billion bid for the nonprofit that oversees OpenAI if the board stops its transformation to a for-profit enterprise. This escalates a long-running feud between Musk and OpenAI CEO Sam Altman.
Trump and Putin Discuss Ukraine War
Oil prices trimmed losses on Thursday as markets discounted efforts to initiate a peace solution in Ukraine. President Trump indicated that he would announce reciprocal tariffs later in the day, while social media company Meta (META) pared gains.