US Stocks Rise Despite Tariff Plans and Inflation Concerns
On Thursday, US stocks climbed higher after President Donald Trump announced plans for reciprocal tariffs but delayed their implementation. Investors also digested another report indicating that inflation remains a concern.
The Dow Jones Industrial Average (^DJI) climbed over 0.7%, or 350 points, while the S&P 500 (^GSPC) soared over 1% to close at 6,115.06, just shy of its record high of 6,118.71. The tech-heavy Nasdaq Composite (^IXIC) surged more than 1.5% as Nvidia (NVDA) and Tesla (TSLA) rallied.
Markets responded well to Trump's tariff announcement. During a briefing, Trump called for "fair and reciprocal" tariffs on all US trading partners. However, the measures he signed stopped short of implementing these tariffs immediately. Instead, they could take effect as early as April, potentially giving countries time to negotiate.
Meanwhile, the January Producer Price Index (PPI) showed that wholesale inflation remains elevated, following a similarly high consumer inflation report for the month.
Earnings season continues strong, with a majority of S&P 500 companies outperforming expectations. Robinhood (HOOD) shares soared after beating fourth-quarter profit estimates, while Reddit's (RDDT) stock tumbled due to a miss in user growth.
Airbnb (ABNB) shares jumped over 15% after exceeding Wall Street's revenue and earnings per share expectations in the fourth quarter. Meta (META) extended its winning streak to 19 consecutive trading sessions, gaining nearly 24% this year.
Despite recent volatility, the 2025 stock market has been positive. As of Wednesday's close, 48% of the S&P 500 was outperforming the index, in line with historical norms. Richard Bernstein Advisors CEO Richard Bernstein believes that 2025 will see a return to broader market growth as speculation gives way to fundamental investing.
Wall Street is debating the possibility of interest rate hikes in the second half of 2025 or 2026. While tariffs could potentially push inflation higher, some economists believe that the Federal Reserve will focus on other factors, such as a shrinking labor force and rising wages.
President Trump's reciprocal tariff plan aims to impose tariffs on both allies and opponents. However, negotiations with individual countries are underway, with India's Prime Minister Narendra Modi scheduled to visit the White House.
Arm stock surged more than 7% after reports surfaced that Meta plans to purchase a new AI chip from the company. Mortgage rates dipped slightly to 6.87%, but remain within a narrow range.
Two inflation reports for January showed higher-than-expected price increases, but economists found positive signs in the details. The Personal Consumptions Expenditures (PCE) index, which is the Fed's preferred inflation gauge, is estimated to have increased less in January than in December.
Nvidia and Tesla led the tech sector higher, while Meta pared gains. Oil prices declined as markets discounted efforts to initiate peace in Ukraine. Elon Musk is reportedly willing to withdraw his bid for OpenAI if the organization abandons plans to convert into a for-profit enterprise.
US stocks continued to gain as investors dismissed expected tariffs and digested the latest inflation data. Despite concerns about inflation and a shrinking labor force, interest rate hikes remain uncertain as the Fed weighs various factors.