Stock Markets Rise Amid Trade Policy Uncertainty and Earnings Optimism

The S&P 500 Index ($SPX) (SPY) has increased by +0.35%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.57%, and the Nasdaq 100 Index ($IUXX) (QQQ) has gained +0.08%. March E-mini S&P futures (ESH25) are up by +0.41%, while March E-mini Nasdaq futures (NQH25) have risen by +0.18%.

Market Movements and Trade Policy Developments

Today’s stock markets are trending upwards, with the S&P 500 reaching a 3-1/2 week high, the Dow Jones Industrials showing a 5-week high, and the Nasdaq 100 achieving a 2-week peak. Investors appear relieved as concerns about potential new tariffs from President Trump have lessened, following his initial day in office when he chose not to impose fresh tariffs on China and Europe. However, he has ordered his administration to tackle unfair trade practices globally and noted intentions to levy tariffs of 25% on Canadian and Mexican goods starting February 1.

Support for stocks also comes from a decrease in the 10-year Treasury note yield, which has fallen to a 2-1/2 week low. This drop is linked to lowered inflation expectations, coinciding with crude oil prices decreasing to a 1-week low. These developments follow Trump’s announcement on Monday regarding a national energy emergency and his plans to enhance US crude production.

Walgreens and Apple’s Decline

However, not all stocks are faring well. Walgreens Boots Alliance saw a significant drop of -13% after the US Justice Department filed a lawsuit against the company for allegedly dispensing prescriptions that may have violated the Controlled Substances Act. Additionally, Apple shares fell over -3% following a disappointing report on Q4 iPhone sales in China, which dropped -18% year-over-year. Consequently, Jeffries downgraded Apple from hold to underperform.

Optimism in Earnings Season

Earnings season is heating up as companies begin to report their Q4 results. Bloomberg Intelligence analysts forecast that S&P 500 earnings will grow by 7.5% year-over-year for Q4, marking the second-highest pre-season estimate in the last three years. The markets currently assign a minimal 1% probability to a -25 basis point rate cut during the FOMC meeting scheduled for January 28-29.

Global Market Overview

International markets are showing mixed results today. The Euro Stoxx 50 has dipped by -0.19%, while China’s Shanghai Composite Index closed marginally lower at -0.05%. Japan’s Nikkei Stock 225, however, rose to a 1-week high, finishing up +0.32%.

Interest Rate Movements

March 10-year Treasury notes (ZNH25) are up +8 ticks today, with the 10-year T-note yield decreasing by 7.5 basis points to 4.552%. T-notes have climbed to a 2-1/2 week high as markets reacted to President Trump’s decision not to impose tariffs specifically on China, which has eased fears about inflation. Moreover, a corresponding drop in inflation expectations contributed to this upward movement.

European government bond yields are also on the decline. The 10-year German bund yield has fallen to a 2-week low of 2.495%, while the 10-year UK gilt yield decreased to 4.578%, marking its own 2-week low.

Looking at the Eurozone, new car registrations for December increased by +5.1% year-over-year, reaching 911,000 units, reflecting the highest growth in eight months. However, the German ZEW survey for January showed economic growth expectations falling from 15.1 to 10.3, below analyst predictions.

Predictions on ECB Rate Cuts

Members of the European Central Bank’s (ECB) Governing Council have indicated a likelihood of interest rate reductions in upcoming meetings. Villeroy de Galhau mentioned a “plausible consensus” for lower rates, while Kazimir projected a near-certain rate cut next week, likely followed by additional reductions.

US Stock Highlights

In the S&P 500, Moderna (MRNA) is leading gainers with a rise of more than +4% after securing an additional $590 million from the US government to expedite bird flu vaccine development. 3M Co (MMM) also climbed over +4% following a Q4 earnings report that surpassed expectations.

Palo Alto Networks (PANW) enjoyed growth exceeding +4% after a price target increase from Scotiabank. Vistra Corp (VST) rose more than +4% due to a positive coverage recommendation from Evercore ISI, and Charles Schwab (SCHW) saw its stock climb over +3% after reporting robust Q4 revenue.

Conversely, leading the decline was Apple (AAPL), down more than -3%, with Walgreens Boots Alliance (WBA) experiencing a drastic fall of over -13%. Other notable declines include Teradyne (TER), down more than -5% after a downgrade by Morgan Stanley.

Upcoming Earnings Reports

Key earnings reports expected on January 21, 2025, include those from 3M Co (MMM), Capital One Financial Corp (COF), and Netflix Inc (NFLX), among others.

On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.