Stocks Surge Amid Trade Tensions and Earnings Reports
The S&P 500 Index ($SPX) (SPY) climbed +0.88% on Tuesday while the Dow Jones Industrials Index ($DOWI) (DIA) increased by +1.24%. The Nasdaq 100 Index ($IUXX) (QQQ) also enjoyed a +0.58% rise. March E-mini S&P futures (ESH25) are up +0.92%, with March E-mini Nasdaq futures (NQH25) rising +0.78%.
Market Rebounds as Tariff Fears Ease
On Tuesday, stock markets celebrated a rally, with the S&P 500 reaching a one-month high, the Dow Jones Industrials marking a five-week high, and the Nasdaq 100 achieving a two-week high. This upturn came as concerns over President Trump’s tariff threats diminished. During his first day in office, Trump refrained from imposing new tariffs on China and Europe but instructed his administration to investigate unfair trade practices and announced intentions to implement a 25% tariff on goods from Canada and Mexico starting February 1.
Further boosting the market, the yield on the 10-year Treasury note fell to its lowest level in two and a half weeks. Expectations of lower inflation helped drive up Treasury prices on Tuesday, following a substantial decrease in crude oil prices, which dropped over -2% after Trump stated his intention to declare a national energy emergency and increase domestic crude production.
Challenges for Major Companies
Despite the rally, some stocks faced sharp declines. Walgreens Boots Alliance saw its shares drop -9% after being sued by the U.S. Justice Department for allegedly violating the Controlled Substances Act. Apple’s shares fell -3% after announcing an -18% year-over-year decline in Q4 sales of iPhones in China, alongside a downgrade from Jeffries to underperform. The dip in WTI crude oil prices, which fell -2% to a one-week low, also pressured energy producers.
The earnings season is underway, and analysts project a 7.5% year-over-year growth in S&P 500 earnings for Q4, marking the second highest pre-season forecast in the last three years according to Bloomberg Intelligence.
Interest Rates and Economic Indicators
The outlook for interest rates remains cautious. Markets currently reflect a 1% chance of a -25 basis point rate cut during the upcoming January 28-29 FOMC meeting.
Globally, stock markets concluded the day mixed, with the Euro Stoxx 50 rising +0.03%, while China’s Shanghai Composite Index dipped -0.05%. Japan’s Nikkei Stock 225, on the other hand, increased by +0.32%, reaching a one-week high.
Interest Rates
March 10-year Treasury notes (ZNH25) closed up +6 ticks on Tuesday, with the yield falling -5.9 basis points to 4.568%. The 10-year yield hit a low of 4.528% as demand for Treasury notes increased after Trump’s cautious approach towards imposing tariffs led to calmer inflation concerns.
The breakeven inflation rate for ten-year Treasuries dropped to a one and a half week low of 2.389%. European government bond yields also fell, with the 10-year German bund yield finishing down -1.7 basis points to 2.510% and the UK gilt yield declining -6.9 basis points to 4.590%.
In economic reports, new car registrations in the Eurozone rose +5.1% year-over-year to 911,000 units—the largest increase in eight months. Conversely, Germany’s January ZEW survey saw expectations for economic growth fall -4.4 to 10.3, falling short of the anticipated 15.1.
European Central Bank (ECB) officials now suggest further interest rate reductions are likely. Member Kazimir stated a cut next week is almost certain, with additional decreases potentially following suit. The markets assign a 99% probability to a -25 basis point cut during the ECB’s January 30 meeting.
US Stock Movers
Vistra Corp (VST) led the S&P 500 gainers, climbing more than +8% after Evercore ISI rated the stock as outperform, setting a price target of $202. Oracle (ORCL) rose over +7% following a new AI investment announcement that could enhance its cloud-infrastructure market share. 3M Co (MMM) saw its shares go up more than +4% after beating Q4 earnings expectations with an adjusted EPS of $1.68 compared to a consensus of $1.66.
Chip stocks also contributed positively to the market. Micron Technology (MU) and ARM Holdings Plc (ARM) gained over +3%, while Nvidia (NVDA) rose more than +2%. Other notable gainers included ON Semiconductor (ON), Qualcomm (QCOM), and Intel (INTC)—all of which saw increases exceeding +1%.
Industry shifts became evident in the energy sector, with stocks retreating as WTI crude prices dipped more than -2%. Devon Energy (DVN) saw a decline of over -3%, with several other major energy firms following similar patterns.
On the flip side, Apple (AAPL) led losses in the Dow Jones Industrials, dropping more than -3% following disappointing sales and a downgrade. Walgreens Boots Alliance (WBA) also ended down over -9% due to its ongoing legal challenges.
KeyCorp (KEY) experienced a decline of more than -3% after reporting Q4 total deposits of $149.76 billion, which fell short of the expected $150.95 billion.
Earnings Reports (1/22/2025)
Investors are also looking forward to earnings reports from Abbott Laboratories (ABT), Amphenol Corp (APH), Discover Financial Services (DFS), GE Vernova Inc (GEV), Halliburton Co (HAL), Johnson & Johnson (JNJ), Kinder Morgan Inc (KMI), Procter & Gamble Co/The (PG), Steel Dynamics Inc (STLD), TE Connectivity PLC (TEL), Teledyne Technologies Inc (TDY), Textron Inc (TXT), and Travelers Cos Inc/The (TRV).
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 are 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.
