Global markets remained volatile as investors reacted to President Donald Trump’s decision to impose tariffs on Canada, Mexico, and China. A last-minute delay on Mexican tariffs helped limit losses, but the equity markets struggled. Here’s a detailed breakdown of the latest market activity.
Market Reactions to Tariff Announcements
Equities struggled, with major indexes showing declines:
- The Nasdaq Composite fell 1.2% to 19,392.
- The S&P 500 declined 0.8% to 5,994.6.
- The Dow Jones Industrial Average slipped 0.3% to 44,421.9.
Technology stocks saw the steepest declines. Apple dropped 3.4%, and Tesla fell 5.2%, while consumer staples outperformed. Investors also sought safe-haven assets, leading to mixed movements in U.S. Treasury yields.
U.S. Treasury Yields: Mixed Movement
The 10-year yield fell to 4.54% as investors sought safety, while the two-year yield rose, reflecting shifting expectations for interest rates. These mixed signals from the bond market have added to the market’s volatility.
Economic Data Provides Support
While tariffs dominated the headlines, some economic data provided support to investor sentiment. U.S. manufacturing expanded for the first time in over two years, lifting market sentiment despite the ongoing trade uncertainty.
Corporate Earnings Resilience
Corporate earnings have remained strong, with a 7.4% year-over-year increase. Major firms like Amazon and Alphabet are set to report earnings this week, and analysts believe that pro-growth policies and corporate resilience may help offset the economic headwinds caused by tariffs.
Focus on Trade Negotiations: Trump and Xi Jinping
Attention now turns to the upcoming trade negotiations between President Trump and Chinese President Xi Jinping, which are expected to address the ongoing tensions between the U.S. and China. Beijing has urged Washington to engage in direct dialogue, arguing that trade restrictions are harming normal economic relations. Additionally, Beijing plans to challenge these tariffs at the World Trade Organization (WTO).
Despite concerns that the tariffs could push inflation higher and slow GDP growth, corporate earnings have remained strong.
Corporate Earnings and Growth
Corporate earnings, particularly in the tech sector, have stayed resilient. Corporate earnings rose by 7.4% year-over-year. As mentioned, major firms like Amazon and Alphabet are set to report, with analysts holding a positive view on the ability of corporate resilience and pro-growth policies to mitigate tariff effects.
Latest Market Update: Regional Performance
Asian Equities Rebound
Asian equities saw a rebound on Tuesday after President Trump postponed tariffs on Canada and Mexico. This helped ease concerns about the trade war, especially in Hong Kong, where stocks surged 3%. Tech stocks, like SMIC and Alibaba, led the gains. However, Chinese markets remained closed for the Lunar New Year holiday.
U.S. Futures Rise After Trump’s Tariff Delay
U.S. equity futures were higher this morning as the market reacted positively to Trump’s decision to delay tariffs on Canada and Mexico. Investor sentiment was boosted by a double-digit surge in Palantir stock after hours, and attention is now on the nonfarm payrolls report set to be released on Friday, which could provide additional economic insights.
European Equities Decline
European equities saw a drop on Monday following Trump’s tariff announcement on China, Canada, and Mexico. The STOXX 50 dropped 1.4%, with auto manufacturers such as Stellantis and Volkswagen leading the losses. Additionally, industrials and banks, including Schneider Electric, Siemens, and Santander, experienced declines.
Currency and Oil Movements
The U.S. dollar stabilized at 108.7 on Tuesday following the market volatility. This stability was attributed to the delay in tariffs on Mexico and Canada and growing optimism about potential trade negotiations with China.
Against the euro, the U.S. dollar remained firm, with EUR/USD trading at 1.0320.
Oil prices retreated as President Trump delayed tariffs on Canadian and Mexican imports for one month, easing concerns about supply disruptions. Brent crude fell 0.7% to $75.47 per barrel, while WTI crude dropped 1% to $71.70.
Eurozone Inflation
Inflation in the Eurozone increased to 2.5% in January 2025, up from 2.4% in December. The increase was primarily driven by a rise in energy costs, which surged 1.8% month-over-month. The core inflation rate held steady at 2.7%, slightly above expectations. This marked the lowest core inflation level since early 2022.
Equities on the Move
Several companies saw significant stock price movements based on earnings reports, analyst ratings, and other news:
- Palantir Technologies reported stronger-than-expected fourth-quarter results, with earnings of $0.14 per share and revenue of $827.5 million, surpassing Wall Street expectations. The company’s positive 2025 outlook helped its stock surge 22% after hours.
- NXP Semiconductors reported slightly better-than-expected Q4 earnings, but its Q1 forecast fell short of Wall Street estimates. Despite this, the company highlighted strong performance in gross margins and free cash flow.
- Berkshire Hathaway increased its stake in SiriusXM by purchasing 2.3 million shares worth $52 million, bringing its total investment in the company to approximately $2.9 billion.
- UBS analysts estimated that around one-third of Apple’s iPhone business could be directly impacted by U.S. tariffs on China, Canada, and Mexico. This could affect earnings and gross margins.
- Vanguard announced its largest-ever fee reduction, cutting expense ratios by one to six basis points across 87 funds, saving investors over $350 million in 2025.
- Cboe Global Markets plans to expand U.S. equities trading to a 24-hour format, offering global access, especially from Asia Pacific markets.
- Robinhood introduced event contracts for U.S. users to bet on outcomes of events like the Super Bowl, expanding its offerings beyond stock trading.
- EssilorLuxottica received FDA approval for its over-the-counter Nuance audio glasses, which combine hearing solutions with prescription eyewear.
- L’Oréal sold 29.6 million shares of its stake in Sanofi for €3 billion, reducing its shareholding to 7.2%.
- Oppenheimer reiterated Uber as its top stock pick, with a price target of $85, despite concerns over the impact of Robotaxi technology.
- UBS upgraded Caterpillar from Sell to Neutral, citing a more balanced risk/reward outlook and a higher price target of $385.
- Piper Sandler analysts view Tesla as one of the most defensive stocks in the auto sector, reiterating a $500 price target despite short-term production challenges.
- Baird downgraded Cloudflare, CrowdStrike, and Fortinet to Neutral due to high valuations and macroeconomic risks.
Upcoming Data and Events
Key upcoming economic releases include the JOLTs Job Openings report and Factory Orders data, which will provide further insights into the labour market and manufacturing sector. Earnings reports from Alphabet, AMD, Amgen, Electronic Arts, and Mondelez International will also be in focus, potentially influencing market sentiment.
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