By Sinéad Carew and Johann M Cherian
(Reuters) – Wall Street’s main indexes rose on Tuesday, with the S&P 500 and the Dow closing at their highest levels in more than a month as investors assessed Donald Trump’s first actions as U.S. president and were encouraged that he did not start his second term with blanket tariff increases.
Trump did not lay out concrete plans on the universal tariffs and additional surcharges on close trade partners as previously promised, but said he was thinking about imposing duties on Canadian and Mexican goods as early as Feb. 1.
While investors remain cautious about tariffs and the potential for a global trade war pushing inflation higher, brokerage Goldman Sachs lowered its forecast for the chances of a universal tariff this year to 25% from about 40% in December.
“There was a definite relief and a bit of surprise that tariffs weren’t called out in the first round of executive actions that happened yesterday,” said Carol Schleif, chief market strategist at BMO Private Wealth. “Markets are leaping to the conclusion, probably rightfully so, that the administration will take a more nuanced approach.”
Investors hope the new administration will use the threat of trade levies as a negotiating tactic and take “a scalpel and not a sledgehammer to tariffs,” Schleif said.
However, with trade policies still unclear, Schleif cautioned the market could face volatility if Trump puts out trial balloons on tariffs since the market has not had a 10% correction in a long time.
The Dow Jones Industrial Average rose 537.98 points, or 1.24%, to 44,025.81, the S&P 500 gained 52.58 points, or 0.88%, to 6,049.24 and the Nasdaq Composite gained 126.58 points, or 0.64%, to 19,756.78, to close near its highest level since Jan. 6.
In a sign of broader market strength, the more domestically focused small-cap Russell 2000 index outperformed larger cap indexes with a 1.85% advance.
Among the S&P 500’s 11 major sectors, the sole loser was energy, down 0.64%, while six sectors rose at least 1%.
The biggest gainer was industrials, which rose 2.03% and was boosted by stocks including 3M, which rallied 4.2% after reporting upbeat fourth-quarter profits.
The utilities sector was lifted by nuclear power stocks after Trump issued a flurry of orders intended to boost energy production. Its biggest gainers included Vistra Corp, NRG Energy and Constellation Energy.
Heavyweight Apple was the S&P 500’s biggest drag, losing 3.2%, after brokerage Jefferies cut its rating to “underperform.”
Shares of automakers, which are most sensitive to tariffs due to their vast supply chains, rose. Gains in Ford, up 2.5%, trailed a 5.7% rally in General Motors, which had a rating upgrade from Deutsche Bank.
During the first year of Trump’s earlier administration, the S&P 500 rose 19.4%. The benchmark index rose nearly 68% through his four-year term, but saw bouts of volatility, stemming in part from a trade war Trump fought with China.
However, inflation is still above the Federal Reserve’s 2% target, fuelling worries that the new administration’s policies could delay the central bank’s pace of monetary policy easing.
Economists see the Fed leaving borrowing costs unchanged when it meets next week and traders see the first interest rate cut coming in June, according to CME Group’s FedWatch tool.
In other individual stocks, Walgreens tumbled 9.2% after the Justice Department accused it of filling unlawful prescriptions for addictive painkillers and other drugs.
Moderna rallied 5.4% after securing $590 million from the U.S. government to hasten development of its bird flu vaccine.
Advancing issues outnumbered decliners by a 4.54-to-1 ratio on the NYSE, where there were 264 new highs and 39 new lows.
On the Nasdaq, 3,086 stocks rose and 1,374 fell as advancing issues outnumbered decliners by a 2.25-to-1 ratio.
The S&P 500 posted 41 new 52-week highs and no new lows while the Nasdaq Composite marked 119 new highs and 78 new lows.
On U.S. exchanges, 15.42 billion shares changed hands compared with the 15.47-billion average for the last 20 sessions.
(Reporting by Sinéad Carew in New York, Johann M Cherian and Sukriti Gupta in Bengaluru; Editing by Shinjini Ganguli and Rod Nickel)
