(Bloomberg) — Stocks climbed as President Donald Trump struck a better-than-expected tone on global trade and speculation grew that his policies would further boost U.S. businesses. Bonds continued to offset the recent rise in yields that has roiled markets. The dollar has faltered.
More than 400 S&P 500 stocks rose, with the index up nearly 1% as Trump is expected to announce a new artificial intelligence investment drive led by Softbank Group Corp., OpenAI LLC and Oracle Corp. tracking of companies exposed to AI has reached a three-year high. Small caps bet they would benefit from a protectionist stance. Trump’s wave of executive orders has helped increase market share in the space sector, while weighing on electric vehicle manufacturers. An ETF focused on large Chinese companies has gained ground as the US president has so far refrained from announcing tariffs on the Asian country.
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Treasury yields have moved closer to their lowest levels of the year. The Mexican peso and Canadian loonie were hit as Trump announced the levies he plans to impose on both countries by February 1.
“Risky assets stand to benefit from deregulation and less severe tariffs than feared,” said Mohit Kumar of Jefferies International Ltd. “For rates, cheaper tariffs and a likely drop in oil prices should be positive.”
Callie Cox of Ritholtz Wealth Management says it’s time to see what speculation was “founded” and what was “just nonsense” when it comes to pricing. At the same time, she stressed that Trump faces a crucial test on another front.
“We’ll start to see more headlines around the debt ceiling negotiations, and perhaps more tension on the short end of the Treasury curve,” she said.
The debt ceiling is frequently used as leverage during budget negotiations in Congress, with deals often being reached at the last minute. As a result, impasses typically spill over into short-term interest rates, with investors abandoning Treasuries most vulnerable to potential default in favor of other securities.
The S&P 500 rose 0.9%. The Nasdaq 100 added 0.6%. The Dow Jones Industrial Average rose 1.2%. The Russell 2000 small-cap index rose 1.8%. A gauge of the “Magnificent Seven” megacaps added 0.3%. Late night, Netflix Inc. soared after reporting its largest quarterly subscriber gain in its history. United Airlines Holdings Inc. issued a bullish outlook.
The yield on the 10-year Treasury note fell seven basis points to 4.56%. The Bloomberg Dollar Spot Index was little changed.
“Last week, equity markets saw a broad rally, supported by weaker inflation data, upbeat bank earnings and a recovery from short-term oversold conditions and negative sentiment,” said Craig Johnson by Piper Sandler. “We expect stocks to rise further, supported by the return of Trump’s ‘business- and investor-friendly’ policies.
The “Presidential Dashboard” of stock performance resets this Tuesday, with Trump starting his day at the White House for the first time in four years.
For Joe Biden’s entire presidency, the Dow Jones Industrial average has risen 39.4% — about 18 percentage points lower than the four years under the first Trump administration — and more than 100 percentage points higher. less than the 149.4% during the eight years of the Obama era, according to data compiled by Bespoke Investment Group.
“While the Dow’s performance under Biden was the weakest of the last three presidents, it’s still nothing to sneeze at, and it caps a third straight period of strong gains under a presidential term,” Bespoke said. “Let these performance numbers remind us that as an investor, you should never let your policy decisions and your investment decisions overlap.”
Since 1944, from the election to Inauguration Day, the S&P 500 has gained an average of 1.6%, according to Sam Stovall of CFRA. In the “first 100 (calendar) days” that followed, the S&P 500 gained an average of 2.1%, he noted.
“Additionally, the performance of S&P 500 sectors and sub-industries during the ‘post-election honeymoon period’ was predictive of sector and sub-industry leadership for the entire year,” added Stovall.
Since 1993, the four major sectors, from Election Day to Inauguration Day, have posted an average increase of 17% over a calendar year compared to the 15.9% average rise of the S&P 500 and outperformed the broader benchmark 75% of the time, Stovall said. Better yet, the S&P 500’s top 10 subsectors saw an average increase of 26.8% over a calendar year and also beat the market 75% of the time, he concluded.
This time around, there are signs that investors are bracing for lagging stocks to rally by betting that Trump may take a softer stance on global trade than expected, according to a Bank of America Corp. survey.
If concerns around Trump’s tariff proposals prove “unfounded,” investor allocations will remain tilted toward risk and stock markets that followed the powerful U.S. rally will catch up, said BofA strategist Michael Hartnett.
In what could be a different macro/market regime in 2025, with a moderate recovery in economic growth, we want to look for other equity markets with reversion potential and positive earnings revisions, according to Emily Roland and Matt Miskin at John. Hancock Investment Management.
“US large-cap (financial strong) and US mid-cap (industrial strong) are the two best options among global stocks that offer potential for reversion and improving earnings trends,” they noted. “Non-U.S. stocks and U.S. small caps might get a boost just from turnover trends, but fundamentally they wouldn’t be as strong.”
Roland and Miskin also added that investors don’t have to go far to benefit from the S&P 500’s potential deconcentration of top 10 primarily technology-focused growth stocks.
“A simple tilt toward value or a slight decline in capitalization can provide them with many fundamentally favorable opportunities,” they concluded.
“Our base case for the U.S. economy is ‘growth despite tariffs,'” said Solita Marcelli of UBS Global Wealth Management. “While we will monitor risks closely, we do not believe the tariff measures outlined in our base case scenario would be sufficient to derail U.S. growth. We also don’t think such tariffs would prevent inflation from continuing to fall from current levels, allowing the Federal Reserve to cut rates by 50 basis points later this year. »
The latest dovish inflation figures are “game-changing” and should provide a Goldilocks backdrop for risk assets over the coming months, according to HSBC.
The bank’s strategists led by Max Kettner expect only very slight declines in the coming months and would take advantage of any decline to increase exposure to risky assets. They say sentiment and positioning always sends a buy signal.
Miller Tabak’s Matt Maley says while many headlines related to Trump’s policies could have a big impact on markets, earnings season – and forecasts – are also expected to be extremely important.
“With the market as expensive as it is today, one wonders if the positive aspects of these new policies have not already been priced into the stock market,” Maley said. “It will therefore be particularly important that the overall earnings situation does not begin to deteriorate significantly.”
Company strengths:
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Apple Inc. received two downgrades from analysts, the latest sign that soft iPhone sales are becoming a growing concern for investors as artificial intelligence fails to act as a hoped-for growth catalyst.
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Charles Schwab Corp. reported results that beat Wall Street estimates as it continues to attract record inflows to its retail brokerage.
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3M Co. expects its profits to rise this year as its CEO, William Brown, works to advance his plan to turn around the sprawling manufacturer.
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DR Horton Inc. reported first-quarter earnings per share that beat analysts’ average estimate.
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MicroStrategy Inc. shareholders have voted for a 30-fold increase in the number of Class A common shares authorized to help finance the company’s purchase of Bitcoin.
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B. Riley Financial Inc. has suspended dividends on a pair of its preferred shares, suspending cash payments to some investors while it prepares to repay another round of notes maturing next month.
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Adidas AG reported better-than-expected results amid a sustained boom in retro sneakers like the Samba and increased sales of its dwindling stock of Yeezy shoes.
Key events this week:
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American Conference Board leading index, Wednesday
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Samsung Galaxy ‘Unpacked 2025’ event, expected to unveil new flagship phone models, on Wednesday
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Euro zone consumer confidence, Thursday
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Unemployment claims in the United States, Thursday
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Bank of Japan policy meeting, Friday
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Eurozone Manufacturing and Services PMI HCOB, Friday
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American University of Michigan Consumer Sentiment, Existing Home Sales, S&P Global Manufacturing & Services PMI, Friday
Some of the main market movements:
Actions
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The S&P 500 rose 0.9% as of 4 p.m. New York time
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The Nasdaq 100 rose 0.6%
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The Dow Jones Industrial Average rose 1.2%
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The MSCI World index increased by 0.8%
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The Russell 2000 index rose 1.8%
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The Bloomberg Magnificent 7 Total Return Index rose 0.3%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro was little changed at $1.0420
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Sterling was little changed at $1.2339.
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The Japanese yen was little changed at 155.52 per dollar
Cryptocurrencies
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Bitcoin rose 3.5% to $106,109.48
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Ether rose 0.9% to $3,311.52
Bonds
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The 10-year Treasury yield fell seven basis points to 4.56%
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The German 10-year yield fell two basis points to 2.51%
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The UK 10-year yield fell seven basis points to 4.59%
Raw materials
This story was produced with the help of Bloomberg Automation.
–With the help of Cécile Gutscher, Margaryta Kirakosian, Chiranjivi Chakraborty, Julien Ponthus and Aya Wagatsuma.
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