Stock Market Rises Post-Holiday
The S&P 500 and Nasdaq also rose as U.S. trading resumed after the Martin Luther King Jr. holiday. Stocks staged an impressive rally, with the Dow and S&P 500 closing 1.2% and 0.9% higher, respectively. The tech-heavy Nasdaq Composite ended the day 0.6% up.
Market Reaction to Trump's Tariff Strategy
President Donald Trump's initial moves on tariffs seemed to calm markets, contributing to the broad rally. Trump refrained from enacting immediate tariffs, which could have caused headaches for both stocks and bonds. He mentioned the possibility of imposing 25% duties on imports from Canada and Mexico starting February 1 but has not yet signed any executive orders.
Bond Yields Decline
Bond yields took a breather, with the 10-year yield dropping by 0.037 percentage points to 4.573%. This decline in yields benefits existing bondholders by increasing the value of bonds in their portfolios.
AI Sector Boost
Towards the end of the trading session, AI-related stocks received a boost from news of a potential $500 billion investment in U.S. AI infrastructure through a joint venture. The Global X Artificial Intelligence & Technology ETF closed near its record high at $40.08.
Gold Prices Reach New Highs
Gold futures closed 0.4% higher at $2,755 an ounce, marking the third-highest close on record. This increase comes amid heightened interest in precious metals futures, with gold prices remaining resilient despite tariff concerns not materializing into formal actions.
Broad Market Gains
More than 80% of stocks in the S&P 500 saw gains today, reflecting strong market breadth. This positive performance could be interpreted as a vote of confidence in Trump's administration. However, energy stocks faced losses, with the S&P 500 Energy index down 0.6%.
Energy Sector Declines
Despite energy being the best-performing sector this year, with a 10% gain through the last close, it experienced a pullback. Factors include profit-taking and the potential impact of Trump's policies, such as withdrawing from the Paris Agreement and opening up areas for drilling.
Conclusion
The stock market displayed a robust performance, buoyed by Trump's cautious approach to tariffs and a potential major investment in AI. While most sectors thrived, energy stocks faced challenges, reflecting a complex market landscape driven by policy expectations and broader economic factors.
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