Market Overview
U.S. stocks staged a recovery on Tuesday, shrugging off lingering fears of tariff-related economic disruptions. The S&P 500 recouped most of its losses from Monday, bolstered by gains in technology and artificial intelligence (AI) stocks. The Dow Jones Industrial Average rose 85 points, or 0.2%, while the Nasdaq Composite advanced by 1%.
Tech and AI Stocks Lead the Rally
Tech stocks fueled the market's upward momentum, with Palantir Technologies Inc. surging over 24% after surpassing Wall Street expectations. The company's strong performance renewed enthusiasm for AI-related investments. Additionally, Nvidia Corp. and Alphabet Inc. posted sharp gains, contributing to the broader tech rally.
Meta Platforms continued its winning streak, heading for its 12th consecutive gain, a record-breaking achievement surpassing its previous 11-day streak in September 2015. Alphabet’s stock was on track for its seventh record close of the year, while Amazon aimed for its fourth record close, just days before its quarterly earnings report.
Treasury Yields Hit 2025 Lows
Long-dated Treasury yields fell to their lowest closing levels of the year after disappointing factory order data for December. The 10-year Treasury yield dropped to 4.511%, and the 30-year yield settled at 4.747%. This decline followed a report indicating weaker-than-expected factory orders, which dampened economic growth expectations.
Tariff Developments and Oil Prices
The trade dispute between the U.S. and China continued to impact market sentiment. The U.S. implemented a 10% tariff on Chinese imports, prompting Beijing to retaliate with a 15% tariff on U.S. coal and liquefied natural gas, as well as a 10% tariff on crude oil.
Despite these tensions, S&P Global Commodity Insights described China’s response as “neutral” for oil prices, signaling a potential opening for negotiations rather than escalation. U.S. crude exports to China remain minimal, at approximately 180,000 barrels per day in 2024. West Texas Intermediate crude for March delivery fell by 46 cents, settling at $72.70 a barrel.
Sector Performance
Energy stocks led the market recovery, with the S&P 500’s energy sector gaining 1.9%. Technology stocks followed closely with a 1.4% increase. The Russell 2000, a small-cap stock index, rose by 1%, while the Nasdaq Composite advanced by 1.2%.
Gold Prices and Trade Policy Uncertainty
Gold prices reached an intraday high of $2,877.10 per ounce on Tuesday, driven by concerns over U.S. trade policy and global market instability. Jake Hanley, managing director at Teucrium, noted that ongoing trade tensions and geopolitical uncertainty could push gold prices toward the $3,000 mark in the first half of the year.
Peter Grant, senior metals strategist at Zaner Metals, highlighted that central banks remain in easing mode, providing additional support for gold. The Federal Reserve appears unlikely to adjust interest rates until midyear, further fueling gold's upward trajectory.
S&P 500 Technical Recovery
The S&P 500 filled the gap created by Monday’s sharp decline, rising by 0.4% to 6,016.79 after reaching an intraday high of 6,040.41. This recovery reassured investors amid ongoing tariff concerns and softened labor market data, which kept hopes alive for future Federal Reserve rate cuts.
Employment Data and Market Response
Data released on Tuesday showed a decline in job openings for December, signaling potential weakness in the labor market. Despite this, the S&P 500 Equal Weight ETF clung to modest gains, rising less than 0.1%. FactSet data indicated that Big Tech stocks, including Nvidia and Alphabet, contributed significantly to the market's resilience.
Conclusion
Tuesday’s market performance demonstrated investor optimism despite ongoing trade tensions and weak economic indicators. The strong performance of tech and AI stocks, alongside muted responses to China tariffs, suggested a potential stabilization in market sentiment. With Meta leading the charge and gold nearing record highs, investors continue to navigate a complex landscape shaped by geopolitical and economic uncertainties.
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