Wall Street Rises Amid US-China Trade Optimism and Energy Sector Gains

Investor relief emerges following tariff delays and strong corporate earnings / Reuters 

Wall Street experienced notable gains on Tuesday as optimism surrounding trade relations between the U.S. and China, combined with a strong performance by energy stocks, lifted the market. The three major indexes closed higher, with the Dow Jones Industrial Average increasing by 134.13 points to 44,556.04, the S&P 500 climbing 43.31 points to 6,037.88, and the Nasdaq Composite surging by 262.06 points to 19,654.02.

Energy stocks were a key driver, with the sector rising by 2.18%. However, utilities and consumer staples saw declines as investors shifted focus to higher-growth segments. Corporate earnings continued to buoy investor sentiment, with 76.8% of S&P 500 companies that have reported thus far surpassing analyst expectations, according to an S&P earnings scorecard.

President Donald Trump’s recent decision to delay tariffs on imports from Mexico and Canada provided a sense of relief to investors. Initially, Trump had planned to impose a 25% tariff on goods from these countries but agreed to a 30-day pause in exchange for concessions related to border security and crime control. Despite the new 10% tariffs on Chinese imports taking effect on Tuesday, market participants viewed the pause as a signal of potential progress in trade negotiations.

Sam Stovall, chief investment strategist at CFRA Research, commented, "The president’s quick decision to offer a 30-day stay for Mexico and Canada suggests he might be seeking a swift declaration of victory without major changes in trade dynamics. Investors are hopeful but remain cautious as we wait to see what unfolds over the next month."

The strong performance of individual stocks also contributed to Tuesday’s market rally. Data analytics company Palantir Technologies saw its shares soar by 24% after it projected better-than-expected revenue for both the first quarter and the full year. Alphabet shares rose 2.6% ahead of its earnings report but later declined over 7% in after-hours trading due to disappointing revenue in its cloud computing division.

Conversely, some stocks faced significant losses. Estee Lauder shares plunged by 16.1% after the cosmetics giant reported a weak quarter and announced job cuts amid declining demand. Similarly, Merck shares fell by 9.1% following the announcement of halted Gardasil shipments to China, which the company said would negatively impact its 2025 revenue. PayPal's stock dropped 13.2% as shrinking operating margins weighed on investor sentiment.

While some sectors thrived, others faced headwinds from geopolitical tensions. Illumina shares declined by 5.3%, and PVH Corp, the parent company of Calvin Klein, fell nearly 1% after being placed on China’s “unreliable entity list.” These developments highlight ongoing economic uncertainties despite positive movements in other market areas.

Adding to investor concerns, three Federal Reserve officials issued warnings on Monday about the inflationary risks posed by trade tariffs. One official emphasized that the uncertainty surrounding price trends could justify a slower pace of interest rate reductions. Additionally, a Labor Department report revealed that U.S. job openings for December stood at 7.6 million, below the forecasted 8 million.

Despite these concerns, market breadth remained strong. On the New York Stock Exchange, advancing issues outnumbered decliners by a ratio of 2.81-to-1. The Nasdaq also saw a positive trend, with 3,035 stocks rising compared to 1,323 declining. A total of 121 stocks reached new highs on the NYSE, while 61 hit new lows. Trading volume across U.S. exchanges was 13.39 billion shares, slightly below the 20-day average of 15.53 billion shares.

As investors continue to monitor developments in global trade, corporate earnings, and monetary policy, Tuesday’s market gains underscore the complex interplay between geopolitical dynamics and economic performance. Whether these gains will be sustained hinges on forthcoming trade talks, corporate results, and economic data in the weeks ahead.