On Tuesday, the US stock market demonstrated its strength, with the Dow Jones Industrial Average and S&P 500 achieving new all-time highs despite worries surrounding the tariffs proposed by President-elect Donald Trump. The Dow increased by 123.74 points, or 0.28%, concluding at 44,860.31. Likewise, the S&P 500 rose by 0.57%, finishing at 6,021.63, and the Nasdaq Composite climbed 0.63% to wrap up at 19,174.30.
Recently, Trump outlined his intentions to impose tariffs on goods from Mexico and Canada, along with an extra 10% tax on items from China. Still, investors seemed to overlook the potential ramifications of these measures. Jamie Cox, managing partner at Harris Financial, remarked, “Markets have grown increasingly optimistic about the likelihood that these tariffs are more about posturing and negotiating tactics rather than actual enforcement.”
Although the overall market posted gains, some individual stocks and funds faced challenges as investors assessed the potential repercussions of Trump’s proposed measures.
Automobile manufacturer stocks dipped, and an alcohol producer renowned for its Mexican beers, such as Corona and Modelo, saw their shares tumble by over 3%. Mexican President Claudia Sheinbaum Pardo stated that her nation would respond with tariffs on U.S. goods, prompting the Mexican IPC Index to decline by more than 2%. According to Gregory Daco, chief economist at EY-Parthenon, next year’s economic outlook will be more influenced by tariffs than tax reforms.
Even though the U.S. economy is strong and projected to grow at 2% by 2025, the enforcement of Trump’s proposed tariffs may have a more significant impact on the economic forecast than alterations to tax policies.
Stock Market Stays Strong Despite Tariffs
In company-related developments, Semtech’s stock soared nearly 17%, marking its strongest performance since March 2020.
The semiconductor firm surpassed Wall Street’s expectations for third-quarter earnings and revenue, providing a robust forecast for the current quarter. Despite indications that the stock market may be trending toward overvaluation, analysts maintain an optimistic outlook. Michael Welch from Canaccord Genuity noted in a communication to clients that tactical indicators do not signal “a reason for alarm” even with the market hovering at record levels.
Furthermore, US-China trade relations continued to worsen after China declared a ban on exports of critical high-tech materials to the US. This announcement comes after the US Commerce Department widened its restrictions on Chinese technology firms subject to export controls. Investors are on the lookout for noteworthy news regarding the US job market, which includes the October job openings data, weekly unemployment claims, and the November employment figures.
These reports could offer insights for forthcoming economic support measures. The stability in US markets occurs amidst persistent geopolitical tensions and investor anticipation of vital economic statistics. Developments in US-China trade interactions and forthcoming job market reports are likely to influence the subsequent movements of the market.
