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By Nicholas Jasinski | Tuesday, January 21
Trump 2.0. Stocks rose on the first day of Donald Trump's second term, lifted by a slate of well-received earnings reports. The lack of major surprises in the new president's initial wave of executive actions likely helped too.
That was particularly the case on the tariff front. Rather than immediately slapping broad tariffs on imports from several countries, as threatened, Trump's day-one orders merely opened the door to a variety of trade-policy actions down the road.
Barron's Matt Peterson has the details:
Trump is proceeding cautiously on tariffs. The president told reporters in the Oval Office Monday evening that the Canada and Mexico tariffs could arrive as soon as Feb. 1. But tariffs on China, and plans for universal tariffs, haven’t been decided on.
Trump’s executive orders help lay the groundwork for aggressive action on tariffs, should he decide to proceed. An order titled “America First Trade Policy” orders U.S. officials to review “any unfair trade practices by other countries.” That and other provisions effectively load the tariff gun. Congress has given the president broad powers to defend the U.S. economy through tariffs, but those policies are more likely to survive legal scrutiny if they follow official reports and investigations.
That slow-rolling of the tariff rollout was good enough for markets. The S&P 500 rose 0.9% on the day, the Dow Jones Industrial Average added 1.2%, and the Nasdaq Composite gained 0.6%.
There's a path ahead in which the most disruptive Trump campaign tariff proposals end up never being enacted. At the very least, any meaningful impact on the economy as a result of the new administration's trade policies appears to be a ways off.
Reporting has suggested a lively internal debate among Trump's circle about what tariffs' ultimate purpose is.
Here's Macquarie Group strategist Thierry Wizman writing today:
[This] likely reflects disagreement within Trump's administration about how to use tariffs and when to implement them. That is, there is a camp of persons (lead by [Treasury Secretary-nominee] Scott Bessent) that would like to see tariffs used to extract concessions—including national security concessions and structural trade concessions—rather than to be implemented for their purported direct benefits (a lower trade deficit, lower federal budget deficit). But to admit this outright reduces Trump's negotiating power, so Trump must always be in “threat mode” to be effective as a negotiator.
Wizman sees permanently increased tariffs on China as much more likely than on U.S. allies, who he expects will negotiate resolutions with the administration on trade, security, and other matters.
The first deadline is coming up: 25% tariffs on Mexico and Canada kick in on Feb. 1, Trump threatened. Those would hit nearly 30% of U.S. imports, or some $910 billion, and a higher share of automotive and crude oil imports.
Trump's other day-one actions included declaring a “national energy emergency” that will help reduce barriers to oil-and-gas production in the U.S. The price of crude oil slid 2.6% today, to $75.89 a barrel. Energy stocks in the S&P 500 lost 0.5%, the only sector of the index to lose ground.
Back on Wall Street, a number of major companies released fourth-quarter results. More on that below.
DJIA: +1.24% to 44,025.81
S&P 500: +0.88% to 6,049.24
Nasdaq: +0.64% to 19,756.78
The Hot Stock: Vistra +8.5%
The Biggest Loser: Walgreens Boots Alliance -9.2%
Best Sector: Industrials +2.1%
Worst Sector: Energy -0.5%
The Earnings Bell Is Ringing
We're only a tenth of the way through fourth-quarter earnings season, but so far so good. Companies that have reported so far haven beaten their consensus earnings estimates by 10% on average, according to data from BofA Securities—which is double the beat rate this time last quarter.
The strong start is largely thanks to a stellar set of reports from the nation's largest banks, which dominate the early reports. The group is on pace for 17% earnings per share growth for the fourth quarter, per BofA, while the overall S&P 500 is on track for 9% growth.
Today's highlights included solid results from 3M, continuing the conglomerate's recent winning streak. Earnings and revenue both beat Wall Street's expectations.
Al Root has the details:
Comparable sales, which exclude the sale of some discontinued chemical products, grew 2.1% year over year, the fastest growth rate for the company in recent history.
Positive growth is what investors want to see. It hasn’t been easy for 3M lately. In the first quarter, organic sales grew by about 1%, the first positive reading in four quarters. In the second quarter, organic sales grew by about 1.2%. In the third quarter, organic sales grew 1%.
Looking ahead, 3M expects comparable sales to grow by about 2.5%, although foreign exchange will drag that rate down a little. 3M sells a lot of things overseas and the U.S. dollar has been strong lately.
It's a sorely needed turnaround for 3M. The stock jumped 4.2% today, extending its one-year gain to 63%. But 3M shares remain lower than they were five years ago.
Read the rest of Al's 3M report here.
After the closing bell, Netflix delivered another quarter for the books. The streaming pioneer added its most subscribers in a quarter ever, while beating estimates for both the top and bottom lines.
Management credited the second season of Squid Game and the Jake Paul-Mike Tyson fight, which was live streamed on Netflix, for boosting paid subscribers by 18.9 million during the quarter. It was nearly double what the company expected and more than the prior two quarters' growth combined.
What's more, Netflix said it will be raising prices for its U.S. customers. Management sees no shortage of demand for the streaming service, it seems.
Netflix stock was up more than 10% in after-hours trading this evening. Tae Kim has all the details here.
Also reporting late today was United Airlines, which...wait for it...reported better-than-expected fourth-quarter earnings and revenue and added a first-quarter forecast that surpassed analysts’ consensus estimate.
United shares were rising in after-hours trading. Find Barron's coverage of the report here.
It will be another busy few days of results this week, before things really pick up next week—roughly 100 S&P 500 companies are scheduled to report.
The Calendar
Abbott Laboratories, Amphenol, Discover Financial Services, GE Vernova, Halliburton, Johnson & Johnson, Kinder Morgan, Procter & Gamble, Steel Dynamics, Teledyne Technologies, Textron, and Travelers report earnings tomorrow.
What We're Reading Today
- When Bonds Make Sense in Your Portfolio—and When Cash Is the Better Option
- Apple Stock Gets Hit With a Downgrade. Why These Analysts Are Worried.
- Nvidia, Chip Makers Rise After Trump Revokes AI Order. What It Means for the Industry.
- Ramaswamy Leaves DOGE. It’s Up to Elon Musk to Save Trillions of Dollars.
- The Fed’s Other Monetary-Policy Tool Could Soon Be in the Spotlight
- Low Taxes Under Trump Sweeten Roth Conversions
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