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Dow climbs as Wall Street overcomes fear of Trump tariffs

Wall Street's top headliners on Tuesday as investors assessed Donald Trump's first actions as president and breathed a sigh of relief that he did not start his second term with an across-the-board tariff hike. Indices closed higher, with the S&P 500 and Dow hitting one-month highs.

The blue-chip Dow Jones Industrial Average rose 537.98 points, or 1.2%, to 44,025.81.

The S&P 500 rose 0.9% and the Nasdaq rose 0.6%.

On Tuesday, the day after Trump took office, the Dow rose more than 500 points, or 1.2%. Getty Images

President Trump did not offer specific plans for previously promised universal tariffs or additional levies on close trading partners, but said: thinking about mepcarry out the mission Products from Canada and Mexico will be available as early as February 1st.

Investors remain wary of President Trump's tariff policies, which could trigger a global trade war and new inflationary pressures, but brokerage Goldman Sachs has updated its outlook for this year's universal tariffs to the lowest in December. The rate was lowered from approximately 40% to 25%.

“There was a definite sense of relief and a bit of surprise that yesterday's first wave of executive action did not result in tariffs,” said Carol Schleiff, chief market strategist at BMO Private Wealth. said. “Markets are jumping to the conclusion, perhaps unsurprisingly, that the administration will take a more nuanced approach.”

Schleif said investors are hoping the new administration will use the threat of tariffs as a negotiating tactic and “put a scalpel on tariffs, not a sledgehammer.”

Last week, the S&P 500 and Dow Jones Industrial Average posted their biggest weekly gains since early November, buoyed by strong bank earnings and signs that underlying inflation is cooling.

Goldman Sachs has lowered its outlook for universal tariffs this year to 25% from about 40% in December. President Trump signed the executive order on Monday (above). AP

Schleiff also noted a healthy expansion of market gains on Tuesday, with the more domestically focused small-cap Russell 2000 index outperforming the large-cap index, rising 1.9% for the first time in more than a month. He also mentioned that the price had reached a new high.

Shares of automakers, which are most sensitive to tariffs because of their vast supply chains, rose. Ford rose 2.5% and General Motors rose 5.7% after Deutsche Bank upgraded its ratings.

On Tuesday, paraphernalia supporting President Trump was displayed at a mailbox on the floor of the New York Stock Exchange. AP

In the first year of the Trump administration, the S&P 500 rose 19.4%. The benchmark index rose nearly 68% over his four-year term, but there were brief fluctuations due in part to President Trump's trade war with China.

But inflation remains above the Fed's 2% target, raising concerns that President Trump's policies will slow the Fed's pace of monetary easing.

Economists expect the Federal Reserve to keep borrowing costs unchanged at next week's meeting, and traders expect the first rate cut to occur in July, according to data compiled by LSEG.

Among other stocks, Walgreens fell 9% after the Justice Department accused the pharmacy owner of writing illegal prescriptions for addictive painkillers and other drugs.

Moderna rose more than 5% after securing $590 million from the U.S. to speed up development of its avian influenza vaccine.

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