(Bloomberg) — One business day into President Donald Trump's second term, it's clear there is new momentum in the stock market, at least for now. Stocks rallied on Tuesday, but the main gains came from the one thing the president didn't do: enact sweeping tariffs on major trading partners.
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The unexpected lack of action (President Trump had long promised to tax Chinese goods by up to 60% and Mexican and Canadian goods by nearly half that on day one) sent US Treasury yields lower and the S&P 500 index at 0.9. % rose. The small-cap Russell 2000 index rose 1.9% as a risk-on atmosphere attracted traders.
The tariff moratorium appears to last at least another week, but as traders noted on Monday, market-moving remarks from President Trump could come at any time. After taking office, the new president issued a slew of executive orders, swaying companies in fields as diverse as electric cars, private prison operators, and space exploration. Big tech stocks were shocked mid-session after White House officials teased pending announcements on AI spending.
Taken together, this event shows that President Trump intends to play a visible role in American business and finance, with an almost unique ability to sway markets based on bizarre comments and social media posts. It reminded me clearly. Measures of stock market volatility were subdued on Tuesday, but traders mainly expect President Trump's leadership style to result in frequent disruptions to keep up with policy pronouncements.
Steve Sosnick, chief strategist at Interactive Brokers, said every president “impacts the stock market, and what we learned from his first term is that President Trump has more influence than any other president. I think it means we have,'' he said, adding that Trump sees markets as having “more clarity” as having influence over them. An important indicator of how he's doing. “During his previous term, we as market participants became very accustomed to a wide range of comments, if not policy announcements, that could be made at any time on specific topics.”
Investors are closely monitoring further moves by the administration and assessing how they will impact the market. JPMorgan Chase & Co. has established a “war room” for just this purpose. It is not yet clear how the policy proposals will be developed. For example, the stock prices of companies facing tariff risk have largely avoided that threat so far.
However, just over 24 hours after the new administration took office, the internal effects on the stock market were far-reaching. While President Trump's non-compliance with tariffs boosted the market, Tesla's stock price, along with other electric car makers, has slumped after the president directed his administration to consider eliminating EV subsidies and incentives. The decline weighed on Elon Musk's company.
Meanwhile, crypto stocks also fell after the U.S. Securities and Exchange Commission announced plans for a virtual currency-focused task force headed by Hester Peirce, also known as “Crypto Mom.” Investors are looking forward to the Trump administration's policies favoring digital assets.
Chris Murphy, co-head of derivatives strategy at Susquehanna International Group, said: “There's been a movement to sell news in hot areas of the market that were expected to rise in value when they first started, like Tesla and cryptocurrencies.'' .
EV slide
Tesla fell 0.6%, paring an earlier decline of about 5%, making it the third-largest weight on the S&P 500 index on Tuesday. This comes after President Trump directed his administration to consider eliminating EV subsidies and other auto-friendly policies. EV startups Rivian Automotive and Lucid Group also lagged, with the Bloomberg Electric Vehicle Index down 1.2%.
Although President Trump did not specifically order the Environmental Protection Agency to rewrite the rules, his directive sets the stage for actions that could slow the spread of electric vehicles in the United States.
space stock jump
Shares of space companies soared after President Trump's pledge to “pursue our manifest destiny for the stars” by landing American astronauts on Mars.
Intuitive Machines, which built and operated the lunar lander that marked a historic victory for private space exploration, saw its stock rise 24%, marking its best day since September, while Rocket Lab USA and Rocket Lab USA Redwire Inc. also rose. It rose by double digits and hit a new all-time high.
Trump media stumbling block
Trump Media and Technology Group shares fell 11% in their worst trading since election week. President Trump's social media company has been volatile, with its shares recently up 22% as of January 13th.
tariff tensions
President Trump's tariff plans hurt Canadian energy and industrial stocks, but not as badly as feared. Meg Energy and Athabasca Oil, for example, fell but held on to some of their gains from Monday. Similarly, shares of aircraft maker Bombardier fell 5.3% on Tuesday after rising 7.2% in the previous session.
The Nasdaq Golden Dragon China Index closed 0.4% lower as President Trump did not announce additional tariffs on Chinese goods.
“President Trump likes to negotiate in public, but it remains to be seen which bold tariff statements will lead to policy changes,” said Eric Sterner, chief investment officer at Apollon Wealth. He expects the new president to continue “weaponizing” the strength of the U.S. economy to force concessions from other countries, but not to the point of causing inflation.
Cryptocurrency makes plans
Major crypto stocks received no lasting shock from the SEC's announcement, even though Bitcoin rose about 4% on Tuesday to trade at about $107,000. MicroStrategy Inc., Coinbase Global Inc., Hive Digital Technologies Ltd. and crypto miner Riot Platforms Inc. all closed lower.
Bloomberg reported last week that the president-elect is considering an executive order designating cryptocurrencies as a “national priority.” Before the inauguration, he and his wife Melania unveiled a personal meme coin.
–With assistance from Natalia Kniazhevich and Esha Dey.
(Updates to add overall closing price.)
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