The U.S. stock market experienced a tumultuous start to the week as the Dow Jones Industrial Average fell over 600 points, or nearly 1.5%, following President Trump's announcement of new tariffs on Mexico, Canada, and China. However, investor sentiment shifted later in the day when Canadian Prime Minister Justin Trudeau revealed that Trump agreed to pause the tariffs against Canada for at least 30 days. This decision led to a rise in stock futures Monday night, with futures tied to the Dow trading 189 points higher.
The initial announcement of tariffs caused the Dow to slip by 0.28%, while the S&P 500 fell 0.76%. The Nasdaq Composite experienced a more significant drop of 1.2%. Despite these losses, the major averages ended Monday well off their lows after news of the tariff pause.
Ross Mayfield, an investment strategist at Baird, commented on the market dynamics:
"We are in a bull market fueled by a strong U.S. consumer and rising corporate profitability. Until something cracks with this narrative, I believe dips are buyable," – Ross Mayfield, investment strategist at Baird.
Stock futures responded positively to the pause in tariffs against Canada, with S&P futures adding 0.7% and Nasdaq 100 futures gaining 0.8%. This change in investor sentiment was further supported by Trump's announcement that duties on Mexican goods would also be paused for one month.
As investors navigate these developments, they are also focusing on upcoming economic data and earnings reports. The main event this week is anticipated to be Friday's January nonfarm payrolls report. Additionally, the Job Openings and Labor Turnover Survey for December is due on Tuesday, along with durable orders.
Corporate earnings reports are also drawing attention. Alphabet, Merck, and PepsiCo are scheduled to release their earnings on Tuesday, while Amazon and Eli Lilly will report later in the week.
Mayfield noted that Trump's use of trade as leverage for non-trade concessions adds to the complexity of the current market environment.