US stocks rallied Tuesday as investors digested President Donald Trump’s trade policy plans on his first full day in office for his second term. The Dow Jones Industrial Average jumped about 1.2%, or 538 points. The S&P 500 gained 0.9% and the Nasdaq Composite rose 0.6%.
In an Oval Office ceremony Monday, Trump said his administration would impose a 25% tariff on Mexico and Canada starting February 1. However, he did not mention tariffs on China, a major US trading partner. Trump noted that the extensive tariffs he implemented during his first term largely remained in place under former President Joe Biden.
Trump also suggested that the US would impose tariffs on China if it did not approve a deal on TikTok, which faces a potential US ban over national security concerns. President Trump’s Inauguration Day policy announcements on tariffs were more benign than expected,” said Alec Phillips, chief US political economist at Goldman Sachs, in a Tuesday note. Jamie Cox, managing partner at Harris Financial Group, added in an email that the market “seems to have overcome its tariff tantrum.”
Morgan Stanley analysts said Trump’s focus on tariffs as early as February 1 reminds investors that “vigilance is warranted” as markets try to track Trump’s rapid-fire policy decisions.
Despite the tariff uncertainty, Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management, remained optimistic about the economy. Tariff risks, US fiscal policy concerns, and shifting expectations around inflation and Fed policy are likely to keep equity markets volatile in the near term. But we believe it is most likely that resilient US economic activity, solid earnings growth, lower borrowing costs, and the potential for greater capital markets activity will lead stocks higher over the balance of 2025,” Marcelli said.
She predicted the S&P 500 would reach 6,600 by December. The dollar, which had been rising in recent months in anticipation of Trump’s second term, edged lower Tuesday following the tariff news. US benchmark West Texas Intermediate (WTI) crude oil fell 1.7% after Trump announced executive orders aimed at rolling back regulations.
The yield on the 10-year Treasury note declined, a positive sign for stocks.
Stocks rally as Trump reveals tariffs
The Russell 2000 index of smaller companies gained 1.85%.
Investors also welcomed news that OpenAI CEO Sam Altman will meet with President Trump and other tech leaders to announce a major private sector investment in US artificial intelligence infrastructure. Oracle shares surged about 7% on news of its upcoming partnership with OpenAI and Softbank for the investment. From Trump’s November election until inauguration day, the S&P 500 rose nearly 4%, according to Sam Stovall, chief investment strategist at CFRA Research.
Stovall noted that positive performance during the “post-election honeymoon period” has historically signaled gains in both the first 100 days of a presidency and the full year almost 80% of the time. “While Tuesday is the first trading session under Trump 2.0, markets are forward-looking, and much of the optimism over the potential for tax cuts and deregulation is already priced in,” said Clark Geranen, chief market strategist at CalBay Investments. Geranen expects market volatility as investors react to Trump’s policy announcements, adding that January will be key for gauging the market’s direction for the year.
The VIX, Wall Street’s fear gauge, dropped 6% as easing fears drove the market. Charles Schwab jumped nearly 6% early Tuesday after reporting better-than-expected earnings. Apple shares fell more than 3% following an analyst downgrade.
Netflix is slated to report fourth-quarter earnings after the closing bell. Bitcoin traded around $106,000 Tuesday afternoon after hitting a record high above $109,000 on Monday. Acting Securities and Exchange Commission Chairman Mark Uyeda announced the creation of an SEC “crypto task force” focused on cryptocurrency regulation.
Trump did not mention bitcoin in his inaugural address. Wall Street was closed Monday for Martin Luther King Jr. Day. This is a developing story and will be updated.