The stock market showed resilience on Tuesday, with major indices reaching new highs despite concerns about potential tariffs proposed by President-elect Donald Trump. The Dow Jones Industrial Average advanced 123.74 points, or 0.28%, to close at 44,860.31, while the S&P 500 added 0.57% to close at 6,021.63, both setting new intraday and closing records. The Nasdaq Composite also gained 0.63% to reach 19,174.30.
Trump’s proposed tariffs on products from Mexico, Canada, and China did not seem to faze market participants, who either expected the tariffs to be more negotiating tactics than actual implementation or considered them already priced in by traders. Jamie Cox, managing partner at Harris Financial, stated, “Markets have become a lot more comfortable with the prospects of these tariffs being more bluster and negotiating tactics than actual implementation.”
However, some sectors and individual stocks struggled, with automaker stocks sliding approximately 2.6% and beer company Constellation Brands falling more than 3%. Mexican President Claudia Sheinbaum Pardo indicated that any new tariffs on her country would be met with retaliatory tariffs on U.S. exports to Mexico, causing the iShares MSCI Mexico ETF to shed more than 2%.
US stocks maintain upswing despite tariffs
The Federal Reserve’s recent meeting minutes, released Tuesday afternoon, suggested that interest rate cuts might be gradual. The minutes stated, “Participants anticipated that if the data came in as expected, with inflation continuing to move down sustainably to 2% and the economy remaining near maximum employment, it would be likely appropriate to move gradually toward a more neutral stance of policy over time.”
Gregory Daco, chief economist at EY-Parthenon, warned that the economic outlook for next year would depend more on potential tariffs than on tax cuts.
He emphasized that the drag from tariffs on growth is likely to outweigh any boosts from tax cuts, even if the Tax Cuts and Jobs Act were to expire. In other news, shares of semiconductor manufacturer Semtech rose nearly 17%, marking their best day since March 2020, after the company exceeded Wall Street’s third-quarter estimates and provided strong guidance for the current quarter. However, material and energy stocks weighed on the S&P 500, with significant losses in companies like Dupont, Mosaic, Occidental Petroleum, and Devon Energy.
Despite signs of the stock market becoming overbought, Canaccord Genuity analyst Michael Welch recommended that investors remain bullish and position for further upside amid a favorable Fed rate cut cycle, a seasonal period, and a relatively young bull market. The U.S. market will be closed on Thursday for the Thanksgiving holiday and will close early on Friday, with trading volume expected to remain light.
