Tariff Talk Shakes Currencies As Apple Whipsaws: Markets Wrap

A placid day in markets turned volatile before the close Thursday as President Donald Trump’s vow to slap 25% tariffs on Mexico and Canada sent currencies of both countries tumbling. Stocks buckled then recovered from the late-session shock, while Apple Inc.’s results threatened more turbulence after hours.

A $328 billion exchange-traded fund tracking the Nasdaq 100 (QQQ) fluctuated after the close as Apple whipsawed. In regular trading, equities were buoyed by a surge in consumer spending. The Mexican peso slid 1.1% and Canada’s dollar fell as much as 1.2% after Trump said he would follow through on trade restrictions Saturday. Oil futures got a short-lived jolt, spiking as much as 1.5% from its settlement price. The gain quickly evaporated as the president said he will decide Thursday night on whether to include crude in the tariffs.

While tech came under renewed pressure on Thursday, economically sensitive corners of Wall Street such as small caps outperformed. The S&P 500’s equal-weighted version — one that gives Target Corp. as much clout as Nvidia Corp. — climbed 1%, fueling hopes the bull market would broaden out.

That would help reduce concerns around the “concentration risk” from the tech megacaps that have come to dominate benchmark indexes. Those jitters were on full display earlier this week when a artificial intelligence-model from Chinese startup DeepSeek added to doubts on whether valuations of the technology that has powered the torrid rally from the market lows would be tough to justify.

“This bull market is still ‘breathing,’ and we should expect more stock participation in the months ahead if the economy cooperates and rates quiet down,” said Callie Cox at Ritholtz Wealth Management. It’s not that the AI story is “doomed,” but “there are so many opportunities in unloved sectors that have been ignored for so long.”

While the bulk of the growth in S&P 500 earnings continues to come from the high-flying tech megacaps, growth is projected to come in at the slowest pace in almost two years. Robust results are a much-needed driver for US stocks after as Wall Street dialed back expectations for interest-rate cuts this year.

Upbeat outlooks from industry heavyweights like Tesla Inc., Meta Platforms Inc. and International Business Machines Corp. also buoyed trading. While the majority of companies have so far exceeded expectations, disappointing forecasts have been met with selloffs, with Microsoft Corp. and United Parcel Service Inc. being the latest examples.

The S&P 500 rose 0.5%. The Nasdaq 100 added 0.5%. The Dow Jones Industrial Average gained 0.4%. A gauge of the “Magnificent Seven” megacaps was little changed. The Russell 2000 of small firms gained 1.1%.

The yield on 10-year Treasuries declined was little changed at 4.52%. The Bloomberg Dollar Spot Index was flat.

“The US consumer has been unstoppable, supported by wealth creation, a strong labor market, and lending. Still, inflation is still a bit too high for the Fed’s liking and the bar to a March rate cut is rising,” said Ellen Zentner at Morgan Stanley Wealth Management.

Monthly US household spending figures on Friday will likely point to momentum heading into 2025. Economists also expect a slight pickup in the personal consumption expenditures index from a month earlier. 

“Friday’s PCE is likely to show that inflation is still elevated and above the Fed’s target, and it comes at a time when markets are hyper jittery about a trifecta of other issues, including big tech, AI and Federal Reserve uncertainty,” said Carol Schleif at BMO Private Wealth.

The US economy expanded at a solid pace at the end of 2024, despite drags from a strike at Boeing Co. and much leaner inventory investment. Consumer spending, which comprises the largest share of economic activity, advanced at a 4.2% pace — the first time since late 2021 that outlays have exceeded 3% in consecutive quarters.

To Neil Birrell at Premier Miton Investors, while the data is all a bit historic now, the economy is “doing just fine.”

“Overall, the economy is on firm footing heading into 2025, which should support risk assets given the strong linkage between economic growth and corporate profits,” said Josh Jamner at ClearBridge Investments.

At Strategas, Don Rissmiller says that even if that pace is starting to slow, the Federal Reserve can likely continue its policy pause for a few more months — to gather more data.

Weekly jobless claims data released at the same time unexpectedly declined, a sign of labor market strength.

The Federal Open Market Committee on Wednesday left interest rates unchanged as expected — after cutting them at each of their three previous meetings since September — and indicated that stalled progress toward lower inflation warranted a patient approach.

“‘Remaining patient’ and ‘no rush’ seem to be how the FOMC plans on operating into the middle of the year, with a bumpy path for inflation giving the Fed pause before reading too much into gains that could prove idiosyncratic,” said Marvin Loh and Hope Allard at State Street Global Markets.

• The collision between an American Airlines Group Inc. regional jet and a military helicopter near Ronald Reagan airport in Washington left no survivors on board the two aircraft, authorities said, making it one of the most deadly US air disasters in decades.

• Southwest Airlines Co. warned that costs will climb faster than expected as it grapples with heavy labor expenses, undercutting gains from strong demand for leisure travel.

• United Parcel Service Inc. projected annual revenue well below expectations, telling investors that a long-awaited rebound in demand for its parcel services won’t arrive this year.

• The US Federal Trade Commission is probing whether Uber Technologies Inc. and Lyft Inc. illegally coordinated to limit driver pay in New York City, according to documents reviewed by Bloomberg News.

• Tesla Inc. plans to launch a long-promised robotaxi business and get back to growing vehicle sales after a year of decline in both deliveries and earnings.

• Microsoft Corp. said its cloud-computing business will continue to grow slowly in the current quarter as the company struggles to build enough data centers to handle demand for its artificial intelligence products.

• Meta Platforms Inc. Chief Executive Officer Mark Zuckerberg exuded confidence in his company’s artificial intelligence strategy, saying 2025 will be a “really big year” in which its AI assistant will become the most widely used in the industry.

• International Business Machines Corp. projected strong revenue growth in the new fiscal year and a jump in AI-related bookings.

• Caterpillar Inc. warned that revenues will be “slightly lower” in 2025 as demand concerns weigh on the outlook of the heavy equipment maker.

• Mastercard Inc. reported earnings that beat estimates as the firm diversifies beyond its traditional payment network into anti-fraud services, data analysis and global money movement.

• Rogers Communications Inc. beat analysts’ fourth-quarter estimates as wireless service revenue gained and subscribers bought more expensive devices.

• Cigna Group reported its fourth quarter was hit by surprisingly high costs from plans employers use to cover catastrophic medical claims.

• US personal income & spending, PCE inflation, employment cost index, Friday

Some of the main moves in markets:

• The S&P 500 rose 0.2% as of 11:46 a.m. New York time

• The Nasdaq 100 was little changed

• The Dow Jones Industrial Average rose 0.3%

• The Stoxx Europe 600 rose 0.9%

• The MSCI World Index rose 0.4%

• Bloomberg Magnificent 7 Total Return Index fell 0.6%

• The Russell 2000 Index rose 1.2%

• S&P 500 Equal Weighted Index rose 1%

• The Bloomberg Dollar Spot Index fell 0.2%

• The euro was little changed at $1.0423

• The British pound was little changed at $1.2462

• The Japanese yen rose 0.5% to 154.37 per dollar

• Bitcoin rose 1.9% to $105,759.33

• Ether rose 3.9% to $3,263.55

• The yield on 10-year Treasuries was little changed at 4.52%

• Germany’s 10-year yield declined seven basis points to 2.51%

• Britain’s 10-year yield declined seven basis points to 4.56%

• West Texas Intermediate crude rose 0.5% to $72.95 a barrel

• Spot gold rose 1.2% to $2,793.57 an ounce