S&P 500 Rises 1% As Dollar Falls On Tariff Delay: Markets Wrap

(Bloomberg) -- Stocks came within a striking distance of their all-time highs while the dollar got hit as President Donald Trump moved to impose reciprocal tariffs — but not right away.

All major groups in the S&P 500 rose, with the gauge up 1%. The greenback dropped against all of its developed-market counterparts. Treasuries rebounded from their worst slide since December. Big tech outperformed as Tesla Inc. and Nvidia Corp. each rallied over 3%. Apple Inc. gained 2% as chief Tim Cook said the “newest member of the family” is coming on Feb. 19. Meta Platforms Inc. advanced for a 19th straight day.

While Trump signed a measure directing the US Trade Representative and Commerce secretary to propose new levies on a country-by-country basis, the process could take a while to complete. Howard Lutnick, his nominee to lead the Commerce Department, said all studies should be complete by April 1 and that Trump could act immediately afterward.

The decision not to implement tariffs right away could be seen as an opening bid for negotiation — following the same strategy Trump already used to extract concessions from Mexico and Canada — rather than a sign he's committed to following through.

“President Trump is seeking to level the global playing field by implementing reciprocal tariffs against nations that maintain levies on the US,” Jose Torres at Interactive Brokers said earlier this week. “But investors are starting to realize that much of the talk is hardly going to come to fruition with the rhetoric increasingly appearing to be a negotiation tactic.”

To Ian Lyngen at BMO Capital Markets, Trump has left open the opportunity for the US's major trade partners to come to the negotiating table with a counteroffer. But, there are enough moving parts to this process that it is challenging to have a precise take on how the final tariff structure will develop.

“We're cautious against rushing too quickly to the conclusion that the market is in a position to move beyond the trade war saga for the time being,” Lyngen said.

Wall Street traders looked past hot inflation data amid signs the Federal Reserve's favored price gauge will be softer than expected. The producer price index rose in January by more than forecast. However, several of its components that feed into the Fed's preferred inflation measure — the personal consumption expenditures price index — were more favorable last month, registering declines in most health-care items and in airfares. The next PCE will be released on Feb. 28.

The S&P 500 topped 6,100. The Nasdaq 100 added 1.4%. The Dow Jones Industrial Average gained 0.8%. The Bloomberg Magnificent Seven Total Return Index climbed 1.8%. The Russell 2000 gained 1.2%. In late hours, Applied Materials Inc. gave a lukewarm revenue forecast. Airbnb Inc. issued an upbeat outlook.

The yield on 10-year Treasuries fell nine basis points to 4.53%. The Bloomberg Dollar Spot Index lost 0.7%. The yen gained 1.1% on safe-haven appeal, while the Canadian dollar touched a new high for the year.

Despite the greenback's slide on Thursday, the long-term view on the dollar remains positive, according to the Bloomberg dollar index's fear-greed gauge.

“With the number of rate cuts being pared back for this year and other central banks moving forward with cuts abroad, dollar strength may be here to stay,” said Ryan Grabinski at Strategas.

Using history as a guide, a rising greenback has favored domestic equities relative to international and emerging, Grabinski noted. On the other hand, a weaker US dollar is more favorable for equities in general and historically has been the greatest tailwind for emerging markets.

“To the extent to which the dollar continues to strengthen, it will weigh on companies with high foreign-sales exposure,” he said.

The two sectors with the greatest foreign-revenue exposure are technology and materials — with 59% and 53% of revenues sourced from abroad, respectively, according to Grabinski. On the opposite end of the spectrum is the utilities sector, with less than 2% of revenue sourced from abroad.

Meantime, Goldman Sachs Group Inc.'s Scott Rubner says a bearish trade is looming for US equities.

The market is increasingly crowded and dip-buying is running out of steam, Rubner said. The managing director for global markets and tactical specialist was rightfully bullish heading into 2025, while touting an upcoming negative turn. In a note this week, he said this was his “last bullish email” for the first quarter.

“Everyone is in the pool, including retail traders, 401k inflows, start of the year allocations, and corporates,” he said. “The flow demand dynamics are quickly changing, and we are approaching negative seasonals.”

Key events this week:

• Eurozone GDP, Friday

• US retail sales, industrial production, business inventories, Friday

• Fed's Lorie Logan speaks, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 1% as of 4 p.m. New York time

• The Nasdaq 100 rose 1.4%

• The Dow Jones Industrial Average rose 0.8%

• The MSCI World Index rose 1.3%

• Bloomberg Magnificent 7 Total Return Index rose 1.8%

• The Russell 2000 Index rose 1.2%

Currencies

• The Bloomberg Dollar Spot Index fell 0.7%

• The euro rose 0.8% to $1.0462

• The British pound rose 0.9% to $1.2560

• The Japanese yen rose 1.1% to 152.76 per dollar

Cryptocurrencies

• Bitcoin fell 1.4% to $96,306.46

• Ether fell 1.1% to $2,654.24

Bonds

• The yield on 10-year Treasuries declined nine basis points to 4.53%

• Germany's 10-year yield declined six basis points to 2.42%

• Britain's 10-year yield declined five basis points to 4.49%

Commodities

• West Texas Intermediate crude was little changed

• Spot gold rose 0.8% to $2,928.62 an ounce