US stocks extended gains on President Donald Trump's retreat from tariff threats while traders' appetite for artificial intelligence bets returned.
The S&P 500 rose 0.7% as of 9:36 a.m. in New York. The Nasdaq 100 gained 0.7% as chipmakers and AI-linked names led market gains. Haven assets including gold and Treasuries fluctuated, signaling caution lurking beneath the surface of the rally.
Sentiment improved after NATO's secretary general said a breakthrough over Greenland focused on the broader issue of security in the Arctic region, instead of a discussion of the territory's sovereignty with the US president.
“It's a rapid fire TACO trade. This one didn't even last a full two trading days,” said Jay Woods. But the chief market strategist at Freedom Capital Markets fears a boy-that-cried-wolf scenario for the market, where Trump's threats “become reality and investors get fooled by buying the dip and it doesn't snap back — especially this quickly.”
JPMorgan Chase & Co. strategists said there's been little evidence of foreign investors pulling back from US assets despite the flare-up in geopolitical tensions, reinforcing the view that global capital remains anchored to American markets.
Equities also got a boost after data showed the US economy remains resilient. Inflation-adjusted gross domestic product increased at a revised 4.4% annualized rate, the fastest in two years, according to Bureau of Economic Analysis data. Applications for US unemployment benefits were little changed last week, steadying at low levels after a volatile holiday season.
Technology shares drew added support from a resurgence in the AI narrative with chip stocks rallying after upbeat commentary from Nvidia Corp. and reports that Anthropic has more than doubled its revenue run rate since last summer reinforced optimism around sustained AI spending.
Separately, discussions around fresh funding for OpenAI and plans by Alibaba to list its chip unit highlighted the intensity of capital flowing into the sector.
Memory and storage stocks are the market's hottest trade, but investors aren't sweating the companies' suddenly elevated valuations as the AI buildout transforms their cyclical nature.
Still, investors should remain alert to macro risks after a three-year bull run that pushed US equities to repeated records. Goldman Sachs Group Inc.'s leading trading floor voices warn that the constructive backdrop for stocks is increasingly challenging given the length of investor positioning, the return of headline roulette and a bond market that needs monitoring.
Tony Pasquariello, a partner and global head of hedge-fund coverage at Goldman noted that both professionals and households have added “a significant amount of risk,” while “headline roulette around tariffs has returned, global bond markets are having a moment in the washing machine.”
Options traders are also bracing for the next shoe to drop in the standoff. Traders are preparing for extreme price swings, with some betting on a significant decline in the stock market and others preparing for a sharp rebound if tensions with Europe over Greenland deescalate further. Open interest in the Cboe Volatility Index's call options relative to puts near the highest level since March.
On the earnings front, Abbott Laboratories shares slumped after the company forecast a first-quarter profit that was lower than Wall Street expected. Shares of Procter & Gamble Co. rose despite growth in a key sales metric stagnating in the last quarter while volume slipped, showing that US consumers spent cautiously in the final months of the year. And General Electric Co. shares fell as strong adjusted earnings per share outlook for 2026 failed to impress investors after a surge in the stock. Analysts described operating profit guidance as potentially conservative.
Among other single stock movers, Alphabet Inc. shares gained after Raymond James upgraded the Google parent to strong buy from outperform.
Venture Global Inc. jumped after the company won a dispute with Spain's Repsol SA involving the sale of liquefied natural gas shipments from its export plant in Louisiana.
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