Dow soars over 500 points — as Wall Street not fearing Trump tariffs yet

Wall Street’s main indexes closed higher on Tuesday, with the S&P 500 and the Dow hitting their highest in more than a month, as investors assessed Donald Trump’s first actions as president and breathed relief that he did not start his second term with blanket tariff increases.

The blue-chip Dow Jones Industrial Average surged 537.98 points, or 1.2%, to 44,025.81.

The S&P 500 gained 0.9%, and the Nasdaq advanced 0.6%.

Trump did not lay out any concrete plans on the universal tariffs and additional surcharges on close trade partners as previously promised, but said he was thinking about imposing duties on Canadian and Mexican goods as early as Feb. 1.

While investors remain cautious about Trump’s tariff policies, which could spark a global trade war and fresh inflation pressures, brokerage Goldman Sachs lowered its forecast for a universal tariff this year to 25% from about 40% seen in December.

“There was a definite relief and a bit of surprise that tariffs weren’t called out in the first round of executive actions that happened yesterday,” said Carol Schleif, chief market strategist at BMO Private Wealth. “Markets are leaping to the conclusion, probably rightfully so, that the administration will take a more nuanced approach.”

Investors hope the new administration will use the threat of tariffs as a negotiating tactic and take “a scalpel and not a sledgehammer to tariffs,” Schleif said.

Last week, the S&P 500 and Dow registered their biggest weekly percentage gains since early November, helped by strong bank earnings and signs that underlying inflation was cooling.

Schleif also noted a healthy broadening of the market rally on Tuesday, with the more domestically focused small-cap Russell 2000 index outperforming larger cap indexes, with a 1.9% gain and a more than one-month high.

Shares of automakers, which are most sensitive to tariffs due to their vast supply chains, rose. Ford gained 2.5%, while General Motors added 5.7%, following a rating upgrade by Deutsche Bank.

During the first year of Trump’s earlier administration, the S&P 500 rose 19.4%. The benchmark index rose nearly 68% through his four-year term, but saw bouts of volatility, stemming in part from a trade war Trump fought with China.

However, inflation is still above the Federal Reserve’s 2% target, and fueling worries that Trump’s policies could delay the central bank’s pace of monetary policy easing.

Economists see the Fed leaving borrowing costs unchanged when it meets next week and traders see the first interest rate cut coming in July, according to data compiled by LSEG.

In other individual stocks, Walgreens fell 9% after the Justice Department accused the pharmacy operator of filling unlawful prescriptions for addictive painkillers and other drugs.

Moderna rose more than 5% after securing $590 million from the US to hasten development of its bird flu vaccine.