Despite Lingering Tariff Concerns, Stocks Get a Tech Boost

Stocks declined as the U.S. moved forward with steep tariffs on automakers, amplifying concerns about an escalating trade war. This overshadowed stronger-than-expected economic growth data, adding to market unease. Equities fell for the second consecutive day, though the S&P 500 trimmed its losses with gains in large-cap stocks like Tesla Inc. and Amazon.com Inc.

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Meanwhile, major automakers, including Toyota Motor Corp., Stellantis NV, Mercedes-Benz Group AG, and General Motors Co., saw their shares take a hit.

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The bond market signaled concerns over inflationary pressures linked to tariffs, as short-term Treasury yields outperformed longer-term bonds. The yield on the 10-year Treasury note inched up by one basis point to 4.36%.

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Revised data showed the U.S. economy grew at a stronger pace in the fourth quarter than initially estimated, driven by solid corporate profits. Additionally, the Federal Reserve’s preferred inflation gauge—the personal consumption expenditures (PCE) price index, excluding food and energy—was revised down to 2.6%, suggesting a more moderate inflationary environment than previously thought.

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Despite this, Bret Kenwell of eToro noted that the data is unlikely to provide much reassurance to investors, who are focused on the current economic outlook rather than past performance. “Investors will be looking for inflation readings that meet or beat expectations, along with strong employment data, to feel more confident about the economic backdrop,” Kenwell said.

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While economic strength may give companies some buffer to absorb higher costs from tariffs, both businesses and consumers remain wary of the broader consequences of a trade conflict. President Donald Trump formalized a 25% tariff on auto imports and warned of stricter penalties against the European Union and Canada if they retaliate against U.S. trade policies.

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Market indices reflected the uncertainty, with the S&P 500 slipping 0.1%, the Nasdaq 100 declining 0.2%, and the Dow Jones Industrial Average down 0.2%. Meanwhile, European stocks also struggled, with the Stoxx Europe 600 falling 0.6%. Globally, the MSCI World Index dropped 0.2%, reflecting broader market weakness.

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In the currency market, the Bloomberg Dollar Spot Index remained relatively stable. The euro strengthened 0.3% to $1.0785, and the British pound also gained 0.3%, reaching $1.2929. However, the Japanese yen edged down 0.1% to 150.78 per dollar.

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Cryptocurrencies experienced a decline, with Bitcoin falling 0.9% to $86,520.56, while Ether dropped 0.3% to $2,005.19.

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In the bond market, Germany’s 10-year yield fell three basis points to 2.77%, while Britain’s 10-year yield rose four basis points to 4.77%. The commodity market also saw movement, with West Texas Intermediate (WTI) crude slipping 0.3% to $69.43 per barrel. In contrast, spot gold climbed 0.8%, reaching $3,043.83 an ounce, as investors sought safe-haven assets amid market uncertainty.

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Despite the upbeat economic revisions, ongoing trade tensions and concerns about inflation weighed on investor sentiment. Traders remain focused on upcoming economic data, particularly inflation figures and employment reports, to gauge the potential impact on Federal Reserve policy and market direction.

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