NEW YORK (AP) — Wall Street is taking President Donald Trump’s latest threat on tariffs in stride, on the whole, and U.S. stocks are drifting higher on Monday.
The S&P 500 was up 0.4% in early trading, coming off a losing weekbookended by worries about how potential tariffs could push up inflation and threaten the economy. The Dow Jones Industrial Average was up 160 points, or 0.4%, as of 9:35 a.m. Eastern time, and the Nasdaq composite was 0.8% higher.
The bond market was also holding relatively firm, with Treasury yields ticking only a bit lower after Trump said over the weekend that he will impose 25% tariffs on all steel and aluminum imports, as well as other import duties later in the week.
Fear around tariffs has been at the center of Wall Street’s moves recently, and experts say the market likely has more swings ahead. But Trump has shown that he can be just as quick to pull back on such threats, like he did with 25% tariffs he announced on Canada and Mexico, suggesting they may be merely a negotiating chip rather than a true long-term policy.
Trump, of course, has already gone ahead with 10% tariffs on China. Even there, though, he said he would also delay the tariffs on millions of small packages — often from fast-fashion firms such as Temu and Shein — until customs officials can figure out ways to impose them. The small packages have previously been exempt from tariffs.
The Chinese tariffs will likely affect which industries are winners and losers on Wall Street, but they won’t necessarily drag the entire market lower, according to Michael Wilson and other strategists at Morgan Stanley. A big market-wide impact would be more likely “if we were to see sustained tariffs on a range of countries including 25% tariffs on Mexico and Canada.”
Stocks of U.S. steel and aluminum producers indeed jumped in early Monday trading, banking on expectations they could be winners of steel tariffs, while the overall index remained relatively calm.
Nucor rose 5.7%, Cleveland-Cliffs jumped 14.2% and Alcoa climbed 2.8%.
Companies that use lots of steel, meanwhile, were mixed. General Motors fell 0.8%, Ford Motor lost 0.7% and Whirlpool rose 0.2%.
In the meantime, earnings reports from big U.S. companies are also helping to drive trading.
McDonald’s climbed 4.8% even though it reported profit and revenue for the end of 2024 that was just shy of analysts’ expectations. Investors focused instead on better-than-expected strength for its restaurants outside the United States, particularly in the Middle East, Japan and other markets with licensed McDonald’s locations.
In the bond market, the yield on the 10-year Treasury fell to 4.46% from 4.50% late Friday. The yield on the two-year Treasury, which more closely tracks expectations for what the Federal Reserve will do with short-term interest rates, fell by a similar amount. It eased to 4.25% from 4.29%.
The Fed cut its main interest rate sharply at the end of last year, but traders have been sharply curtailing their expectations for more in 2025, in part because of fears that higher inflation from tariffs could tie the central bank’s hands. While lower rates can give a boost to the economy and investment prices, they can also fan inflation higher.
Fed Chair Jerome Powell will be offering testimony before Congress later this week, where he could offer more hints about what the Fed is thinking. In December, it sent financial markets sharply lower after indicating it may cut rates only twice this year. Now, some traders and economists think it may not cut at all.
Reports are also coming this week on inflation, which could further drive the Fed’s actions. On Wednesday, economists expect a report to show prices for eggs, gasoline and other living costs for U.S. consumers were 2.9% higher in January than a year earlier.
In stock markets abroad, indexes rose modestly across much of Europe and Asia.
Tokyo’s Nikkei 225 was virtually unchanged after Japan’s government reported a record current account surplus last year.
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AP Business Writer Yuri Kageyama contributed.
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