Markets React to Softening Trade Tariff Policy

Monday, February 3, 2025

Monday’s trading session resulted in slight negative closes across major indexes, but there’s good news here: whereas the Dow finished the trading day -122 points, it was -400 a half hour before this morning’s open. The S&P 500 ended -45 at the close, but an improvement from the -100 early this morning; the Nasdaq lost -235 points Monday, but this morning it was -400; the small-cap Russell 2000 completed regular trading -27, cutting the -52 ahead of the open nearly in half.

An almost immediate retraction of a 25% tariff on imported goods from Mexico prodded this relief trade. Before this announcement from the White House, it appeared a tariff war had begun with our neighbors to both the south and north fielding harsh potential export taxes. We now see there is likely some wiggle room between today’s aggressive salvo and a finalized deal via negotiation.

Economic Prints During the Trading Day

Final S&P Manufacturing PMI for January came in moderately ahead of expectations: +51.2 versus +50.1 reported a month ago, and importantly above the +50 threshold that determines growth from contraction. ISM Manufacturing, also for January, reported a stronger-than-expected +50.9%, nearly a full point above the +50.0 anticipated and +49.2% from the December print. ISM Manufacturing today reached highs not seen since September of 2022.

Manufacturing has had a very tough slog over the past few years — going back to the Covid pandemic which began five years ago. The “America First” agenda of the current Trump administration hopes to bring more jobs back home, and the Chips Act from the previous administration may yet bring a boost to goods productivity in this country. But talk is cheap; action is usually expensive.

Earnings Reports After the Bell: PLTR, NXPI, CLX