(Jan 22): One trading day into Donald Trump’s second term and it’s clear the stock market has a new driver, at least for now. Share prices rallied Tuesday, with gains largely generated by one thing the president didn’t do: enact sweeping tariffs on major trading partners.

The unexpected lack of action — Trump had long promised levies of as much as 60% on Chinese goods and almost half that on Mexican and Canadian products on Day 1 — sent treasury yields tumbling while the S&P 500 Index climbed 0.9%. The small-capitalisation Russell 2000 Index surged 1.9% as a risk-on vibe captivated traders. 

The tariff reprieve looks like it will last at least another week, although as traders were reminded Monday, market-moving pronouncements from Trump can come at any time. The new president unleashed a barrage of executive orders after being sworn in, moving companies in sectors as varied as electric vehicles, private prison operators and space exploration. Big tech shares got a jolt at mid-session after a White House official teased an pending announcement on AI spending. 

Taken together, it was a stark reminder that Trump intends to play a visible role in American business and finance, with an almost unique ability to send markets careening based on an odd comment or social media post. The stock market’s measure of volatility was subdued Tuesday, but traders largely expect Trump’s leadership style to provide frequent scrambles to keep up with policy proclamations.

Any president “influences the stock market, and I think what we learned from his first term is that President Trump does so more than most,” said Steve Sosnick, chief strategist at Interactive Brokers, adding that Trump sees markets “more explicitly” as a key indicator of how he’s doing. “During his prior term, those of us in the markets got very accustomed to a wide range of commentary if not policy announcements that could come at any given time at any given subject.”

Investors are closely watching further moves from the administration to assess how they will affect markets. JPMorgan Chase & Co is establishing a “war room” for just this purpose. Exactly how the policy proposals will play out isn’t clear yet. For example, shares of companies with tariff risks are largely shrugging off the threats for now. 

But just over 24 hours into the new administration, the impact underneath the hood of the stock market was far-reaching. While Trump’s tariff inaction boosted markets, Tesla Inc’s stock price fell alongside other electric-vehicle makers after the president ordered his administration to consider removing subsidies for EVs and policies favoring the vehicles, which weighed on Elon Musk’s company. 

Meanwhile, stocks linked to cryptocurrencies fell even after the US Securities and Exchange Commission announced a plan for a cryptocurrency-focused task force headed by Hester Peirce, who has been nicknamed “Crypto Mom.” Investors are eagerly awaiting policies from the Trump administration that favor digital assets.

“We are seeing some sell the news in hot parts of the market like Tesla and crypto that were priced for more going into the inauguration,” said Chris Murphy, co-head of derivatives strategy at Susquehanna International Group.

Tesla closed down 0.6%, after paring earlier declines of almost 5%, and was the third biggest weight on the S&P 500 Tuesday after Trump directed his administration to consider removing EV subsidies and other policies that favor the vehicles. EV startups Rivian Automotive Inc and Lucid Group Inc also slumped, and the Bloomberg Electric Vehicles Index slid 1.2%.

While Trump didn’t explicitly order the Environmental Protection Agency to rewrite the rules, his directive sets the stage for actions that could slow the adoption of EVs in the US. 

Shares of space companies leaped on Trump’s promise to “pursue our manifest destiny into the stars” by landing American astronauts on Mars. 

Intuitive Machines Inc, which built and operated a moon lander that notched a historic win for private-sector space exploration, saw its stock jump 24% to post its best day since September, while Rocket Lab USA Inc and Redwire Corp both rode double-digit gains to record highs. 

Trump Media & Technology Group Corp shares tumbled 11% in their worst session since the week of the election. Trump’s social media company has been prone to wild swings, with the stock gaining 22% as recently as Jan 13.

Trump’s tariff plans hit Canadian energy and industrial stocks, but not as badly as feared. For example, Meg Energy Corp and Athabasca Oil Corp fell but held onto part of their gains from Monday. Similarly, shares of aircraft maker Bombardier Inc slumped 5.3% on Tuesday after rising 7.2% in the previous session. 

The Nasdaq Golden Dragon China Index closed down 0.4%, as Trump hasn’t announced tariffs on Chinese goods. 

“While Trump likes to negotiate in public, it remains to be seen which bold tariff statements translate into policy change,” said Eric Sterner, chief investment officer at Apollon Wealth. He expects the new president to continue to “weaponise” the US economy’s strength in an attempt to coerce concessions from other nations, but doesn’t see him going far enough to trigger inflation. 

Major crypto-linked stocks didn’t get a lasting jolt from the SEC’s annoucement, even as bitcoin gained roughly 4% Tuesday and traded around US$107,000. MicroStrategy Inc, Coinbase Global Inc, Hive Digital Technologies Ltd and crypto miner Riot Platforms Inc all closed lower. 

Bloomberg reported last week that the incoming president was considering an executive order designating cryptocurrencies a “national priority.” Before the inauguration, he and his wife Melania unveiled personal memecoins. 

Uploaded by Isabelle Francis