Wall Street rebounded on Tuesday as investors looked beyond escalating trade tensions to focus on strong corporate earnings and resilient market performance. The S&P 500 and Nasdaq Composite climbed higher, led by a surge in Palantir and other big tech names, while the Dow Jones posted moderate gains. Despite fresh tariffs imposed by China on select US imports, investor sentiment steadied after the US paused new levies on Canada and Mexico. European and Asian markets also found footing as global investors reassessed the impact of ongoing trade disputes. Meanwhile, declining job openings and falling Treasury yields signalled potential economic softness, adding to speculation about future Federal Reserve policy moves.

Key Takeaways:

  • S&P 500 and Nasdaq Rebound on Tech Strength: The S&P 500 rose 0.72%, closing at 6,037.88, while the Nasdaq Composite surged 1.35% to 19,654.02. The gains were driven by a 24% jump in Palantir shares after the company posted fourth-quarter earnings that beat analyst expectations. 
  • Dow Jones Climbs Over 130 Points: The Dow Jones Industrial Average added 134.13 points or 0.3%, closing at 44,556.04, rebounding from the previous session’s decline. The index remained subdued compared to the tech-heavy Nasdaq and S&P 500, as industrial and financial stocks saw mixed performance amid ongoing tariff uncertainties.
  • European Markets Recover Amid Tariff Uncertainty: The pan-European Stoxx 600 rose 0.22%, regaining ground after Monday’s losses. France’s CAC 40 gained 0.66%, while Germany’s DAX advanced 0.4% to 21,511. Italy’s FTSE MIB led European gains, climbing 1.4% to 36,719.40, while the UK’s FTSE 100 remained under pressure, slipping 0.15% to 8,570.77. The slight recovery was driven by optimism that Europe might avoid new US tariffs, following the trade relief extended to Canada and Mexico.
  • Asia-Pacific Markets Rally While China Retaliates on US Tariff Pause: Asian equities surged as Trump’s decision to delay tariffs on Mexico and Canada boosted market confidence. Japan’s Nikkei 225 gained 0.72%, closing at 38,798.37, while the Topix index added 0.65% to 2,738.02. South Korea’s Kospi climbed 1.13% to 2,481.69, with the Kosdaq jumping 2.29% to 719.92. India’s Nifty 50 and BSE Sensex advanced 1.19% and 1.12%, respectively. However, Australian markets erased earlier gains, with the S&P/ASX 200 closing flat at 8,374. Meanwhile, in response to US trade measures, China announced new tariffs of up to 15% on key American exports, including coal and liquefied natural gas, while increasing duties on crude oil, farm equipment, and selected vehicles by 10%. These tariffs mark the latest escalation in the ongoing US-China trade dispute.
  • US Job Openings Decline Sharply in December: The number of job openings in the US fell to 7.6 million, the lowest since September, missing forecasts of 8 million. The decline of 556,000 openings signals a cooling labour market, with the job openings-to-available workers ratio dropping to 1.1 to 1. Professional and business services saw the largest decrease, with openings falling by 225,000, while private education and health services declined by 194,000.
  • Treasury Yields Decline Amid Trade Tensions: The yield on the 10-year US Treasury dropped more than 3 basis points to 4.511%, while the 2-year yield slipped nearly 5 basis points to 4.216%. Investors sought safe-haven assets amid concerns that the escalating US-China trade conflict could slow global economic growth.
  • Oil Prices Struggle as Trade War Escalates, Iran Sanctions Loom: West Texas Intermediate (WTI) crude fell 0.63% to $72.70 per barrel, reversing early losses after news that Trump plans to restore his “maximum pressure” campaign on Iran, aiming to cut Iranian oil exports to zero. Meanwhile, Brent crude gained 0.32% to $76.20 per barrel as traders assessed the impact of sanctions on global oil supply.

FX Today:

  • EUR/USD Holds Above Key Support, Struggles to Reverse Losses: The EUR/USD pair edged higher by 0.38%, closing at 1.0382, as it attempted to recover from last week’s low of 1.0300. Despite today’s slight rebound, the pair remains under pressure, having fallen from 1.0750 in early January. While EUR/USD managed to stay above 1.0350, a significant recovery remains elusive. A push toward 1.0500 could occur if bullish momentum picks up, but failure to hold current levels may lead to a retest of 1.0300, with further downside potential toward 1.0200 if selling pressure intensifies. The broader trend remains bearish, with the pair still trading below the 50-day moving average at 1.0418.
  • GBP/USD Struggles to Regain Strength After Prolonged Decline: GBP/USD posted a modest gain of 0.28%, closing at 1.2484, as it attempted to stabilise following weeks of weakness. However, the pair remains well below its January high of 1.2770, with resistance at the 50-day moving average of 1.2506 limiting further upside. If price fails to reclaim this level, a renewed push lower toward 1.2400 is likely, with stronger support seen at 1.2300, last tested in November. On the upside, a decisive break above 1.2500 would be needed to shift sentiment in favour of the bulls, with the next resistance level standing at 1.2600. 
  • Australian Dollar Edges Higher Amid Delayed Tariffs and Soft US Data: AUD/USD advanced 0.50% to 0.6257, recovering from last week’s test of 0.6200. The rebound comes amid trade relief following Trump’s decision to delay tariffs on Mexico and Canada, though concerns over China’s economic slowdown and expectations of an RBA rate cut continue to weigh on sentiment. Despite today’s gains, AUD/USD remains firmly in a downtrend, having declined from 0.6700 in December. The 50-day moving average at 0.6297 is acting as a major resistance level, and unless price breaks above this threshold, further downside remains likely. If AUD/USD fails to hold above 0.6250, another test of 0.6200 is expected, with a potential drop toward 0.6100 if sellers regain control. On the upside, a break above 0.6300 could trigger a short-term rally toward 0.6400, but the broader trend remains bearish.
  • Canadian Dollar Surges as Markets Recover from Tariff Fears: The Canadian Dollar (CAD) made a strong move higher on Tuesday, with USD/CAD falling 0.75% to 1.4316, marking one of its biggest single-day declines in weeks. The sharp drop followed a rejection at 1.4700, where selling pressure intensified. Now trading near the 50-day moving average at 1.4294, the pair sits at a key decision point. A break below this level could accelerate losses toward 1.4200, with the 100-day moving average at 1.4032 acting as the next major support. Despite the recent pullback, USD/CAD remains in an overall uptrend, having rallied from 1.3700 in late 2024. If buyers re-enter near current levels and push price back above 1.4400, the pair could attempt another run toward 1.4600. However, failure to hold above 1.4300 could lead to a deeper correction, bringing the 200-day moving average at 1.3852 into focus.
  • Gold Hits All-Time High as US-China Trade War Escalates: Gold continued its impressive rally, rising 1.04% to $2,843.29, marking another fresh all-time high. The metal has now gained over 150 points in the past two weeks, as escalating trade tensions between the US and China drive safe-haven demand. Gold remains well-supported above the 50-day moving average at $2,677.60, reinforcing the bullish momentum. After breaking through key resistance at $2,800, the next significant target lies at $2,900, a level not seen since late 2024. While gold’s near-term outlook remains firmly bullish, a pullback cannot be ruled out following such a steep rally. A retracement toward $2,800 would be a natural test of the breakout level, with stronger support near $2,750. If buyers fail to defend these levels, a deeper correction could see gold retest the 50-day moving average at $2,677.60, aligning with previous consolidation zones. 

Market Movers:

  • Palantir Technologies Surges on Strong Earnings Report: Palantir Technologies (PLTR) soared 23%, leading gains in both the S&P 500 and Nasdaq 100, after reporting fourth-quarter revenue of $827.5 million, significantly surpassing analyst expectations of $775.9 million. 
  • Mega-Cap Tech Stocks Rally, Lifting the Market: Tech giants provided strong upward momentum for the broader market, with Alphabet (GOOGL), Apple (AAPL), and Tesla (TSLA) all closing up more than 2%. Meanwhile, Nvidia (NVDA), Amazon.com (AMZN), and Meta Platforms (META) gained over 1% each, helping offset broader concerns about ongoing trade tensions.
  • Spotify Technology Surges on User Growth Beat: Spotify Technology (SPOT) surged 13% after reporting fourth-quarter monthly active users of 675 million, surpassing the consensus estimate of 664.94 million. 
  • Estee Lauder Plummets on Weak Outlook: Estee Lauder (EL) plunged 16%, leading losses in the S&P 500, after forecasting third-quarter organic net sales to decline between 8% and 10%, far worse than the expected 5.08% drop. The weak outlook spurred heavy selling pressure.
  • Illumina and PVH Corp Slide as China Blacklists Companies: Illumina (ILMN) and PVH Corp (PVH) dropped 5% and 1%, respectively, after China placed them on a blacklist of entities, citing violations of market transaction principles and actions detrimental to Chinese firms. 

Markets rebounded on Tuesday as investors looked past escalating trade tensions to focus on strong earnings from key technology stocks, with Palantir surging 24% and mega-cap tech names like Nvidia, Amazon, and Meta posting solid gains. The S&P 500 rose while the Nasdaq Composite jumped, driven by renewed optimism despite China imposing retaliatory tariffs of up to 15% on US imports. European stocks managed modest gains after Trump delayed new levies on Canada and Mexico, easing some trade war fears, while Asian markets rallied as sentiment improved. With the January US nonfarm payrolls report on the horizon and trade policies continuing to evolve, market volatility is likely to persist in the days ahead as traders assess the broader economic outlook.