Wall Street Rises After Trump Backs Off Tariffs and U.S. Economic Data Reassures Investors

BY COMFORT OGBONNA

Wall Street’s main indexes climbed on Thursday, marking the second consecutive day of gains, as investors responded to U.S. President Donald Trump’s reversal of tariff threats on European allies and data showing continued strength in the American economy. The gains followed a volatile week in which markets had been shaken by fears of a transatlantic trade dispute.

Thursday’s advance came on the heels of the S&P 500’s largest daily percentage gain in two months, recorded on Wednesday after Trump stepped back from his plan to impose tariffs as leverage to acquire Greenland. He indicated that a framework to resolve the dispute over the Danish territory was within reach, easing investor concerns. Markets had fallen sharply on Tuesday, when the tariff threat first emerged, leaving the S&P 500 and Nasdaq Composite down roughly 0.4% for the week, while the Dow Jones Industrial Average remained essentially flat.

Gregg Abella, CEO of Investment Partners Asset Management, described the current environment for money managers as unpredictable, saying, “It’s very weird to wake up every day as a money manager and you do not know whether it is Christmas morning or Friday the 13th.” He added that geopolitical issues are forcing greater focus on managing portfolios through periods of volatility and highlighted the growing importance of diversification across names, sectors, and asset classes.

The risk-on sentiment was reflected in the performance of smaller companies as well. The Russell 2000 index, which tracks small-cap stocks, rose 0.8% to close at a record high, demonstrating investors’ increased appetite for risk and broader market participation. The Dow Jones Industrial Average gained 306.78 points, or 0.63%, to 49,384.01, the S&P 500 advanced 37.73 points, or 0.55%, to 6,913.35, and the Nasdaq Composite added 211.20 points, or 0.91%, to finish at 23,436.02.

Earnings season is accelerating and could further influence market sentiment, as companies report on how consumer demand, rising costs, and an uneven macroeconomic backdrop affected their year-end performance. The so-called Magnificent Seven stocks, which carry significant weight in major indexes, are scheduled to release earnings next week, with investors closely watching to gauge the sustainability of their growth narratives. On Thursday, all seven posted gains, led by Meta, which surged 5.7%, and Tesla, which climbed 4.2%.

Banking stocks have largely performed well during the earnings cycle, though some experienced pullbacks. Huntington Bancshares fell 6% after posting fourth-quarter results affected by costs from recent acquisitions. Fifth Third Bancorp dropped 3.7% and Regions Financial fell 1.3%. Consumer staples and technology also contributed to the gains, with Procter & Gamble rising 2.6% following quarterly results and Intel edging up 0.1% in after-hours trading, extending its 2026 gains to 47.2%.

Not all earnings news was positive, however. Abbott experienced its largest one-day percentage drop since 2002, falling 10% after forecasting lower-than-expected profit for the current quarter. GE Aerospace slipped 7.4% despite projecting annual profits above estimates, while McCormick, the Cholula hot-sauce maker, dropped 8.1% after predicting weaker profits for 2026 due to higher costs linked to tariffs and other inputs.

Economic data released Thursday further supported investor optimism. The U.S. personal consumption expenditures index showed solid growth in consumer spending for October and November, indicating the economy remains on track for a third consecutive quarter of strong expansion. Additionally, initial claims for state unemployment benefits increased less than expected, and the U.S. economy grew at an annualized rate of 4.4% in the third quarter of 2025, slightly exceeding forecasts.

Trading activity on Thursday was above recent averages, with 18.30 billion shares changing hands on U.S. exchanges compared with a 20-day average of 16.91 billion shares, highlighting renewed investor engagement following the recent market turbulence.

Overall, the combination of Trump’s tariff reversal, solid economic indicators, and strong corporate earnings helped restore confidence to U.S. markets, even as investors remain cautious about geopolitical risks and the potential for volatility in the weeks ahead.