All three major U.S. stock indices in the New York financial markets posted gains for a second consecutive session. Investor sentiment improved as former U.S. President Donald Trump confirmed that the Greenland annexation issue would be resolved through negotiations, fueling a second day of bargain hunting. U.S. Treasury prices were mixed, with short-term yields rising and long-term yields falling, though overall volatility remained limited. Stronger-than-expected U.S. economic data, including a slight upward revision to last year’s Q3 GDP growth, tempered expectations for a rate cut. With the prospect of a prolonged rate hold, market-based inflation expectations eased somewhat during the session. The dollar weakened, trending lower in New York as the euro strengthened. Hopes for a ceasefire in Ukraine supported the euro, while the Australian dollar surged more than 1% against the greenback on robust labor market data, reaching its highest level in 15 months. New York oil prices plunged 2% as Trump and Ukrainian President Volodymyr Zelensky signaled optimism for a Russia-Ukraine ceasefire, putting downward pressure on crude.
At the close of trading on the New York Stock Exchange (NYSE), the Dow Jones Industrial Average rose 306.78 points (0.63%) to 49,384.01. The S&P 500 gained 37.73 points (0.55%) to 6,913.35, while the Nasdaq Composite climbed 211.20 points (0.91%) to 23,436.02. The so-called “TACO trade” – an acronym for “Trump Always Chickens Out” – continued for a second day, with investors viewing noise around Trump’s key policy pushes as buying opportunities. Trump announced he would not use force regarding the Greenland annexation and would withdraw planned tariffs on major European countries. This news quickly restored investor confidence, fueling continued buying. Markets also found relief as the U.S., Ukraine, and Russia agreed to hold their first-ever trilateral talks aimed at ending the war. After a summit with Trump in Davos, Switzerland, Ukrainian President Volodymyr Zelensky said, “From the 23rd, U.S., Ukrainian, and Russian officials will meet in the UAE for two days to discuss a ceasefire proposal. This will be the first trilateral meeting,” adding that the very fact of the meeting was a positive signal.
Ukraine’s success in securing security guarantees from the U.S. was also seen as a significant achievement by the market. Eric Parnell, chief market strategist at Great Barrier Advisors, commented, “Statements from the White House are often part of a larger negotiation and typically move toward a specific outcome. The resulting noise usually presents buying opportunities.” The U.S. economy continued to show solid growth. According to the Department of Commerce, Q3 real GDP was revised up to an annualized 4.4% quarter-on-quarter, the fastest pace since Q3 2023 (+4.7%). Both household income and consumption increased in November, while inflation remained moderate, producing an ideal outcome. The core PCE price index, excluding volatile food and energy, rose 0.2% month-on-month in November, matching October’s pace. The headline PCE price index also increased 0.2% month-on-month, in line with October. By sector, consumer discretionary and communication services rose more than 1%, while real estate fell over 1%.
Among mega-cap tech stocks with market capitalizations above $1 trillion, all except Broadcom advanced. Tesla gained 4.15%, and Meta surged 5.66%, with buying concentrated in Meta after a period of underperformance relative to other big tech names. Micron Technology, which has benefited from the global memory chip shortage, rose another 2.18%, pushing its market cap close to $450 billion. Intel shares plunged more than 6% after the close, as its Q4 results beat expectations but its Q1 outlook disappointed, triggering heavy selling. Intel projected Q1 revenue between $11.7 billion and $12.7 billion, below the LSEG consensus estimate of $12.51 billion. According to CME FedWatch Tool, the federal funds futures market priced in a 95.0% probability of a rate hold at the January FOMC meeting. The CBOE Volatility Index (VIX) fell 1.26 points (7.46%) to 15.64.