Stocks opened sharply lower Monday as Wall Street reacted to news that the Trump administration levied tariffs against Canada, Mexico and China. However, the main benchmarks finished well off their session lows after Trump delayed Mexico tariffs.
Over the weekend, President Donald Trump said the U.S. will levy 25% tariffs on Mexico and Canada and 10% tariffs on China. Stock market losses ranged from 1.4% to 2.5% in early trading Monday.
However, the main indexes closed well off these levels after Mexican President Claudia Sheinbaum said she would send 10,000 troops to the U.S. southern border. In return, Trump said he will delay tariffs on Mexico for one month.
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At the close, the Dow Jones Industrial Average was down 0.3% at 44,421, the S&P 500 was 0.8% lower at 5,994, and the Nasdaq Composite had lost 1.2% to 19,391.
While Monday's tariff-related slide is certainly an unwelcome way for investors to start the week and month, Carson Group Chief Market Strategist Ryan Detrick says "volatility is just the toll we pay to invest."
He adds that "every single year has some bad days and scary headlines" and to think that this year would be different isn't a good investing strategy. And while tariffs bring about "a lot of uncertainty … the bottom line is the underpinnings of this economy and bull market are still solid."
Tesla leads Mag 7 losers
As for single stocks, several Magnificent 7 members saw outsized declines Monday. Tesla (TSLA), for one, plunged 5.2% as many automakers sold off on the tariff news.
As Kiplinger contributor Charles Lewis Sizemore, CFA, explains in his feature "How Do Tariffs Impact the Stock Market?," while tariffs reduce competition for domestic car companies, they also increase costs for imported parts, such as aluminum.
Nvidia (NVDA, -2.8%) and Apple (AAPL, -3.4%) also ended notably lower, while Alphabet (GOOGL, -1.4%) and Amazon.com (AMZN, -0.1%) – which appear on the earnings calendar later this week – also finished in the red.
Why Meta stock's a "dynamic AI play"
Meanwhile, Meta Platforms (META) outperformed its Mag 7 peers with its 1.2% gain, adding $21 billion in market value on a down day. The social media platform wowed Wall Street last week with its solid fourth-quarter earnings report thanks in part to the company's artificial intelligence (AI) initiatives.
Wedbush analyst Scott Devitt (Outperform, the equivalent of Buy), thinks Meta's runway for growth is long and calls the mega cap a "dynamic AI play."
He notes that "over time, Meta has the opportunity to monetize its AI assistant, Meta AI, expand AI agents for businesses, drive deeper automation of advertiser tools and creative, and further integrate generative AI capabilities in Meta hardware products."
Manufacturing activity expands in January
In economic news, the Institute for Supply Management's (ISM) Manufacturing Purchasing Managers Index (PMI) showed that activity in the manufacturing sector swung into expansion territory in January, with the index rising to 50.9% from December's adjusted reading of 49.2%.
"Strong domestic and foreign demand catapulted the U.S. manufacturing sector into expansion territory for the first time since April," says José Torres, senior economist at Interactive Brokers.
Torres adds that new orders, prices, production and exports all contributed to the upside beat, while imports, deliveries and employment helped "at more modest degrees."
Separate data from the Census Bureau showed that construction spending rose 0.5% from November to December and was up 4.3% year over year. Economists expected a 0.2% monthly increase.
"Construction spending ended 2024 on a better-than-expected note" thanks to private single-family construction and home improvement outlays, says Charlie Dougherty, senior economist at Wells Fargo. He adds that the build-out of data centers was a "notable green shoot."
Still, Dougherty expects construction spending to "stay under pressure this year as interest rates remain elevated and trade and immigration policy changes increase construction costs."
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