New York Stock Market Mixed in Early Trading... Digesting Trump Tariff Threat and Q4 GDP Data

Trump Announces Additional 10% Tariff on China
Mexico and Canada to Face Tariffs as Scheduled on March 4
Nvidia Shares Drop Over 3% Despite Strong Earnings
New Jobless Claims Reach 242,000, Exceeding Expectations

The three major indices of the U.S. New York stock market showed mixed trends in the early session on the 27th (local time). Investors are adopting a cautious stance as they digest President Donald Trump's tariff remarks and the fourth-quarter economic growth data from last year. Despite Nvidia, the leading AI stock, reporting better-than-expected fourth-quarter earnings the previous day, its shares fell more than 3%.

As of 10:53 a.m. in the New York stock market, the Dow Jones Industrial Average (Dow), which focuses on blue-chip stocks, was trading at 43,795.09, up 0.83% from the previous day. The S&P 500, centered on large-cap stocks, was down 0.01% at 5,955.33, and the tech-heavy Nasdaq was trading at 18,949.29, down 0.66%.

By individual stocks, Nvidia was down 3.38%. Although Nvidia's fourth-quarter revenue and net income for last year exceeded expectations, investors showed a muted response as market expectations had already been raised significantly. Defensive stocks such as banks were on the rise. JP Morgan Chase was up 1.12%, and Bank of America (BoA) rose 1.45%.

Investors focused on President Trump's tariff remarks. On that day, Trump stated on his social media platform Truth Social that the 25% tariffs scheduled to take effect on March 4 for Mexico and Canada "will actually be implemented as planned," and that China would also face an additional 10% tariff on the same day. Earlier, Trump had announced on February 4 the imposition of a 25% tariff on Mexico and Canada and an additional 10% tariff on China due to issues related to drug and illegal immigration inflows. Subsequently, the tariffs on Mexico and Canada were postponed for one month, while the tariffs on China were implemented as scheduled. This time, the administration announced plans to raise the tariff on China by an additional 10%, bringing the total additional tariff to 20%.

Investors also paid close attention to the U.S. economic indicators released that morning. According to the U.S. Bureau of Economic Analysis (BEA), the preliminary estimate of the U.S. real Gross Domestic Product (GDP) growth rate for the fourth quarter of last year was 2.3% annualized compared to the previous quarter. This matched both the flash estimate released last month and market expectations (both 2.3%), significantly exceeding the U.S. potential growth rate, which is estimated to be in the high 1% range. Personal consumption expenditures increased by 4.2% quarter-over-quarter, driving a solid recovery. Inflation was revised upward, raising concerns about a price rebound. The core Personal Consumption Expenditures (PCE) price index rose 2.7% in the fourth quarter of last year, higher than both the flash estimate and the forecast (both 2.5%) released last month. With the U.S. economy maintaining solid growth and inflation being revised upward, there is growing speculation that the Federal Reserve, which paused rate cuts last month, will continue a cautious monetary easing stance for the time being.

Chris Larkin, Managing Director of Investments at Morgan Stanley E*TRADE, analyzed, "Although there are recent concerns about the strength of U.S. consumers, most indicators continue to show that the U.S. economy, while possibly easing, remains on a solid foundation."

Employment data released separately from the GDP figures showed mixed trends. According to the U.S. Department of Labor, initial jobless claims for the week of February 16-22 rose by 22,000 from the revised previous week's figure (220,000) to 242,000. This was the highest level since October last year and exceeded expert forecasts (222,000) by 20,000. As the second Trump administration undertakes federal government restructuring, unemployment claims in Washington D.C. have increased to the highest level in 1 year and 11 months since March 2023.

As the week progresses toward its end, investors are turning their attention to the core PCE price index for January, which will be released on the 28th. According to Bloomberg News, the core PCE price index for last month is expected to have risen 2.6% year-over-year. This would be a decline from the previous month (2.8%) and the lowest level in seven months since June last year (2.6%). Amid rising concerns about a price rebound, attention is focused on whether the January core PCE price index can alleviate such worries.

U.S. Treasury yields are on the rise. The 10-year U.S. Treasury yield, a global bond yield benchmark, rose 4 basis points (1bp = 0.01 percentage points) from the previous trading day to 4.29%, while the 2-year U.S. Treasury yield, sensitive to monetary policy, moved up 3 basis points to around 4.1%.