U.S. stocks maintained their upward trajectory in early trading on Thursday, with the Dow Jones Industrial Average climbing 270 points. A reduction in geopolitical tensions, following the cancellation of tariffs related to Greenland by former President Trump, sparked a market rebound for the second consecutive session.
The Dow Jones Industrial Average rose by 273.09 points, or 0.56%, to 49,350.32; the Nasdaq Composite gained 120.68 points, or 0.52%, reaching 23,345.50; and the S&P 500 increased by 27.81 points, or 0.40%, to 6,903.43. Technology stocks, including Nvidia, Microsoft, Micron Technology, and Meta Platforms, generally trended higher. U.S. stocks surged on Wednesday after former President Trump indicated he would not proceed with new tariffs on Europe scheduled for February 1st and announced a "framework" for an agreement concerning Greenland. In recent weeks, Trump had persistently advocated for U.S. control over Greenland. On Wednesday, Trump stated on Truth Social that he and NATO Secretary General Mark Rutte had "formed a framework for a future agreement regarding Greenland and the entire Arctic region." Trump later told media that he had a "concept of a deal" with the Arctic island. Prior to this, during a speech at the World Economic Forum in Davos, Switzerland, Trump stated he would not use military force to acquire Greenland. The S&P 500 closed up nearly 1.2% that day, the Dow Jones Industrial Average finished nearly 589 points higher, a gain of 1.2%. The tech-heavy Nasdaq Composite Index advanced nearly 1.2%. The Russell 2000 small-cap index rose about 2%, setting a new record closing high. "The Greenland crisis appears to be de-escalating and reversing the recent selling trend, although details about the 'framework' remain to be announced," said Eric Tiller, Chief Investment Officer at Comerica Wealth Management. He noted that the relief rally was driving significant gains in traditional value sectors such as financials and energy. Despite the stock market rebound following Trump's announcement of an agreement "framework," the situation regarding Greenland seems far from resolved. On Thursday, Danish Prime Minister Mette Frederiksen characterized Trump's discussions with Rutte on Arctic security as "good and natural," and stated the country is prepared to negotiate regarding the U.S. "Gold Dome" missile defense plan. However, she emphasized that sovereignty issues are not negotiable. "The Kingdom of Denmark wishes to continue constructive dialogue with allies on how to strengthen Arctic security, including the U.S. 'Gold Dome' project, provided it respects our territorial integrity," Frederiksen said. On the economic data front Thursday, U.S. third-quarter GDP grew at a slightly faster-than-expected pace of 4.4%. The U.S. Commerce Department reported that the economy expanded slightly faster than anticipated in the third quarter. According to seasonally and inflation-adjusted data, the annualized GDP growth rate for the July-September period was 4.4%, revised up 0.1 percentage point from prior estimates and surpassing the second quarter's 3.8%. This modest upward revision reflected upward adjustments to consumer spending, exports, government spending, and investment. Additionally, imports declined amidst the ongoing global tariff friction involving the U.S., China, and their trading partners. Consumer spending, which accounts for over two-thirds of U.S. economic activity, grew at a rate of 3.5% for the quarter. Final sales to domestic purchasers, a measure of total demand in the $31 trillion economy, accelerated to a rate of 6.3%, the highest level since the third quarter of 2023. A strong year of U.S. economic growth is expected to continue into the fourth quarter. The Atlanta Federal Reserve's GDPNow model's ongoing tracking forecast, based on the latest data, projects a fourth-quarter growth rate of 5.4%. Another report indicated that U.S. initial jobless claims for the past week were essentially flat, coming in below market expectations. The U.S. Labor Department reported that initial jobless claims changed little last week, extending a period of low layoffs that supports the labor market. A report from the Bureau of Labor Statistics, a unit of the Labor Department, showed that seasonally adjusted initial claims totaled 200,000 for the week ending January 17, an increase of 1,000 from the previous week, but below the Dow Jones survey expectation of 208,000. The four-week moving average for claims was 201,500, the lowest level since January 13, 2024. Continuing claims, which lag by one week, edged down to 1.85 million, a decrease of 26,000 from the prior week. The consensus expectation from a FactSet survey was 1.89 million.
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