US stocks continued to advance during Tuesday's midday session, with the Dow Jones Industrial Average climbing 360 points. The major indexes attempted a rebound following sharp declines in the previous trading day. Investors are focused on President Trump's scheduled State of the Union address Tuesday evening, particularly for any comments regarding tariffs. Several Federal Reserve officials are also scheduled to speak today, with one FOMC voting member calling for a pause in interest rate cuts.
The Dow Jones Industrial Average rose 360.22 points, or 0.74%, to 49,164.28. The Nasdaq Composite gained 222.31 points, or 0.98%, reaching 22,849.58. The S&P 500 increased by 45.15 points, or 0.66%, to 6,882.90.
Shares of AMD surged 6.6% after Meta announced a multi-year cooperation agreement with the company. The new partnership plans to deploy up to 6 gigawatts of AMD graphics processing units for artificial intelligence data centers. Meta will also invest in AMD through performance-based warrants, allowing it to subscribe for up to 160 million AMD shares.
This development comes just a week after Meta indicated it had utilized millions of Nvidia chips in its data center construction.
Major indices experienced a broad decline on Monday as market concerns resurfaced regarding AI's disruptive potential across various industries. Adding to trader caution were President Trump's threats to raise global tariffs to 15% and escalating tensions between the US and Iran.
Trade uncertainty has resurged this week, dominating global market sentiment. Trump's new "uniform (comprehensive) tariff rate" took effect Tuesday, intensifying doubts about the enforceability of last year's trade agreement terms. Against this backdrop, the European Parliament decided to delay a vote on the US-EU trade deal reached last year for the second time.
Following the implementation of a 10% US tariff on global imports Tuesday, reports citing a senior US administration official indicated the White House is advancing plans to formally raise the rate to 15%.
Reports also suggest the Trump administration is considering new national security tariffs on six industries, following a Supreme Court ruling that invalidated many tariffs from the president's first term.
The potential new tariffs could cover sectors including large-scale batteries, iron castings and fittings, plastic piping, industrial chemicals, power grid equipment, and telecommunications gear. These tariffs would be issued under Section 232 of the Trade Expansion Act of 1962, separate from other tariffs announced by Trump after the court decision.
The Dow fell over 800 points on Monday, with a roughly 13% drop in IBM shares weighing on the index. The tech-heavy Nasdaq Composite declined 1.1%, while the S&P 500 fell about 1%, turning negative for the year to date.
Software stocks like Microsoft and CrowdStrike, cybersecurity shares, and a range of financial sector stocks saw notable declines during Monday's trading.
A report from Citrini Research discussing hypothetical AI-driven structural changes further fueled market anxiety about AI's "substitution effect" on industries such as software.
Tony Sycamore, a market analyst at IG in Sydney, noted the report "gained significant traction" and "aligns with many existing concerns in the market."
The article, which circulated widely over the weekend, is one of several recent "thought pieces" discussing AI's long-term implications on employment, global growth, and even "human existence," unsettling investors.
In commentary on a similar article, Deutsche Bank strategist Jim Reid wrote, "The argument relies more on narrative and sentiment than hard evidence. This doesn't mean it's ultimately wrong, but... the proportion of 'sentiment atmosphere' relative to 'substantive content' is undoubtedly high."
So-called "AI panic trading" has become a dominant theme in US stocks. The sell-off has spread from the software sector to areas like insurance brokerage, private credit, cybersecurity, and even real estate services. The flight from risk is part of a broader structural shift beneath the surface of the US market; after years of tech-led gains, US stocks are nearly flat for the year 2026 to date.
Heading into Tuesday, traders are closely watching a key event hosted by AI company Anthropic, the creator of Claude. Anthropic is expected to launch new products and demonstrate the latest features of Claude. Market anticipation for this event—and the potential for further disruption—was cited as a factor in Monday's software sector decline.
A trader at Mizuho Securities stated, "No one wants to outsmart the market ahead of another AI product launch. Fair or not, every new announcement from Anthropic is seen as 'incremental competition' for existing software. So, instead of trying to predict the outcome, investors are choosing to step aside temporarily."
Federal Reserve official Austan Goolsbee called for a pause in rate cuts. The Chicago Fed President said Tuesday that it would be premature to cut interest rates until more evidence emerges showing inflation is subsiding.
Given recent indicators showing inflation, while well below its peak, remains above the Fed's 2% target, Goolsbee noted that policymakers have been misled before by assuming inflation was transitory and should not repeat the mistake.
"I believe it would be unwise to enact significant rate cuts too early in this situation," he said during a speech at the National Association for Business Economics annual conference in Washington, D.C. "People indicate that prices are one of their most pressing concerns. Let's stay focused on that. Before we stimulate the economy further with rate cuts, let's ensure inflation is returning to the 2% level."
The latest December inflation data showed the core Personal Consumption Expenditures price index, the Fed's primary gauge which excludes volatile food and energy prices, at 3%. This figure was 0.2 percentage points higher than November, partly due to tariffs considered temporary, but also because of underlying pressures in services and sectors not directly affected by tariffs.
Specifically, Goolsbee stated that stubbornly high housing inflation is not driven by tariffs and emphasized the need for the Fed to remain "vigilant."
Goolsbee noted that a 3% inflation rate "is not sufficient—it is not the level consistent with the Fed's commitment to a 2% target. For reasons we know all too well, stalling at 3% is not a safe position." He has previously stated he believes the Fed will be able to cut rates later this year.
Goolsbee's comments come as markets expect the Federal Open Market Committee, of which he is a voting member this year, to hold rates steady at least until June, and potentially until July. According to the CME Group's FedWatch tool, traders of financial instruments see about a 50% probability of a rate cut in June and about a 71% probability in July. The Fed implemented three 25-basis-point rate cuts in the second half of 2025.
Fed Governor Christopher Waller, who has generally advocated for rate cuts, also spoke at the NABE conference Monday, striking a more cautious tone.
While Waller said he believes policymakers should "look through" the effects of tariffs, he noted that recent data suggests labor market conditions might be stronger than previously indicated, reducing the necessity for further cuts. Continued improvement in the employment situation would further weaken the case for cuts, though he conceded he does not view January's non-farm payroll data as merely "noise over signal."
Waller also mentioned that the Fed is progressing with the systematic deployment of AI across regional banks and its headquarters to leverage the breakthrough technology.
"In my lifetime, I haven't witnessed a technological revolution like this," Waller said Tuesday during prepared remarks at a conference organized by the Federal Reserve Bank of Boston. He stated the Fed's system prioritizes sharing standards and infrastructure while maintaining decentralization in monetary policy and economic research.
Tuesday is set to be an active day for Fed speakers, with Governor Lisa Cook also scheduled to address the National Association for Business Economics later in the morning.
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