Remember the TACO Trade? It's back, and markets are here for it.
U.S. stock futures climbed Wednesday night after President Donald Trump pulled a surprise reversal on his planned tariffs against the European Union. After what he called a "very productive" meeting with NATO Secretary General Mark Rutte at the World Economic Forum in Davos, Trump announced that the threatened 10% tariffs are off the table. The reason? A "framework of a future deal" on Greenland.
The market response was immediate and enthusiastic. S&P 500 Futures jumped 0.30%, or 21 points, to 6,931.00. Nasdaq Futures performed even better, climbing 0.43%, or 108 points, to 25,579.00. Dow Futures added 88 points, or 0.18%, reaching 49,353.00 in late Wednesday evening trading.
Trump confirmed the tariff retreat in a Truth Social post on Wednesday, signaling that the diplomatic breakthrough with Europe was significant enough to warrant backing away from his earlier trade threats.
Asian Markets Celebrate the News
If you thought U.S. investors were happy, check out what's happening across the Pacific. Japan's Nikkei 225 soared 1.20%, adding 635 points to reach 53,409.16, with companies that have European market exposure leading the charge.
The rally comes as Japanese exporters got a fresh dose of good news. According to Trade Statistics of Japan, the country's exports rose 5.1% year over year in December, marking the fourth consecutive month of growth. Sure, shipments to the U.S. dropped 11.1% from a year earlier, but stronger demand from other markets combined with a weaker yen more than made up for it.
Precious Metals Pull Back
With risk appetite returning, safe-haven assets took a breather. Gold slipped 0.52% to trade at $4,806 per ounce, while Silver dropped 0.81% to $92.355.
The U.S. Dollar Index (DXY) barely budged, down just 0.01% to 98.787 for the day. Zoom out a bit though, and the dollar is up 0.86% over the past month, even as concerns about Federal Reserve independence continue to simmer.
What's Next
Thursday promises to be busy. Investors will be watching earnings releases from major players including Procter & Gamble Co. (PG), General Electric Co. (GE), Intel Corp. (INTC), and Capital One Financial Corp. (COF). Beyond corporate results, markets will be digesting key economic data: the GDP report, Initial Jobless Claims, and the Personal Consumption Expenditure reports.
For now though, traders are enjoying the tariff reprieve and what it might signal about Trump's willingness to negotiate rather than escalate trade tensions. Whether this framework deal on Greenland actually materializes into something concrete remains to be seen, but markets are taking the win.
