S&P 500 Hits Fresh Record High as Stocks Extend Gains on Trump Optimism, AI Investments

January 22, 2025 TruthUSA

Solid start to the earnings season helps lift U.S. stocks.

Wall Street remained optimistic about President Donald Trump’s second term and artificial intelligence (AI) investments. Stocks rallied during the Jan. 22 trading session, with the benchmark S&P 500 Index reaching a record high.

The index picked up 37.12 points, or 0.61 percent, to finish at a fresh record high of 6,086.36. The S&P 500 has recorded gains in six out of the last seven sessions and has jumped 3.48 percent so far in January.

The tech-heavy Nasdaq Composite Index climbed 252.56 points, or 1.28 percent, to 20,009.34. The Nasdaq has risen 3.6 percent this month.

Investor optimism fueled the stock market’s gains midweek. Traders have signaled that Trump may have softened his position on trade policy, especially on tariffs.

The 47th president signed a presidential memorandum hours after taking office. It did not include sweeping universal tariffs.

Speaking to reporters as he was signing executive orders, Trump revealed that he was considering levies on Canada and Mexico on Feb. 1.

At a Jan. 21 White House news conference, Trump noted that his administration was considering imposing an “approximately 25 percent” tariff on the country’s North American neighbors due to border concerns.

He also told reporters that he was weighing a 10 percent tariff on China as early as Feb. 1.

“We’re talking about a tariff of 10 percent on China based on the fact that they’re sending fentanyl to Mexico and Canada,” Trump said. “Probably Feb. 1 is the date we’re looking at.”

While on the campaign trail, Trump proposed an across-the-board 10-20 percent tariff on all U.S. imports and 60-100 percent tariffs on Chinese goods.

Financial markets breathed a sigh of relief that President Trump’s slate of executive orders did not feature tariffs, said Tom Essaye, the president and founder of Sevens Report Research.

“Looking forward, we should expect ‘off the cuff’ tariff threats from Trump from time to time (including the impromptu threat of 20% tariffs on Mexico and Canada on February 1st),” Essaye said in a note emailed to The Epoch Times.

“But, looking beyond that, the reality is that Trump’s executive order for departments to review trade policies likely puts any meaningful tariff news on hold until April and again.”

With the week light on major economic reports, Apollo chief economist Torsten Slok said market watchers are observing the “animal spirits,” a term coined by economist John Maynard Keynes to describe confidence and optimism in driving market dynamics.

Incoming trends, Slok said, will highlight tailwinds from AI spending, data center investments, and Biden-era government initiatives—the Inflation Reduction Act and the CHIPS Act, for example.

“Combined with additional tailwinds to growth from high stock prices, high home prices, high crypto prices, Fed cuts, higher animal spirits, and potential Trump policies, the bottom line is that the US economy is entering 2025 on a firm footing,” Slok said in a note emailed to The Epoch Times.

“With GDP currently at 3.1 percent and core inflation at 3.2 percent, we continue to worry more about upside risks to growth and inflation.”

The Conference Board’s Leading Economic Index indicated “fewer headwinds to U.S. economic activity ahead,” according to the group’s senior manager of business cycle indicators, Justyna Zabinska-La Monica.

Last month, the index dipped 0.1 percent, down from an upwardly revised 0.4 percent increase in November.

“We expect growth momentum to remain strong to start the year and U.S. real GDP to expand by 2.3 perhaps in 2025,” Zabinska-La Monica said.

AI Push

President Trump announced a new joint venture featuring OpenAI, Oracle, and SoftBank. These companies will invest up to $500 billion over four years in a new project called Stargate.

President Donald Trump speaks in the Roosevelt Room flanked by Masayoshi Son (2R), chairman and CEO of SoftBank Group Corp., Larry Ellison (2L), executive chairman of Oracle, and Sam Altman (R), CEO of Open AI, at the White House in Washington, on Jan. 21, 2025. (Jim Watson/AFP via Getty Images) — President Donald Trump speaks in the Roosevelt Room flanked by Masayoshi Son (2R), chairman and CEO of SoftBank Group Corp., Larry Ellison (2L), executive chairman of Oracle, and Sam Altman (R), CEO of Open AI, at the White House in Washington, on Jan. 21, 2025. Jim Watson/AFP via Getty Images

The companies plan to invest an initial $100 billion and construct data centers in Texas. This initiative, Trump noted, will establish the physical and digital foundation to “power the next generation of advancements” in AI.

“This monumental undertaking is a resounding declaration of confidence in America’s potential under a new President,” Trump said in the Roosevelt Room flanked by SoftBank CEO Masayoshi Son, OpenAI head Sam Altman, and Oracle co-founder Larry Ellison. “This is the money that normally would have gone to China or other countries.”

In December, Son announced a $100 billion investment in AI and related infrastructure. The Japanese technology investing behemoth had invested $50 billion in the U.S. economy before Trump’s first term started.

Days before Trump’s inauguration, Emirati billionaire businessman Hussain Sajwani confirmed a $20 billion pledge to build new data centers across the United States.

After the private investment announcement, Oracle shares surged about 7 percent as investors maintained their bullish AI sentiment.

The Earnings Season Path

The leading benchmark indexes registered additional gains on a solid start to the earnings season.

Netflix advanced as much as 15 percent after the streaming giant reported that paid memberships exceeded 300 million, fueled by live sporting events and enormous interest in the hit series “Squid Game.” Fourth-quarter earnings and revenues also beat market estimates.

Shares of Procter & Gamble and Johnson & Johnson also climbed about 3 percent and 2 percent, respectively, after the releases as earnings surpassed Wall Street forecasts.

“At this early stage, the fourth-quarter earnings season for the S&P 500 is off to a strong start,” said John Butters, the vice president and senior earnings analyst at FactSet, in a report. “Both the percentage of S&P 500 companies reporting positive earnings surprises and the magnitude of earnings surprises are above recent averages.”

The next major earnings report will be GE Aerospace, American Express, and Verizon.

“The fact that we are in earnings season which so far has exceeded expectations does mean that any downside may face buying pressure, provided that U.S. earnings continue to beat estimates,” said Zain Vawda, a market analyst at OANDA, in a note.

Unless the Federal Reserve signals a hawkish position next week or Wall Street witnesses abysmal earnings releases, “the bulls seem firmly in control,” Vawda said.

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