On Wednesday, US stock markets registered strong gains, marking a recovery from the previous session's steep declines. The S&P 500 surged by its largest daily percentage increase in two months, propelled by favorable developments in geopolitical trade negotiations and robust corporate earnings.
The positive momentum was sparked by news that the US administration and European partners had established a framework for an agreement concerning Greenland and the Arctic region. This pact paved the way for President Donald Trump to announce a halt to proposed tariffs against European allies that had been scheduled to take effect on February 1. The announcement, posted on the President's Truth Social platform, noted the avoidance of a potential tariff escalation that might have triggered broader economic disruptions.
Investor reaction was swift and enthusiastic, with all three major indices climbing significantly. The Dow Jones Industrial Average added 588.64 points, representing a 1.21% rise to close at 49,077.23. Similarly, the S&P 500 increased by 78.76 points, or 1.16%, ending the session at 6,875.62. The Nasdaq Composite also reflected this bullish sentiment, gaining 270.50 points, or 1.18%, to 23,224.83.
Market analysts attributed much of this bullishness to the defused tariff tensions, which prevented the escalation of a trade conflict with important European trading partners. Jason Pride, chief of investment strategy and research at Glenmede, remarked that while Greenland's ownership itself has limited economic impact, the threat of widespread tariffs between trading partners poses significant risks to global trade and investment.
The trading session had started on a positive trajectory as investors absorbed the rebound after Tuesday's steep losses - the worst for these benchmarks since early October. Although momentum waned somewhat by early afternoon, the President's tariff announcement reignited investor optimism. This development allowed the market to refocus on underlying economic strengths, including solid quarterly earnings from financial institutions.
Regional banks experienced notable gains, highlighted by a 4.7% rally in the regional banking index, which reached its highest closing level since November 2024. Citizens Financial Group shares soared 7.1% to a record closing price following a 31.7% year-over-year profit increase. Truist Financial Corp also advanced 1.8%, lifted by improved income from interest and investment banking fees.
Across sectors, all S&P 500 subsectors recorded gains, with the energy sector taking the lead. Halliburton contributed to the sector's strength, rising 4.1% after reporting earnings above analyst expectations. Similarly, EQT Corp and Expand Energy saw substantial gains of 6.5% and 4.5%, respectively, helped by natural gas prices climbing to a six-week high amid cold weather forecasts.
Airline stocks benefited from the overall positive market environment. United Airlines increased 2.2% after issuing an optimistic outlook for the current quarter and full year. Delta Air Lines, American Airlines, and Southwest Airlines also participated in the rally with share price increases ranging from 1.1% to 2.4%.
However, not all sectors participated in this upbeat market mood. Netflix shares declined 2.2% following a subdued earnings outlook and a temporary halt to share repurchases designed to fund the acquisition of Warner Bros Discovery’s media operations. Additionally, Kraft Heinz shares dropped 5.7%, pressured by regulatory filings indicating Berkshire Hathaway might reduce its 27.5% stake in the company.