Calm returns to Wall Street, and tech stocks lead US indexes higher

NEW YORK (AP) - Calm returned to Wall Street Tuesday, and tech stocks led U.S. indexes higher following a strong profit report from Palantir Technologies, a darling benefiting from the artificial-intelligence boom.

The S&P 500 rose 0.7% a day after swinging sharply on worries that President Donald Trump's tariffs could spark a trade war that would hurt economies around the world, including the United States.

The Dow Jones Industrial Average added 134 points, or 0.3%, and the Nasdaq composite climbed 1.4%.

Trump on Monday agreed to delay his taxes on U.S. imports of Canadian and Mexican products for a month, with the announcement on Canada coming after trading closed for the day. That bolstered Wall Street's longstanding hopes that Trump's tough talk on tariffs may be just that, talk. The hope is that Trump sees tariffs as a stick he can use in negotiations with trading partners rather than as a long-term policy.

That hope is built in part on traders' belief that Trump would likely be turned off by the damage Wall Street would take if a worst-case, long-term trade war were to occur. Trump has pointed in the past to the stock market as a real-time measure of his performance.

But a trade war is still possible, and some analysts say more swings may be coming because Trump's threats should be taken both seriously and literally.

"Investors have suggested the equity market is the US administration's scorecard and any policy changes that hurt risk assets will be quickly dialed back," Bank of America strategists led by Mark Cabana wrote in a BofA Global Research report. "We advise caution."

They say a big takeaway from all the tariff tumult is that the Trump administration is transactional, and "nothing is settled until it is final."

Trump is pressing ahead with a 10% tax on U.S. companies importing things from China. And China retaliated on Tuesday by announcing its own tariffs on some U.S. products and an antitrust investigation into Google.

But the 15% tariff on U.S. coal and liquefied natural gas products, as well as a 10% tariff on crude oil, agricultural machinery and large-engine cars imported from the United States won't take effect until Monday. That leaves time for negotiations between Trump and Chinese President Xi Jinping.

Some on Wall Street also see tariffs on China as separate from Trump's moves against other trading partners. Trump may be more likely to keep tariffs on China for the longer term, as he did in his first term, because of a desire to separate the United States more from its geopolitical rival.

Outside of China, the result of all this tumult for Canada, Mexico, the European Union and other U.S. allies is more likely to be concessions and not tariffs, according to Thierry Wizman, a strategist at Macquarie.

The stock price of Google's parent company, Alphabet, rose 2.5% even with China's antitrust investigation. The company released its latest earnings report after trading ended for the day.

Elsewhere on Wall Street, stocks that had swung sharply a day before when worries were high about tariffs on Mexico and Canada were calmer.

Auto makers had dropped because so much of their production occurs in Mexico, for example. But General Motors rose 1.4%, and Ford Motor climbed 2.7%.

More attention was on earnings reports for U.S. companies, which likely would have been in the market's spotlight if not for worries about a potential trade war.

Palantir Technologies jumped 24% and was one of the strongest forces lifting the S&P 500 after reporting a better profit for the latest quarter than analysts expected. The Denver company also issued forecasts for upcoming revenue that were ahead of analysts' projections, as CEO Alexander Karp said his company is at the "center of the AI revolution."

Pharmaceutical giant Merck tumbled 9.1% despite beating sales and profit forecasts for the latest quarter. It gave a forecast for upcoming revenue that fell short of analysts' expectations, due partly to a pause in shipments of one of its top-selling products to China.

All told, the S&P 500 rose 43.31 points to 6,037.88. The Dow Jones Industrial Average added 134.13 to 44,556.04, and the Nasdaq composite gained 262.06 to 19,654.02.

In the bond market, Treasury yields eased after a report indicated the U.S. job market may be adding less upward pressure on inflation. U.S. employers advertised fewer job openings at the end of December than economists expected, suggesting a slowing but still healthy job market.

The yield on the 10-year Treasury fell to 4.51% from 4.56% late Monday. The two-year yield, which moves more closely with expectations for what the Federal Reserve will do with short-term interest rates, eased to 4.21% from 4.25%

In stock markets abroad, London's FTSE 100 slipped 0.1%, but other big European indexes rose modestly.

In Asia, Hong Kong's Hang Seng jumped 2.8%, and South Korea's Kospi rose 1.1%.