Just the Facts: Stock Market Ends Higher on Sector Divergences

The stock market closed on a positive note after navigating through volatility spurred by geopolitical and trade-related news. An afternoon dip, triggered by President Trump’s announcement of a 25 percent tariff on Canada and Mexico starting Saturday, was quickly reversed, with major indices finishing higher.

The S&P 500 gained 0.5 percent, the Nasdaq Composite added 0.3 percent, and the Dow Jones Industrial Average advanced 0.4 percent. The Russell 2000 outperformed, surging 1.1 percent, indicating strength in small-cap stocks.

Market Breadth and Trading Volume

Trading volume was mixed, with the New York Stock Exchange seeing above-average participation, while Nasdaq volumes lagged behind typical levels. NYSE trading reached 1,091 million shares, exceeding the 1,031 million average, while Nasdaq volumes came in at 6,724 million shares, trailing the 7,902 million average.

Market breadth favored the bulls, with advancing stocks outnumbering decliners across both major exchanges. On the NYSE, 2,180 stocks moved higher, while 609 declined. The Nasdaq saw 2,877 advancers versus 1,476 decliners. The number of stocks reaching 52-week highs outpaced those hitting new lows, with the NYSE recording 140 new highs against 25 new lows, while Nasdaq saw 152 highs and 107 lows.

Key Areas of Strength

Precious metals and energy-related sectors displayed notable relative strength, buoyed by geopolitical uncertainties and renewed interest in safe-haven assets.

- Silver miners and gold miners led the market, with the Global X Silver Miners ETF (SIL) rising 4.72 percent, the VanEck Gold Miners ETF (GDX) climbing 3.96 percent, and the Junior Gold Miners ETF (GDXJ) up 3.89 percent. Silver prices also gained, lifting the iShares Silver Trust (SLV) by 2.55 percent.

- The nuclear and uranium sector continued its recent uptrend, with the Uranium & Nuclear Energy ETF (NLR) adding 3.04 percent as investors bet on long-term energy security.

- Emerging market equities in Brazil and Chile outperformed, with the iShares MSCI Brazil ETF (EWZ) and the iShares MSCI Chile ETF (ECH) both advancing 2.92 percent. Strength in these markets likely reflects increasing foreign capital flows into commodity-rich economies.

- The semiconductor sector displayed solid gains, with the VanEck Semiconductor ETF (SMH) rising 2.35 percent. This suggests ongoing optimism surrounding AI-related chip demand despite recent volatility in leading stocks such as Nvidia and AMD.

Areas of Weakness

Some sectors faced headwinds, particularly natural gas and transportation stocks, which saw declines amid concerns over supply-demand imbalances and economic uncertainty.

- The United States Natural Gas Fund (UNG) fell 3.64 percent, as warmer-than-expected weather forecasts reduced demand expectations for heating fuels.

- The transportation sector, represented by the iShares Transportation Average ETF (IYT), declined 1.57 percent, reflecting concerns about rising fuel costs and potential trade disruptions following the tariff announcement.

- The North American software sector exhibited relative weakness, with the iShares North American Tech-Software ETF (IGV) slipping 0.7 percent. This follows mixed earnings results from leading software companies, with some firms reporting cautious guidance for 2025.

- The Canadian dollar weakened against the U.S. dollar, with the Invesco Canadian Dollar ETF (FXC) falling 0.38 percent. Investors appeared to price in potential economic headwinds from the impending tariffs on Canadian exports.

Looking Ahead

The market’s ability to recover from the tariff-related dip suggests underlying strength, particularly in select growth sectors and defensive plays such as gold and silver. However, ongoing trade tensions, Federal Reserve policy decisions, and corporate earnings will continue to shape investor sentiment in the coming days.

Investors will now turn their attention to key economic reports and corporate earnings releases. The upcoming Personal Income and Spending report, along with the PCE Price Index, will provide insights into consumer demand and inflationary pressures, which could influence Federal Reserve policy expectations.

As markets digest trade developments and sector rotations continue, investors should remain vigilant, particularly in areas vulnerable to macroeconomic shifts. Defensive assets, including precious metals and commodities, have gained favor, while cyclical and growth-oriented sectors remain sensitive to external shocks. The next few trading sessions will be crucial in determining whether the market can sustain its upward momentum or if renewed volatility will emerge.