How Markets Reacted to Trump’s First Day Back in the Oval Office

Stocks advanced, Treasury yields fell and crypto was volatile on Tuesday as market participants reacted to the slew of executive orders issued on the first day of Donald Trump’s second term as president. 

Trump ran on promises to restrict immigration, erect trade barriers, slash corporate regulations, and extend tax cuts. But his first day in office, Morgan Stanley analysts wrote on Tuesday, “was heavy on executive actions to restrict immigration and trade, with little to nothing on deregulation and fiscal policy.” That, they said, didn’t mean the administration was de-prioritizing deregulation and tax cuts; just that Trump wanted to hammer home his “America First” narrative.

Trump’s first day in office, they said, played out how they expected. “Consistent with our base case, broad and immediate tariffs were not announced,” the analysts wrote, supporting their view that “tariffs will mostly target China imports,” about 40% of which are currently exempt.

Yields, Dollar Fall on Tariff Restraint

The timing and scale of tariffs have been the biggest unknown hanging over financial markets since Trump’s re-election. Concerns that U.S. tariffs and international retaliation could reignite inflation had led Treasury yields and the dollar to climb in recent months, even as the Federal Reserve cut interest rates. The absence of trade action on Monday—aside from executive orders directing federal agencies to review existing trade policies—came as a relief to financial markets, and both Treasury yields and the dollar fell.

International stocks felt the relief. Despite a comment from Trump suggesting he could impose a 25% tariff on Canadian and Mexican goods as early as February 1, stocks were higher across both borders on Tuesday. Chinese stocks held steady, and the MSCI Emerging Markets Index rose more than 1%.

Energy, Renewables Stocks Hit by Executive Orders

Among Trump’s main focuses on Monday was U.S. energy, specifically oil and gas production. Trump on Monday declared a “national energy emergency,” the first of its kind, to expedite the extraction of fossil fuels and “unleash American energy.”

Oil futures slumped yesterday, when the stock market was closed for Martin Luther King Jr. Day, and continued to decline on Tuesday. Trump’s orders and “drill, baby, drill” ethos are expected to increase oil supplies and subsequently weigh on prices. West Texas Intermediate crude futures, the U.S. oil benchmark, were down more than 2% on Tuesday at around $76 a barrel. 

Energy stocks followed oil prices lower. The S&P 500 Energy Sector Index slid 0.6% and was the only sector group to lose ground. Shares of ExxonMobil (XOM) and Chevron (CVX), America’s most valuable oil producers, fell 0.8% and 2%, respectively. 

Clean energy stocks also tumbled after Trump signed a slew of orders to unwind his predecessor’s support for clean energy. Trump on Monday removed the U.S. from the Paris Agreement and halted the development of new wind farms off the U.S. coast, underscoring the administration’s hostility to renewable energy projects. First Solar (FSLR) and Enphase Energy (ENPH) fell 4.9% and 1.3%, respectively.

Crypto Left Out of Day One Priorities

Cryptocurrency prices tumbled on Monday after Trump snubbed the sector in his inaugural speech. Bitcoin (BTCUSD) climbed to an all-time high of nearly $110,000 early Monday ahead of the inauguration, boosted by Trump’s insistence his administration will provide the regulatory clarity the industry has been asking for. 

Bitcoin slid to around $100,000 in the early-morning hours Tuesday before rebounding to trade around $106,5000 recently as Trump’s acting SEC director announced the establishment of a task force that aims to create a clear regulatory framework for crypto assets.

Assets bearing Trump’s name sold off on Tuesday, likely the result of speculators taking profits after the assets ran up in value ahead of Trump’s inauguration. Shares of Trump Media & Technology Group (DJT), the parent company of Truth Social, slid 11% after rising 16% in the week leading up to Monday’s inauguration. 

The meme coin that Trump began selling for about $7 a token on Friday night was trading at more than $75 by Sunday morning but has since retreated to around $45. First Lady Melania Trump’s meme coin, which also launched at about $7 on Friday night, was trading for about $4.50 on Tuesday.