US stocks climb amid signs government may avert shutdown

(WASHINGTON) — Economists say the uncertainty from President Donald Trump’s tariff threats and mass layoffs of government workers are starting to have a “chilling” effect on the U.S. economy.

“It’s a very difficult business environment, because they can’t plan for what their cost structure is going to be,” said Rachel Ziemba, an adjunct senior fellow at the Center for a New American Security. “It’s adding to investment uncertainty, and some people are holding back on investments.”

Trump has so far imposed 10% tariffs on Chinese imports and says he’ll impose additional 10%, plus 25% tariffs on Canada and Mexico on March 4. Trump also says he will impose “reciprocal tariffs” that match the duties other countries levy on the U.S. That comes on top of tariff plans on cars, semiconductors, steel and aluminum. Even if Trump doesn’t ultimately move forward with all his tariff threats, the mere uncertainty has a chilling effect.

“If one of the inputs of your factory goes up by 25%, you might cut your production and say maybe we’ll have to fire some people,” Ziemba added.

Meanwhile, the Department of Government Efficiency’s slashing of the federal workforce across the country “also impacts consumption, because people are losing their jobs or are afraid of losing their jobs, so that might cause them to save more money,“ Ziemba said.

This week, The Conference Board’s consumer sentiment survey found that it registered the largest monthly decline since August 2021.

“Views of current labor market conditions weakened. Consumers became pessimistic about future business conditions and less optimistic about future income. Pessimism about future employment prospects worsened and reached a 10-month high,” said Stephanie Guichard, senior economist for global indicators at The Conference Board.

“Average 12-month inflation expectations surged from 5.2% to 6% in February. This increase likely reflected a mix of factors, including sticky inflation but also the recent jump in prices of key household staples like eggs and the expected impact of tariffs,” Guichard said.

The Canada and Mexico tariffs would have a sweeping effect, since those are America’s two biggest trading partners. It could raise prices at the grocery store and the gas pump. Ziemba also noted that the cost of cars could increase by several thousand dollars.

“Every time a car part crosses the border, 25% tariffs could be very onerous,” Ziemba said. “We could see the cost of building a house go up quite substantially.”

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(NEW YORK) — Online holiday shopping soared to a fresh record high in 2024, driven by an array of e-commerce discounts and adoption of AI-fueled shopping assistants, according to data released on Tuesday by Adobe.

E-commerce sales topped $240 billion in November and December, climbing nearly 9% when compared with the gift-buying season a year prior, data showed.

The data indicated that three product categories accounted for more than half of the online holiday spending: electronics, apparel and home goods.

Spending on cosmetics totaled nearly $8 billion, jumping more than 12% compared to a year prior. That marked the largest year-over-year spending increase for any product category, the data showed.

Discounts helped drive strong sales for some high-priced items, Adobe said, pointing to a 20% jump in units sold for expensive goods.

The fresh data indicated a spike in use of shopping assistants powered by generative AI, suggesting the technology has seeped into the retail sector’s busiest time of the year.

Traffic to retail sites from generative AI-powered chatbots skyrocketed 1,300% over November and December when compared to the same period a year prior, the data showed.

The share of consumers arriving via AI shopping assistants remains modest, however, Adobe said. Shoppers arrived at retail sites via links shared by the chatbots.

“The 2024 holiday season showed that e-commerce is being reshaped by a consumer who now prefers to transact on smaller screens and lean on generative AI-powered services to shop more efficiently,” Vivek Pandya, a lead analyst at Adobe Digital Insights, said in a statement.

The e-commerce data comes weeks after initial indicators pointed to a robust holiday shopping season.

Overall holiday spending surged in 2024, blowing past expectations and outpacing customer purchases over the gift-buying season last year, according to data released by Mastercard SpendingPulse last month.

The end-of-year flex of consumer strength marks the latest indication of resilient U.S. buying power, which has kept the economy humming despite a prolonged stretch of high interest rates.

Gross domestic product grew at a solid 2.8% annualized rate over three months ending in September, the most recent quarter for which data is available.

The labor market has slowed but proven sturdy. The unemployment rate stands at 4.2%, a historically low figure.

Consumer spending accounts for nearly three-quarters of U.S. economic activity.

The increase in holiday spending coincided with an initial bout of relief for borrowers, as the Federal Reserve cut interest rates by a total of one percentage point over the final few months of the year.

However, interest rates still stand at a historically high level of between 4.25% and 4.5%.

Lower interest rates typically stimulate economic activity by making it easier for consumers and businesses to borrow, which in turn fuels investment and spending. But interest rate cuts usually influence the economy after a lag of several months, meaning the recent lowering of rates likely had little impact on holiday spending.

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(NEW YORK) — The stock market fell on Monday after President Donald Trump slapped tariffs on Canada, Mexico and China, eliciting threats of retaliation and setting the stage for a trade war.

The Dow Jones Industrial Average slid about 550 points, or 1.25%, in early trading on Monday. The S&P 500 dropped 1.5%, and the tech-heavy Nasdaq plummeted 2%.

Traders demonstrated their jitters with a selloff of U.S. auto companies, which hold deep ties to suppliers in Canada and Mexico. Shares of General Motors plummeted 6%, while Ford saw its stock price plunge 4%.

The market rout extended worldwide. Japan’s Nikkei index fell 2.5% on Monday, and the pan-European STOXX 600 dropped about 1%.

On Saturday, Trump imposed 25% tariffs on products from Mexico and Canada, as well as 10% tariffs on goods from China. The tariffs are set to take effect on Tuesday, the White House said.

Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum both responded within hours of the announcement, vowing to retaliate.

Trudeau said Canada will implement 25% tariffs on $155 billion worth of U.S. goods, while Sheinbaum said she has instructed officials in her government to implement what she called Plan B, “which includes tariff and non-tariff measures in defense of Mexico’s interests.”

The tariffs imposed by the White House could raise prices for an array of products ranging from avocados to tequila to gasoline, experts previously told ABC News. The price impact remains unclear, however, since businesses within the supply chain could opt to take on some or all of the tax burden, they said.

Potential retaliatory tariffs issued by Canada and Mexico would make it more difficult for U.S. exporters to compete in those markets, raising the possibility of weaker sales.

This is a developing story. Please check back for updates.

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