US STOCKS-Wall Street inches toward record on tariff relief, upbeat data

By Sruthi Shankar and Pranav Kashyap

Jan 22 (Reuters) - Wall Street's main indexes rose toward record highs on Thursday after President Donald Trump dialed back his threat of tariffs on European countries, while a new batch of economic data underscored a resilient U.S. economy.

The gains follow the S&P 500's .SPX biggest one-day percentage gain in two months on Wednesday when Trump stepped back from imposing tariffs as leverage to seize Greenland and said a deal was in sight to end a dispute over the Danish territory.

Trump's tariff threats had sent shivers through global markets on Tuesday, though buyers quickly returned to stock markets following his U-turn.

Tech stocks were at the forefront of the rally, with Alphabet GOOGL.O, Tesla TSLA.O and Apple AAPL.O all up nearly 1%, while Meta META.O gained 3%.

The small-cap Russell 2000 index .RUT gained 1.3% to a record high.

"It's the TACO trade follow on from yesterday," said Dustin Thackeray, head of portfolio management at Crewe Advisors, referring to traders' acronym for "Trump Always Chickens Out" - what some say is the U.S. president's tendency to ramp up threats only to later back down.

"There's definitely a lot going on in the geopolitical realm, and I don't think that's going to slow down anytime soon, especially as it a midterm year," said Thackeray.

The CBOE Volatility Index, also known as Wall Street's fear gauge, slid to 15.52 points, moving further from a two-month peak touched on Tuesday.

At 11:27 a.m. ET, the Dow Jones Industrial Average .DJI rose 410.16 points, or 0.84%, to 49,487.39, the S&P 500 .SPX gained 47.41 points, or 0.69%, to 6,922.96 and the Nasdaq Composite .IXIC gained 238.25 points, or 1.03%, to 23,463.07.

ECONOMIC DATA IN SPOTLIGHT

U.S. consumer spending increased solidly in November and October, likely keeping the economy on track for a third straight quarter of strong growth, the personal consumption expenditures index showed.

Separate data showed initial claims for state unemployment benefits increased less than expected last week, while the U.S. economy grew by a slightly more-than-expected 4.4% in the third quarter of 2025.

The data lands ahead of the U.S. central bank's rate decision next week, where it is widely expected to stand pat on interest rates amid still‑sticky inflation and evidence of economic resilience.

"If you're simply looking at fundamentals and hard economic data, it's a fairly good backdrop and (we're) only positioning to potentially get better if we can get some of the tariff issues we had last year behind us," Thackeray added.

The earnings season is also picking up pace, and could test market sentiment as companies detail how consumer demand, cost pressures and a bumpy macro backdrop shaped their year-end performance.

GE Aerospace GE.N slipped 5.4% despite forecasting its annual profit above estimates, while Abbott ABT.N slid 6.9% after the medical device maker forecast current-quarter profit below Wall Street expectations.

Procter & Gamble PG.N gained 2.2% following its quarterly results. Chipmaker Intel INTC.O, up 47% so far this year, is expected to post results after the bell.

U.S.-listed shares of Alibaba Holdings BABA.N rose 6.2% after Bloomberg News reported the Chinese e-commerce firm is preparing to list its chipmaking arm, T-Head.