Mixed Performance for US Stocks Amid Tariff Concerns and Inflation Outlook

US stocks closed with mixed results on Tuesday as investors weighed the potential impact of President Trump's tariff announcements and awaited key inflation data.

Tariff Uncertainty Impacts Trade

The Dow Jones Industrial Average gained 0.3%, while the S&P 500 remained largely unchanged. However, the Nasdaq Composite declined 0.4% as investors expressed concerns over the potential impact of President Trump's proposed tariffs on all steel and aluminum imports. The move has raised concerns about a trade war, with the European Union threatening countermeasures.

Inflation Data on the Horizon

Investors also looked ahead to Wednesday's Consumer Price Index (CPI) data, which is expected to show a slight deceleration in inflation. However, economists are monitoring core inflation, which excludes volatile food and energy prices, for signs of persistent inflationary pressures.

Intel Stock Soars on AI Chip Production

Intel (INTC) surged 6.5% after Vice President Vance stated that the Trump administration would prioritize domestic production of AI chips. The company is the only US-based chipmaker that manufactures advanced semiconductors.

Tech Sector Weighs AI Spending

The tech-heavy Nasdaq Composite underperformed due to concerns over AI spending. Tesla (TSLA) fell 5% as Chinese automaker BYD announced a partnership with DeepSeek to develop autonomous technology. Meta (META) also initiated layoffs as part of a pivot to acquire AI talent.

Gold Gains Traction

Gold took a breather after a 10% rally since the start of the year. However, analysts anticipate further gains as the tariff announcements contribute to market uncertainty and increase the demand for safe-haven assets. UBS predicts a rise to $3,000 per ounce in 2025.

Fed Chair Emphasizes Independence

Federal Reserve Chair Jerome Powell reiterated the importance of the central bank's independence, emphasizing that it should "stay out of politics" and focus on its primary mandate of controlling inflation.

Powell: Housing Prices to Remain Elevated

Powell also commented that despite expected declines in mortgage rates, housing prices are likely to remain elevated due to short-term effects of the pandemic and long-term issues with housing availability.

Stablecoin Regulation to Emerge

Powell confirmed that a regulatory framework would be developed for stablecoins, which are cryptocurrencies pegged to stable assets like the US dollar.

Fed Not Focused on Tariffs

Powell stated that the Fed would not comment on trade policy, emphasizing that such decisions were the responsibility of elected officials. He noted that the impact of tariff policies remained uncertain.

Soft Landing Remains Elusive

Powell declined to comment on whether the US economy had achieved a "soft landing," but ruled out a "hard landing" where restrictive monetary policy leads to a recession.

SVB Collapse Prompts Playbook Revision

Powell mentioned that the playbook for addressing financial institution failures had been revised following the collapse of Silicon Valley Bank (SVB) in 2023, highlighting the need for more focused supervision of interest rate risk.

No Rush to Cut Rates

Powell affirmed that the Fed would not rush to cut interest rates, citing elevated inflation and a "solid pace" of economic expansion.

Coca-Cola on Tariff Impact

Coca-Cola (KO) discussed the potential impact of Trump's tariffs on its operations. While the company has contingency plans to mitigate cost increases, it acknowledged that higher aluminum tariffs could lead to a greater focus on plastic bottles.

Oil Gains Amid Russian Sanctions

Oil futures rose 1.4% as signs emerged that US sanctions on Russian crude were impacting the country's output. Brent and West Texas Intermediate futures both moved higher.

Hang Seng Index Retreats

Asian stock markets, including Hong Kong's Hang Seng, fell on Tuesday as investors assessed the impact of Trump's tariffs. Chinese automakers Xpeng and Geely Auto posted significant declines following BYD's launch of free smart-driving features, intensifying competition in the EV market.