US Stocks Mixed: Traders Eye Tariff Shifts, Inflation Data, and Fed Chair Powell's Testimony
US equities exhibited mixed performance on Tuesday, as investors weighed the implications of the latest tariff policy changes from President Donald Trump and anticipated upcoming inflation statistics.
Traders also processed the commencement of Federal Reserve Chair Jerome Powell's two-day testimony before Congress. Powell reiterated that the Fed is not rushing to adjust interest rates, maintaining the central bank's stance of abstaining from commenting on trade policy.
Dow Jones and S&P 500 Steady
By mid-afternoon, the Dow Jones Industrial Average (DJI) had marginally risen by 0.2%, while the S&P 500 (GSPC) hovered near stability. The tech-heavy Nasdaq Composite (IXIC) retreated by approximately 0.3% after a positive trading day on Wall Street.
Caution Prevails Amid Tariff Policy
Caution permeated the market as investors awaited Trump's announcement of a universal "like-for-like" tariff plan, which is expected mid-week. On Monday, the President imposed 25% tariffs on steel and aluminum imports, effective March 12th, putting pressure on major trading partners like Canada and Mexico.
Inflation Data on Horizon
Meanwhile, the countdown continues for the release of the January Consumer Price Index on Wednesday and its wholesale counterpart on Thursday, as inflation remains persistently high.
Earnings News
Coca-Cola (KO) shares climbed after surpassing fourth-quarter profit and revenue estimates, driven by robust soda demand amid price increases. Shopify (SHOP) stock rebounded from pre-market losses after the e-commerce company reported a subdued first-quarter profit projection but better-than-expected holiday sales.
Tech Sector Headlines
The tech-heavy Nasdaq Composite (IXIC) underperformed the major indices on Monday, weighed down by megacap companies like Tesla. Shares of Tesla (TSLA) fell over 5% after Chinese automaker BYD (1211.HK) collaborated with generative AI company DeepSeek to develop new autonomous technology.
Meta Platforms (META) has commenced laying off employees as part of CEO Mark Zuckerberg's plan to reduce workforce and pivot towards AI talent acquisition.
Gold Surge
Gold (GC=F) took a breather on Tuesday after a substantial 10% rally since the start of the year, although Wall Street anticipates further upside potential following recent tariff announcements.
UBS Global Wealth Management's Chief Investment Officer, Solita Marcelli, predicts a gold forecast of $3,000/oz by 2025, fueled by fragile risk sentiment and strong demand.
Powell Emphasizes Fed Independence
Powell reiterated the significance of Fed independence on Tuesday. He emphasized the need for central bank leaders to prioritize data analysis, avoiding political interference.
Powell on Housing and Stablecoins
Powell anticipates that housing prices will likely remain elevated, even with a potential decline in mortgage rates. He also affirmed that there will be a regulatory framework for stablecoins and supports efforts towards its development.
Powell on Trade Policy
Powell reiterated that commenting on tariff policy falls outside the Fed's purview and is a matter for elected officials. He acknowledged the uncertainty surrounding tariff implementation and declined to speculate on specific actions.
Powell on Economic "Soft Landing"
Powell declined to comment on whether the US economy has achieved a "soft landing," indicating that it is not his place to provide such an assessment. However, he ruled out the possibility of a "hard landing," where restrictive monetary policy triggers a recession.
Revised Playbook Following SVB Collapse
Powell revealed that the Fed's playbook has been substantially revised following the collapse of Silicon Valley Bank (SVB) in 2023. He attributed the failure to insufficient oversight of interest-rate risk and a lack of focus on the bank's unstable funding base.
Powell on Interest Rate Cuts
In prepared remarks ahead of his testimony, Powell reaffirmed that the Fed is in no rush to reduce interest rates. He cited inflationary pressures that remain elevated relative to the central bank's 2% target.
Coca-Cola Addresses Tariff Impact
Coca-Cola (KO) executives discussed the potential impact of Trump's tariff policy and recent pricing pressures during their earnings call. They anticipate that commodity costs will be in the low-single-digit range, with specific pressures on agricultural products.
Stocks Open Lower
US equities opened lower on Tuesday, with tariff uncertainty weighing on investors' minds. The Dow Jones Industrial Average (DJI) dipped by 0.3%, the S&P 500 (GSPC) lost around 0.3%, and the Nasdaq Composite (IXIC) declined by 0.5%.
Oil Gains Amid Supply Concerns
Oil futures gained 1.4% on Tuesday, extending their upward trend for the third consecutive day. Investors are evaluating signs that US sanctions on Russian crude are affecting the major producer's supply.
Asian Stocks Falter
Stock indices in Asia fell on Tuesday due to concerns over the impact of Trump's tariffs on steel and aluminum. Hong Kong's Hang Seng (HSI) dropped over 1%, while the Shanghai Composite (000300.SS) declined by 0.5%.
Gold Hits All-Time High
Gold (GC=F) continues to benefit from stock market uncertainty. President Donald Trump's 25% steel and aluminum tariffs pushed the safe-haven asset to a consecutive all-time high, surpassing $2,921 an ounce.