US Stocks Mixed as Investors Anticipate Fed Meeting Minutes and Trump-Russia Talks
On Tuesday, US stocks exhibited a mixed performance to start a holiday-shortened trading week. The Dow Jones Industrial Average (^DJI) and the tech-heavy Nasdaq Composite (^IXIC) declined around 0.2% and 0.1% respectively, while the benchmark S&P 500 (^GSPC) rose slightly to trade near all-time highs.
Investors adopted a cautious approach following the Presidents' Day closure on Monday as concerns linger over potential policy shifts by the Federal Reserve and President Donald Trump. Fed officials emphasized the need for continued low interest rates to combat rising inflation. Treasury yields rose as investors sought clues about rate cut expectations, especially given recent economic data that failed to provide clear guidance.
Uncertainty regarding the release of minutes from the Fed's January meeting on Wednesday has heightened market attention. The minutes may shed light on policymakers' perspectives amidst Trump's tariff policies. Additionally, talks between the US and Russia on resolving the Ukraine conflict are being closely monitored after teams from both countries met in Saudi Arabia on Monday.
European stock markets (^STOXX) remained near record highs as investors anticipate increased defense spending in the region. Earnings season continues, with 46 S&P 500 companies expected to report their results this week. Baidu (BIDU, 9888.HK) reported a revenue decline, setting the stage for upcoming reports from China's trillion-dollar tech industry, including Alibaba (BABA) on Thursday.
The strong US dollar (DX=F, DX-Y.NYB) has weighed on corporate earnings this season. Companies across industries, from tech giants to consumer brands, have cited foreign exchange headwinds in their fourth-quarter results and forward-looking guidance. A strong dollar typically affects companies with significant overseas operations by hindering revenue and earnings growth due to unfavorable currency exchange conversions.
Super Micro Computer (SMCI) stock surged over 13% on Tuesday morning, extending its rally amid efforts to avoid delisting by Nasdaq. The server maker has faced controversies over the past year following allegations of accounting violations. Super Micro recently provided an update on its progress in submitting delayed SEC filings before the Nasdaq's February 25th deadline.
According to a recent Bank of America fund manager survey, investor optimism towards stocks remains high. Cash levels have declined to 15-year lows as traders increase their equity holdings. However, Big Tech has not been the primary driver of gains in 2025. Meta (META) is the only Magnificent Seven tech stock that has outperformed the S&P 500 thus far, despite a 20-day winning streak.
The survey also revealed that investors view global equities as the best-performing asset class in 2025, surpassing US equities. Concerns persist, with 42% of respondents ranking a global trade war as the primary risk to assets.
Homebuilder confidence has declined to its lowest level in five months as builders navigate challenges with tariffs, high mortgage rates, and inflated housing costs. The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index fell to 42 in February, indicating that more builders perceive current conditions as negative.
Intel (INTC) stock jumped 9.6% on Tuesday following reports that rivals Broadcom (AVGO) and TSMC (TSM) are considering deals to split the chipmaker into two. Broadcom is reportedly exploring a bid for Intel's product business, while TSMC is considering acquiring some or all of Intel's factories.
Chip stocks led the rally in the tech sector on Tuesday, with Nvidia (NVDA), Micron (MU), and Super Micro Computer (SMCI) experiencing significant gains. Fed speakers emphasized the need for caution in light of persistent inflation, although some expressed optimism that rate cuts could resume later this year if inflation moderates.
European stocks stabilized on Tuesday as the US and Russia commenced talks on ending the Ukraine war. The broad Stoxx 600 (^STOXX) index rose slightly, with defense-related stocks Rheinmetall (RHM.DE) and Dassault (DSY.PA) reaching all-time highs.
A Bank of America survey indicates that a global trade war has emerged as the most significant risk to markets, with 42% of respondents expressing concern.