Markets recover after yesterday's selloff

Dow was up 134, advancers over decliners better than 2-1 & NAZ gained 262.  The MLP index was up 2+ to the 225s & the REIT index hardly budged from 401, yesterday's close.  Junk bond funds edged higher & Treasuries had modest buying which lowered yields.  Oil was fractionally lower in the 72s & gold gained another 17 to 2874 (more on both below).

Dow Jones Industrials

Boeing (BA), a Dow stock, has lost more than $2B & counting on its Starliner spacecraft after a rough year in which the capsule's first astronaut flight turned into a headache for NASA.  The Starliner program reported charges of $523M for 2024, its largest single-year loss to date, BA reported in a filing.  The company noted that Starliner is under a fixed-price contract from NASA, so “there is ongoing risk that similar losses may have to be recognized in future periods.”  Since 2014, when NASA awarded BA with a nearly $5B fixed-price contract to develop Starliner, the company has recorded losses on the program almost every year.  BA's program competes with Elon Musk's SpaceX, which has flown 10 crew missions for NASA & counting on its Dragon capsules.  Last summer, BA's first crew flight went awry after part of the capsule's propulsion system malfunctioned.  While Starliner delivered astronauts Butch Wilmore & Suni Williams to the Intl Space Station NASA made the decision to bring Starliner back empty and use SpaceX to return the crew early this year, an agency choice that recently became politicized.  Neither BA nor NASA have provided details on how or when they plan to resolve the Starliner propulsion issue.  Nearly 4 months ago,  NASA said  it was keeping “windows of opportunity for a potential Starliner flight in 2025,” but scheduled SpaceX to fly both its crews on missions launching in spring & late summer.  NASA then specified that “the timing and configuration of Starliner’s next flight will be determined once a better understanding of Boeing’s path to system certification is established.”  BA stock rose 50¢.

Boeing’s Starliner losses top $2 billion after program reports worst year yet

The first volleys in the latest US-China trade war made clear that Xi Jinping is taking a more cautious approach than during Donald Trump's first term.  After the US leader gave a last-minute reprieve to both Canada & Mexico, his 10% tariffs on China took effect after midnight DC time today.  Beijing announced additional tariffs on roughly 80 products to take effect on Feb 10, launched an antitrust investigation into Google (GOOG), tightened export controls on critical minerals, & added 2 US companies to its blacklist of unreliable entities.  The swift but calculated retaliation signaled that Beijing had learned a lesson from its first trade fight with Trump, when China retaliated with tariffs on par or close to what the US imposed. This time Xi only put tariffs on $14B worth of American products, a sliver of what Trump targeted, while taking other measures that showed off China's ability to inflict further pain on US companies if needed.  The shift reflects both Xi's success at diversifying imports away from the US since Trump’s first term, as well as China's more precarious economic situation.  The Chinese leader has been relying on manufacturing & overseas sales to keep growth ticking along as he moves to burst a property bubble, all while dealing with increased deflationary pressure.  China is being restrained because it “has more to lose,” due to its huge trade imbalance with the US, according to Larry Hu, head of China economics at Macquarie Group Ltd.  “A full-blown tariff war is not in China’s interest,” he added.  “Instead, China is likely to respond to tariffs mainly through domestic stimulus.”

Xi's reply to Trump tariffs shows China has more to lose

General Motors (GM) is laying off roughly ½ of the employees who remain at its discontinued Cruise robotaxi business.  The plans come 2 months after GM said it would no longer fund Cruise after spending more than $10B since acquiring the self-driving car business in 2016.  “Today, Cruise shared the difficult decision to part ways with approximately 50% of its workforce,” Cruise said.  “We are grateful for their passion and contributions to help us reach this stage, and our focus is on supporting them into their next chapter with severance packages and career support.”  Cruise had nearly 2300 employees as of the end of last year.  In an internal email sent to all Cruise employees, Cruise Pres & Chief Administrative Officer Craig Glidden wrote that the 50% reduction came “as a result of the change in strategy we announced in December.”  “With our move away from the ride-hail business and toward providing autonomous vehicles to customers alongside GM, our staffing and resource needs have dramatically changed,” Glidden wrote.  He added that a string of execs will also depart this week.  Mo Elshenawy, pres & chief technology officer, will stay on at Cruise thru the end of Apr to help with transition duties.  GM stock rose 75¢.

GM cuts 50% of Cruise staff after ending robotaxi business

Gold prices regained an all-time high, driven by investors seeking the safe-haven asset after China retaliated with tariffs on the US in response to Pres Trump's tariffs.  Spot gold gained 1.1% to $2844 after hitting a record high of $2845 earlier in the session.  US gold futures settled 0.7% higher at $2875.  The tariff news came out like it did overnight became the main driver more than any other thing  that came out today.  The $ fell 0.9%, making gold less expensive for other currency holders.  China imposed tariffs on US imports, swiftly responding to new US duties, escalating the trade war between the world's top 2 economies even as Trump offered reprieves to Mexico & Canada.

Gold hits record high as investors flock to safe-haven amid tariff war

US oil prices slipped on tariff drama between DC & Beijing, then pared losses after an official said Pres Trump plans to restore his maximum pressure campaign on Iran in a bid to drive down Iranian oil exports to zero.  The official said Trump's directive orders the Treasury secretary to impose maximum economic pressure on Iran, including sanctions & enforcement mechanisms.  US West Texas Intermediate (WTI) crude was trading down 19¢ at $72.97 a barrel.  Oil came under pressure early as new 10% US tariffs on Chinese imports took effect today, spurring retaliatory tariffs announced by Beijing.  At its session low US crude was down more than 3%, the lowest since late Dec.  Global benchmark Brent crude futures rose 42¢ (0.6%) to $76.38.  Trump had driven Iran's oil exports to near-zero during part of his first term after re-imposing sanctions.  They rose under former Pres Biden's tenure as Iran succeeded in evading sanctions.  The reason why oil was down near the lower end of the trading range was the China retaliation, & it went back up because of the maximum pressure on Iran.  Iranian crude exports shot to the highest level in years in 2024 as the country found ways to sidestep punitive sanctions.

US oil pares losses as Trump set to reimpose 'maximum pressure' on Iran

Beijing reacted swiftly to Trump's additional 10% levies on Chinese imports going into effect at midnight.  China slapped tariffs of 15% on US coal & liquefied natural gas, starting Feb 10, alongside 10% duties on imports of crude oil, farm equipment & some autos.  Tit-for-tat measures raise the risk of an escalation into trade war that would damage both of the world's top economies.  However some see the Chinese response as showing restraint that opens the door to compromise, as seen in the US tariff postponement deals with Mexico & Canada.

Markets gain as investors shake off Trump’s trade battles

Dow went up 97, advancers over decliners 5-2 & NAZ advanced 250.  The MLP index crawled up 1+ to the 234s & the REIT index was steady in the 401s.  Junk bond funds were mixed & Treasuries had limited buying which brought slightly lower yields.  Oil slid back to the 72s & gold was up 7 to 2865.

Dow Jones Industrials

China imposed tariffs on some US imports in response to new tariffs Pres Trump placed on Chinese goods beginning shortly after midnight.  Trump had signed an exec order authorizing a 10% additional tariff on imports from China.  The order also included a 25% additional tariff on imports from Canada & Mexico, & an additional 10% tax on energy imported from Canada, including oil, natural gas & electricity.  The pres has since agreed to a 30-day pause on the tariffs on Mexico & Canada.  The additional 10% tariff on all Chinese imports into the US went into effect today after Trump warned Beijing it was not doing enough to stop fentanyl from being trafficked into the country.  Trump plans to speak to Chinese Pres Xi Jinping as early as today.  China's Finance Ministry said shortly after the tariff started that it would impose a tariff of 15% for coal & liquefied natural gas and 10% for crude oil, agricultural equipment & large-engine cars imported from the US.  China also launched an anti-monopoly investigation into Alphabet's Google (GOOG) & included both PVH Corp, the holding company for Calvin Klein & other brands, US biotechnology company Illumina on its "unreliable entities list."  Additionally, China's Commerce Ministry and its Customs Administration revealed it is imposing export controls on some rare earths & metals that are critical for high-tech gadgets & the clean energy transition.  The new tariffs on US goods will start on Feb 10, according to the ministry.  Trump had warned he might continue to increase tariffs on China unless it blocked the flow of fentanyl into the US.  GOOG stock rose 4.60.

China responds with tariffs on US goods after Trump's tariffs on Chinese imports take effect

New orders for US-manufactured goods dropped in Dec, pulled down by a decline in bookings for civilian aircraft, but demand elsewhere was marginally firm.  Factory orders tumbled 0.9% after a revised 0.8% decline in Nov, the Commerce Dep's Census Bureau said.  The forecast called for factory orders to fall 0.7% after a previously reported 0.4% drop in Nov.  Factory orders were unchanged on a year-on-year basis in Dec.  Manufacturing, which accounts for 10.3% of the economy, has been constrained by the Federal Reserve's aggressive interest rate hikes in 2022 & 2023.  It has shown signs of revival as the central bank started easing monetary policy.  The Institute for Supply Management's manufacturing PMI swung into growth territory in Jan for the first time in more than 2 years.  But that nascent recovery is threatened by additional US tariffs on imported Chinese goods, which come into effect today.  A 25% tariff on most Canadian & Mexican goods has been delayed until next month.  Civilian aircraft orders decreased 45.7% in Dec, contributing to the 7.4% decline in orders for transportation equipment.  Excluding transportation equipment, orders rose 0.3%.  Business spending on equipment contracted in the 4th qtr after double-digit growth in the Jul-Sep qtr, weighed down by aircraft deliveries.

US factory orders decline again in December

Job openings slid in Dec, falling close to 4-year low, while hiring, voluntary quits & layoffs held steady, the Labor Dept reported.  Available positions tumbled to 7.6M, the lowest since Sep, & below the estimate for 8M, the Bureau of Labor Statistics said in its monthly Job Openings & Labor Turnover Survey.  The decline left the ratio of open jobs to available workers at 1.1 to 1.  Though the report runs a month behind other jobs data, the Federal Reserve watches it closely for signs of a slack or tight labor market.  While the net gain in nonfarm payrolls  picked up in the month by 256K, the level of openings fell by 556K.  As a share of the labor force, openings declined to 4.5%, or 0.4 percentage point below Nov.  Professional & business services saw a drop of 225K, while private education & health services declined by 194K & financial activities decreased by 166K.  Major stock market averages rose following the news while Treasury yields were mixed as the report showed a relatively healthy labor market as 2024 came to a close.  Layoffs totaled 1.77M for the month, down just 29K, while hires nudged up to 5.46M & quits also saw a small gain to near 3.2M.  Total separations also moved little, at 5.27M.

Job openings decline sharply in December to 7.6 million, below forecast

Stocks moved higher as investors assessed China's instant retaliation to Pres Trump's additional tariffs amid worries about the risk of a trade war.  Traders also took in fresh jobs data, with job openings declining more than expected in Dec & investors are continuing to watch any signs of cooling in the labor market as the Federal Reserve debates future interest rate cuts in the face of sticky inflation.

Markets claw back after sharp losses on Mexican tariffs are paused

Dow dropped 122 (well off early losses), decliners over advancers 2-1 & NAZ fell 235.  The MLP index gained 4 to the 322s & the REIT index slid back 1 to the 401s.  Junk bond funds remained out of favor & Treasuries saw limited buying, reducing yields slightly.  Oil crawled up to the 73s & gold advanced 23 to 2858 (more on both below).

Dow Jones Industrials

Federal Reserve Bank of Atlanta Pres Raphael Bostic said he wants to wait “a while” before cutting interest rates again following last year's reductions amid uncertainty over where the US economy is headed in 2025.  “I want to see what the 100 basis points of reduction that we did at the end of last year translates to in terms of the economy,” Bostic said.  “Depending on what the data are, it might mean that we are waiting for a while.”  The comments were Bostic's first public remarks since Fed officials agreed to leave their benchmark interest rate steady last week in a target at 4.25% - 4.50%.  The pause in adjustments followed 3 reductions late last year that lowered the benchmark by a full percentage point.  Fed Chair Jerome Powell said officials are in no hurry to lower interest rates, pointing to strong economic data & uncertainty over how the US economy & inflation will respond to Pres Trump's policies on tariffs, immigration, taxation & regulation.  Trump announced over the weekend that he would invoke emergency powers to impose tariffs on Mexico, Canada & China, though today he delayed implementation of the levies against Mexico.  “I had uncertainty on December 31. The amount of uncertainty that we have today is greater than that,” Bostic said during the conversation with his predecessor, former Atlanta Fed Pres Dennis Lockhart.  Powell said last week officials want to see more progress on inflation & would be looking for “serial readings” showing price pressures moving in the right direction.  Subsequent data showed the Fed's preferred measure of underlying inflation remained muted in Dec & real incomes were soft, according to a gov report released Fri.

Fed’s Bostic Says It Might Be a While Before Next Rate Cut

Tesla's (TSLA) electric-vehicle registrations in California fell about 12% last year, according to industry data, indicating mounting challenges for the automaker in the key US market.  While high interest rates, tough competition & the introduction of a restyled Model 3 sedan hurt the EV maker's sales in California, the loss of business was likely exacerbated by CEO Elon Musk's involvement in the US election.  "Things aren't looking so golden for Tesla in the Golden State. Tesla's dominance in the electric-vehicle market continues to falter as the brand reported its fifth consecutive quarterly registration decline," California New Car Dealers Association said in a report on Jan 31.  Still, the Model Y crossover continued to be the top-selling vehicle in the state, with about 129K units sold last year.  The Model 3 sedan was a distant second, with around 53K cars delivered.  Sales of the Model 3 fell about 36% from a year earlier, according to data sourced by the industry body, which was first reported earlier in the day.  Its global deliveries fell for the first time last year, pressured by high borrowing costs & competition from Chinese & European automakers.  A report said in Nov that Trump's transition team was planning to kill the $7500 consumer tax credit for EV purchases as part of broader tax-reform legislation.  If the Trump administration scraps the federal tax credit for EV purchases, California may introduce state tax credits under a new proposal & TSLA's EV likely would not qualify for the incentives, Governor Gavin Newsom's office had then said.  The stock fell 20.92 (5%)

Tesla's California car registrations down 12% in 2024

Apple (AAPL), a Dow & NAZ stock, shares fell after Pres Trump announced 10% tariffs on China, where the company assembles the majority of its products.  The decline was steeper than all of the tech megacaps shows how vulnerable the iPhone manufacturer could be to increased import costs.  While AAPL faced tariffs during the first Trump administration, the company was largely able to avoid fees by securing waivers for its specific products.  It also expanded its supply chain to do some assembly in countries like Vietnam, Malaysia & India.  But AAPL remains reliant on Chinese production.  Last week, AAPL reported 4% revenue growth in the Dec qtr to $124B.  However, the company guided investors to expect merely “low to mid single digits” growth in the current qtr, & said sales in China, Taiwan & Hong Kong declined 11% in the latest period.  The ultimate effect of the tariffs on its profit may depend on how much US demand the company can fill from production locations outside of China.  If AAPL can source 80% of US-bound devices from outside of China & doesn't raise prices, it could hurt annual EPS by 5¢, less than 1%, according to a note from Bank of America Securities analyst Wamsi Mohan.  If ½ of US AAPL devices are from China, it would hurt full-year EPS by 12¢, Mohan estimates.  For the fiscal year ending in Sep, analysts expect AAPL to report EPS of $7.34.  The stock fell 7.99 (3%).

Apple shares fall on concern Trump tariffs on China will hit profit

Gold futures settled moderately higher as prices recovered from early lows, with investors picking up the safe-haven commodity amid fears of a prolonged trade war after Pres Trump imposed tariffs on Canada, Mexico & China & warned that the EU & the UK could be the next targets for the levy.  However, the US has decided to postpone implementation of tariffs on Mexico by a month after Trump reached an agreement with Mexican Pres Claudia Sheinbaum as per which Mexico will immediately reinforce its northern border with 10K members of its National Guard to prevent drug trafficking from Mexico to the US, particularly fentanyl.  Canada & Mexico ordered retaliatory tariffs on American goods, while China vowed countermeasures.  The EU also warned of firm retaliation if targeted.  Investors fear that a trade war could hit the earnings of major companies & dent global growth.  The tariffs could also lead to renewed inflation fears, leading the Federal Reserve to keep interest rates on hold for longer.  The $'s strength weighed a bit on gold prices & limited the upside. The dollar index climbed to 109.88 in the Asian session, but dropped to 108.57 before recovering to 108.95, still up fairly above the flat line, gaining 0.54%.  Gold futures for Feb closed up $21 (0.8%) at $2833 an ounce for a fresh record high.

Gold Futures Settle Moderately Higher On Safe-haven Buying

The US crude benchmark outpaced gains in other oil markets after Pres Trump announced tariffs that threaten flows from America''s 2 biggest foreign suppliers.  West Texas Intermediate crude rose to $2.65 a barrel today, compared with $1.67 for Brent, narrowing the spread between the 2 grades to the smallest since Sep 2023.  The narrowing gap underscores risks to US supply, both from Canadian flows into the Oklahoma storage hub where US crude futures are priced, & from Mexican shipments into the Gulf Coast.

U.S. Oil Prices Outpace Global Gains as Tariffs Threaten Supply

Stocks mostly fell in reaction to Pres Trump's announcement of tariffs on China, Mexico & Canada.  But the major averages pared heavy losses after Trump said the US would delay tariffs on Mexican imports by a month.  Consumer discretionary  stocks, which includes automakers, were hit over fears of tariff impacts.

Markets cut losses after Trump pauses tariffs on Mexico

Dow was off 31, decliners over advancers about 2-1 & NAZ dropped 190.  The MLP index rose 2+ to 321 & the REIT index was unchanged in the 402s.  Junk bond funds slid lower & Treasuries were in demand, lowering yields (more below).  Oil was up pennies in the 72s & gold jumped 24 to 2859 for yet another record!

Dow Jones Industrials

Beijing is threatening to retaliate against the US as Pres Trump's 10% tariffs on China are expected to take effect tomorrow.  The White House announced on Sat that the Trump administration is implementing a 25% additional tariff on imports from Canada & Mexico & a 10% additional tariff on imports from China, in a move intended to hold the 3 countries "accountable to their promises of halting illegal immigration and stopping poisonous fentanyl and other drugs from flowing into our country."  Namely with Beijing, the White House said Chinese officials "have failed to take the actions necessary to stem the flow of precursor chemicals to known criminal cartels and shut down money laundering by transnational criminal organizations."  A spokesperson for the Chinese Foreign Ministry said that the 10% tariffs were being levied "under the pretext of the fentanyl issue."  "China firmly deplores and opposes this move and will take necessary countermeasures to defend its legitimate rights and interests," the Foreign Ministry said.  "China’s position is firm and consistent. Trade and tariff wars have no winners."  The spokesperson argued that the US' unilateral tariff hikes "severely violate" World Trade Organization rules & "cannot solve the U.S.'s problems at home and more importantly, does not benefit either side, still less the world."  "China is one of the world’s toughest countries on counternarcotics both in terms of policy and its implementation.  Fentanyl is an issue for the U.S.," the Foreign Ministry claimed.  "In the spirit of humanity and goodwill, China has given support to the U.S.’s response to this issue. At the U.S.’s request, China announced back in 2019 the decision to officially schedule fentanyl-related substances as a class. We are the first country in the world to do so," the spokesperson went on, adding that China has "conducted counternarcotics cooperation with the U.S. side in a broad-based way" & that the "U.S. needs to view and solve its own fentanyl issue in an objective and rational way instead of threatening other countries with arbitrary tariff hikes."  Beijing argued that "additional tariffs are not constructive and bound to affect and harm the counternarcotics cooperation between the two sides in the future."  "China calls on the U.S. to correct its wrongdoings, maintain the hard-won positive dynamics in the counternarcotics cooperation, and promote the steady, sound and sustainable development of China-U.S. relationship," the spokesperson added.

China threatens to retaliate against Trump tariffs

Pres Trump said that he is pausing for 1 month his new 25% tariff on goods entering the US from Mexico after Mexican Pres Claudia Sheinbaum agreed to immediately send 10K soldiers to her country's northern border to prevent drug trafficking.  The announcement of the pause came 2 days after Trump slapped 25% tariffs on goods from Mexico & Canada, as well as a 10% tariff on goods imported from China.  Trump said in a social media post that he & Sheinbaum spoke today.  Both he & Sheinbaum said that the 10K Mexican National Guard troop that she is sending to the border with the US will have the mission of halting drug trafficking from Mexico & Canada, particularly that of the deadly opioid fentanyl.  Trump also wrote in his Truth Social post that the Mexican troops will aim to stop the flow “of migrants into our Country.”  “We further agreed to immediately pause the anticipated tariffs for a one month period during which we will have negotiations headed by Secretary of State Marco Rubio, Secretary of Treasury Scott Bessent, & Secretary of Commerce Howard Lutnick, & high-level Representatives of Mexico,” Trump wrote in the post.  “I look forward to participating in those negotiations, with Pres Sheinbaum, as we attempt to achieve a ‘deal’ between our two Countries,” Trump wrote.

Trump pauses Mexico tariffs for one month after agreement on border troops

Treasury yields were mixed as investors weighed Pres Trump's new tariffs on goods from key trade partners & their impact on the economy.  The 10-year Treasury yield was down 6 basis points at 4.506% & the 2-year Treasury yield was down 1 basis point at 4.228%.  One basis point is equal to 0.01%, & yields & prices move in opposite directions.  Investors are weighing the impact of tariffs on trade partners, with Trump signing an exec order on Sat imposing 25% tariffs on imports from Mexico & Canada & a 10% duty on China.  The US does roughly $1.6T in business with the 3 countries. Today Mexico Pres Claudia Sheinbaum said that Trump's tariffs against the country would be paused for 1 month as it sends 10K soldiers to its northern border to stop drug trafficking.  Canada, meanwhile, has responded by threatening its own tariffs on the US, while Mexico is looking to impose levies on US goods & the Chinese gov is filing a lawsuit with the World Trade Organization.

10-year Treasury yield slips as investors weigh Trump’s tariffs

All 3 of the major indices are trading lower after Pres Trump announced new tariffs on Canada, Mexico & China.  However early losses have been reduced while traders are weighing quickly changing conditions.

Markets give up gains after White House says tariffs start on Saturday

Dow fell 337, decliners over advancers about 3-1 & NAZ fell 54.  The MLP index sank 9+ to 320 & the REIT index was off fractionally to the 402s.  Junk bond funds traded higher & Treasuries had limited selling which raised yields modestly.  Oil slid lower in the 72s & gold pulled back 16 to 2828 on profit taking after reaching a new record (more on both below).

Dow Jones Industrials

In an apparent ending to weeks of intense speculation, the White House confirmed that Pres Trump will be leveling aggressive tariffs this weekend on major US trading partners.  Karoline Leavitt, the White House press secretary, said Trump will be implementing 25% tariffs on Mexico & Canada as well as a 10% duty on China, in retaliation for “the illegal fentanyl that they have sourced and allowed to distribute into our country.”  The White House provided few details on exactly how the levies will be meted out, saying that they will be available for public inspection at some point tomorrow.  “These are promises made and promises kept by the president,” Leavitt said.  There was no word on potential exemptions to the tariffs; the White House denied an a report that there would be at least some exclusions rather than simply blanket measures covering all products & that the tariffs would be delayed until Mar 1.  Together, the US does about $1.6T in annual business with the 3 countries.  Trump is seeking to use the tariffs as both bargaining chips & methods to affect foreign policy changes, specifically the immigration & drug trade issues.  “We’ve got the Super Bowl coming up, and eerily, the amount of people that fit in the [New Orleans] Superdome are almost exactly equal to the number of people dying every year here in America from fentanyl, and that comes from China and Mexico,” Trump trade adviser Peter Navarro said.  “This is why we have these kind of discussions.”  Economists worry that the tariffs could reignite inflation at a time when it appears price pressures are beginning to abate.  The Commerce Dept reported today that an inflation reading closely watched by the Federal Reserve rose to 2.6% in Dec, but the details in the report appeared more positive.  However, Fed officials have said they are monitoring the impact of fiscal policy.  “It will be very important to have a better sense of the actual policies and how they will be implemented, in addition to greater confidence about how the economy will respond,” Fed Governor Michelle Bowman said.  Chicago Fed Pres Austan Goolsbee said the key will be whether the tariffs are one-off events or lead to retaliation.

Tariffs on Canada, Mexico and China begin Saturday, White House says

Nvidia (NVDA) CEO Jensen Huang is DC & will be meeting with Pres Trump.  The main topic Huang & Trump are expected to discuss is US artificial intelligence policy.  China's DeepSeek is likely to be part of the discussion, but the meeting is seen as a way for both leaders to get to know each other.  Top technology CEOs have embraced Trump in recent months to a degree not seen in his first administration.  But this is the first meeting between Huang & Trump since the pres started his 2nd term last week.  Many other industry leaders were at Trump’s inauguration.  Tesla (TSLA) & SpaceX CEO Elon Musk  has emerged as one of Trump's top advisors, after heavily financing his campaign.  Musk is implementing policy for the Trump administration thru his oversight of an outside advisory council, the Dept of Gov Efficiency (DOGE).  NVDA fell 4.48.

Nvidia CEO Jensen Huang to meet with Trump at White House

As Pres Trump threatens to impose 25% tariffs on imports from Canada & Mexico as soon as tomorrow, the global automotive industry is collectively holding its breath.  For months, automakers have been taking a “wait-&-see” approach to the Trump administration's potential tariffs.  Trump promised to impose duties upon his inauguration this month, then he set a target date of Feb 1 for levies on the key US trading partners.  Amid a media report  that the tariffs could be delayed until Mar, the White House said Trump would follow thru Sat on his proposal to slap 25% tariffs on imports from Canada 2 Mexico, 2 key US trading partners.  If Trump implements the tariffs, automakers such as General Motors (GM), the top seller in the US, may have to change their business strategies to avoid increases in costs, as their supply chains are integrated across North America.  A tariff is a tax on imports, or foreign goods, brought into the US.  Companies importing the goods pay the tariffs & some fear the companies would simply pass any additional costs on to consumers, raising the cost of vehicles & potentially reducing demand.  Uncertainty about trade took a toll on GM yesterday, when the automaker's stock had 1 of its worst days in years even after it beat expectations for its 2025 guidance & its top- & bottom-line for 4th qtr.  “Our key take from GM’s 4Q [earnings] result is that while the opportunity for GM is highly compelling, US policy uncertainty must be navigated for the time being,” Barclays analyst Dan Levy said on Wed.  GM stock fell 8¢.

Trump’s threat for 25% tariffs on Mexico and Canada is challenging the auto industry

Gold prices surpassed the key $2800 mark for the first time, fuelled by a rush to safety following US Pres Trump's tariff threats, which heightened concerns about global economic growth & inflationary pressures.  Spot gold rose 0.3% to $2801 per ounce, after hitting a record peak of $2817 earlier in the session.  US gold futures settled 0.4% lower at $2835, trading a premium to spot gold rates.  There's a lot of uncertainty out there right now & also wait-&-see attitude on the geopolitical stage with tariffs.  Trump has set a Sat deadline to slap a 25% tariff on imports from Canada & Mexico & said he was still considering new tariffs on Chinese goods.  Bullion, a preferred asset during times of economic & geopolitical turmoil, is on track to record its best monthly performance since Mar 2024, rising nearly 7% so far.  The metal surpassed multiple record peaks last year.  Additionally, "the mixed signals coming from the Fed & the Trump administration right now is causing uncertainty in the market.  Trump wants to cut interest rates, while the Fed wants to hold them steady.  Earlier this week, Federal Reserve Chair Jerome Powell said there would be no rush to cut interest rates again, contradicting Trump's earlier calls saving he wants borrowing costs to be lowered.

Gold surges past $2,800 as tariff threats reignite record rally

Crude oil prices were steady but set for weekly declines as markets waited to see if Pres Trump would follow thru on his threat to impose tariffs on Mexico & Canada later this week.  Brent crude for Mar, which expires today, was up pennies at $76.95 a barrel & US West Texas Intermediate (WTI) crude was up 21¢ at $72.94.  For the week, benchmarks Brent & WTI are set to fall 2% & 2.3%, respectively.  Crude oil prices have fallen this week on growing concerns about Trump's tariffs, which are expected to hamper global economic growth.  Investors are weighing the possibility of US tariffs alongside a series of exec orders & policy announcements.  Trump has threatened to impose 25% tariffs as early as Sat on Canadian & Mexican exports to the US if the 2 countries do not stop shipping fentanyl across the US border.  Canada & Mexico are the 2 largest crude oil exporters to the US, but it is unclear whether crude will be included in the tariffs.  Trump said yesterday he would decide soon whether to exempt Canadian & Mexican oil imports from the tariffs.  In 2023, the latest full year, Canada exported 3.9 million barrels per day (bpd) of crude to the US, for 6.5M bpd of total imports, while Mexico exported 733K bpd

Crude Oil Prices Set For Weekly Decline As Trump Tariff Threat Looms

US stocks lost ground after the White House said tariffs against Mexico, Canada & China will take effect on Sat, reigniting fears of a coming trade war with the nation' closest trading partners.  White House Press Secretary Karoline Leavitt said the pres would impose 25% tariffs on goods from Mexico & Canada, as well as a 10% tariff on goods from China.  The looming Sat tariff deadline has revived worries about the impact on the economy from a clampdown on the US's biggest trading partners.  The $ rose, headed for its best week since Nov.  The uncertainty over tariffs has left Federal Reserve Chair Jerome Powell in wait-&-see mode, with the potential for tariffs to inflame inflation in focus.

Markets rise after December inflation data and looming tariff deadline

Dow edged up 19, advancers over decliners about 5-4 & NAZ gained 256.  The MLP index was off 5+ to the 324s & the REIT index added 2+ to the 402s.  Junk bond funds continued to inch higher & Treasuries were little changed, keeping yields steady (more below).  Oil was little changed in the mid 72s & gold added 10 to 2855.

Dow Jones Industrials

The Federal Reserve's preferred inflation gauge showed prices rose as expected in Dec, & it remains above the central bank's target level amid its ongoing efforts to wrestle down inflation.  The Commerce Dept reported that the personal consumption expenditures (PCE) index was up 0.3% from the prior month & 2.6% on an annual basis.  Those figures were in line with the estimates.  Core PCE, which excludes volatile food & energy prices, rose 0.2% for the month & increased 2.8% from a year ago, also in line with estimates.  Federal Reserve policymakers are focusing on the PCE headline figure as they try to slow the pace of price increases to their target of 2%, though they view core data as a better indicator of inflation.  Headline PCE ticked higher from an annual rate of 2.4% in Nov to 2.6% last month, while core PCE has been at 2.8% for 3 consecutive months.  Headline PCE showed prices for goods were flat in Dec, while prices for services rose by 3.8% from a year ago.  Food prices were up 1.6% last month when compared with a year ago, while energy prices were down 1.1% during that period.  Wages & salaries were up 0.4% in Dec compared with the prior month, a slight deceleration after Oct & Nov both saw wage & salary growth of 0.5% in those months.  The personal savings rate as a percentage of disposable income was 3.8% in Dec.  That metric declined from 4.3% in Oct to 4.1% in Nov & had been nearly 5% last spring.

Fed's favored inflation gauge just came out as price fight ramps up

Treasury yields were unchanged as investors parsed the latest inflation data as well as other economic data.  The 10-year Treasury yield was marginally lower at 4.508% & the 2-year Treasury yield was fractionally higher at 4.199%.  1 basis point is equal to 0.01% & yields & prices move in opposite directions.  The personal consumption expenditures price index (above) increased 0.3% in Dec from a month earlier & 2.6% on an annual basis.  Both readings were in line with forecasts.  Yesterday, yields moved lower as the latest gross domestic product report came in weaker than expected, showing slower economic growth in the US.  The 4th-qtr GDP growth rate was 2.3%, while the forecast was forecasting an increase of 2.5%.  Fed Chair Jerome Powell said at his press conference that the central bank will need to see “real progress on inflation or some weakness in the labor market before we consider making adjustments” to interest rates.  Meanwhile, Trump is planning to go ahead with increased tariffs, which threaten to raise the cost of goods. The pres said that he will impose 25% tariffs on Canada & Mexico starting tomorrow.

Treasury yields are unchanged latest sticky inflation data

Exxon Mobil (XOM), a Dow stock & Dividend Aristocrat, beat the estimate for 4th-qtr profit as higher oil & gas production offset lower oil prices & weaker refining margins.  4th qtr EPS was $1.67, beating estimates of $1.56.  The #1 oil producer reported total earnings of $33.5B for full-year 2024, down from $38.6B the year earlier.  The company became the largest oil producer in the Permian basin in 2024, the biggest US oilfield, after closing its acquisition of Pioneer Natural Resources in May.  Low production costs in the basin & its lucrative & prolific projects in Guyana have bolstered the company's profits despite lower oil prices & a decline in profits for making fuel.  The company signaled earlier this month that sharply lower oil refining margins would cut earnings by $300M - $700M compared to the 3rd qtr.  Shareholder returns via buybacks & divs totaled $36B in 2024, up from $32B the previous year.  Shareholder distributions, a cornerstone of its strategy to court investors, were covered by free cash flow of $36.2B.  The stock was off 60¢.

Exxon beats fourth-quarter estimates with higher Permian, Guyana output

US stocks rose as the Federal Reserve's preferred inflation gauge matched expectations. Investors also braced for a looming tariff deadline.  Trump yesterday doubled down on a threat to impose a first round of 25% tariffs on Canada & Mexico tomorrow.  The looming deadline has revived worries about the impact on the economy from a clampdown on the US's biggest trading partners.

Markets rise in choppy session as traders digest earnings reports

Dow finished up 168, advancers over decliners better than 4-1 & NAZ closed up 49.  The MLP index rose 1+ to the 283s & the REIT index rebounded 6+ to the 404s.  Junk bond funds inched higher & Treasuries were purchased, driving yields lower.  Oil finished slightly higher in the 72s & gold remained hot, up 50 to a record of 2843 (more on both below).

Dow Jones Industrials

Shares of United Parcel Service (UPS) plunged after the company issued weak revenue guidance for the year & said it planned to cut deliveries for Amazon (AMZN), its largest customer, by more than ½.  The shipping giant said in its 4th-qtr earnings report  that it “reached an agreement in principle with its largest customer to lower its volume by more than 50% by the second half of 2026.”  At the same time, UPS said it’s reconfiguring its US network & launching multi-year efficiency initiatives that it expects will result in savings of approximately $1B.  CEO Carol Tome said that AMZN is UPS' largest customer, but it's not the company's most profitable customer.  “Its margin is very dilutive to the U.S. domestic business,” she added.  “We are making business and operational changes that, along with the foundational changes we’ve already made, will put us further down the path to become a more profitable, agile and differentiated UPS that is growing in the best parts of the market,” Tome continued.  UPS forecast 2025 revenue of $89B, down from revenue of $91B in 2024.  That's well below estimates for 2025 revenue of $94.9B.  For the 4th qtr, UPS missed on revenue, reporting $25.3B versus $25.4B expected.   UPS has, for its part, taken more aggressive cost-control measures, including catering to more profitable delivery customers.  Tome highlighted healthcare, small business, intl & business-to-business, or B2B, as “the best parts of the market” that it’s leaned into more heavily.  In recent qtrs, UPS has benefited from an influx of volume from bargain retailers Temu & Shein, which have rapidly gained popularity in the US.  Last Jan, UPS laid off 12K employees as part of a bid to realize $1B in cost savings.  The stock tumbled 18.88 (14%).

UPS shares tank 15% after weak guidance, plan to slash Amazon deliveries by more than half

Mortgage rates fell slightly this week, remaining stubbornly high while would-be buyers & sellers continue to wait for steeper declines.  Freddie Mac's latest Primary Mortgage Market Survey showed that the average rate on the benchmark 30-year fixed mortgage ticked down to 6.95% from last week's reading of 6.96%.  The average rate on a 30-year loan was 6.63% a year ago.  "The 30-year fixed-rate has hovered between 6% and 7% for most of the last two and a half years. That trend continued this week, with the average rate remaining essentially flat at 6.95%," said Sam Khater, Freddie Mac's chief economist.  "Driven by these higher rates and a persistent supply shortage, affordability hurdles still exist for many homebuyers and a significant number of them remain on the sidelines."  The average rate on the 15-year fixed mortgage fell to 6.12% from 6.16% last week.  One year ago, the rate on the 15-year fixed note averaged 5.94%.

Mortgage rates tick lower, hover near 7%

IBM (IBM), a Dow stock, surged 12% on the back of strong 4th-qtr results that showed artificial intelligence growth boosting its software business.  The move put the stock in its best day since Jul 2000, when shares popped 13%.  The company reported adjusted EPS of $3.92 adjusted on $17.55B in revenue.  The forecast had expected EPS to come in at $3.75 & revenues to reach $17.54B.  IBM reported a 1% rise in revenues overall, while its software unit grew 10% on a year-over-year basis amid growing demand for artificial intelligence & its operating system known as Red Hat Linux.  CEO Arvind Krishna also said that the company posted $5B in bookings for its generative AI segment.  “We closed the year with double-digit revenue growth in Software for the quarter, led by further acceleration in Red Hat,” he said.  “Clients globally continue to turn to IBM to transform with AI.”  JPMorgan analyst Brian Essex maintained his neutral rating on IBM but said the firm remains “encouraged” by its software strength & growth trajectory.  Goldman Sachs analyst James Schneider reiterated his buy rating, saying that software strength should benefit IBM's turnaround plan.  The stock jumped 29.69 (13%).

IBM rallies 12%, heads for best day since 2000 on strong earnings
 

Gold prices rose to hit a lifetime high, sparked by safe-haven demand due to US tariff threats, while the focus was also on a crucial inflation report for clues on the Federal Reserve's policy path.  Spot gold was up 1.3% at $2794 per ounce, hitting its record high level at $2798 earlier in the session.  US gold futures settled 1.8% higher at $2845.  There is keener uncertainty & anxiety about the Trump administration's new policies on trade & foreign policy & fresh technical buying coming in as prices are trending higher.  Earlier this week, the White House said Pres Trump planned to hit Mexico & Canada with steep tariffs on Sat & was also considering some on China.  The $ fell 0.2%, making gold less expensive for other currency holders, while 10-year Treasury yields fell to their lowest level in over a month.  Gold is shining as a safe haven asset, with investors seeking shelter to weather the storm of unpredictability.  The Fed held rates steady yesterday, in line with expectations, with Chair Jerome Powell saying.

Gold hits record high on safe-haven demand amid tariff threats

West Texas Intermediate (WTI) crude prices continued to decline for a 2nd straight session, trading around $72.20 a barrel.  Investors remained cautious as uncertainty looms over US trade policy, following conflicting statements from the White House regarding Pres Trump's proposed tariffs on Canada &d Mexico—2 of the US' main crude suppliers.  White House spokeswoman confirmed on Tues that Trump remains committed to imposing tariffs on Canada & Mexico as planned on Sat.  Yesterday, Trump's nominee for commerce secretary, Howard Lutnick, suggested that Canada & Mexico could avoid tariffs if they immediately tighten border controls on fentanyl & curb China's advances in artificial intelligence.  Lutnick advocated broad, blanket tariffs that target countries rather than specific products, reinforcing a more aggressive stance toward China.  Crude oil prices also remained under pressure after the Energy Information Administration (EIA) reported a 3.5M barrel increase in US stockpiles last week, the first build in stocks after 9 consecutive weeks of declines, which was in line with expectations for a 3.2M barrel increase.  Recent winter storms across the US have further dented oil demand.  On the supply side, Russian crude exports from western ports are expected to fall by 8% in Feb compared to Jan, as Moscow ramps up refining operations.  The decline comes amid fresh US sanctions, which have tightened restrictions on Russian crude exports.

WTI Drops To $72.00 As Traders Await Clarity On US Trade Policy

US stocks gained steam in the  as investors digested megacap tech earnings & looking for Big Tech stocks for more clues on their prospects.  After the Federal Reserve stood pat on interest rates  as expected, investors have turned to parsing earnings reports & the first wave of results from the tech companies  have driven broader stock market gains.

Markets slide after US economic growth and inflation data

Dow added 48, advancers 4-1 & NAZ slid back 59.  The MLP index hovered in the 322s & the REIT index jumped 7 to the 404s.  Junk bond funds were mixed & Treasuries had limited buying which lowered yields.  Oil edged up in the 73s & gold shot up 53 to a new record at 2847.

Dow Jones Industrials

The US economy grew slower than expected in the 4th qtr, according to new data.  The Commerce Dept's Bureau of Economic Analysis released its advance estimate for 4th qtr gross domestic product (GDP), which found the US economy grew at an annual rate of 2.3% in the 4th qtr, which runs from Oct-Dec.  The forecast had expected the economy to grow at a 2.6% rate in the qtr.  The 4th qtr's 2.3% growth was slower than the 3.1% GDP growth recorded in the 3rd qtr.  GDP growth was driven primarily by growth in consumer & gov spending, but was partly offset by a decrease in investment.  Consumer spending grew 4.2%, with increases in both services & goods, up from 3.7% in the 3rd qtr & 2.8% in the 2nd qtr.  Gov spending was up 2.5%, slower than the 5.1% increase in the 3rd qtr.  Business investment declined 5.6% compared with the 3rd qtr, which was relatively flat at 0.8%.  Investment in equipment declined by 7.8% while investment in structures dipped by 2.2% – which was partly offset by a 5.3% rise in residential investment & a 2.6% uptick in intellectual property products.  Disposable personal income increased by 2.8%, an acceleration from 1% & 1.1% in the 2nd & 3rd qtrs, respectively.  Business investment  were $896B in the 4th qtr, down from $936B in the prior qtr & personal saving as a percentage of disposable personal income was 4.1%.  The BEA's report also included an estimate for real GDP for 2024, which came in as an increase of 2.8%, down slightly from the 2.9% rise recorded in 2023.

US economy grew slower than expected in fourth quarter

Microsoft (MSFT), a Dow stock, shares dropped after issuing weak current-qtr guidance.  The software giant topped fiscal 2nd-qtr estimates, posting EPS of $3.23 on $69.6B in revenue.  That surpassed the EPS of $3.11 & $68.8B forecast.  The decline came as CFO Amy Hood said the company expects revenues for the current qtr to be $67.7 - $68.7B, falling short of the $69.8B forecast.  Revenue grew 12.3% year over year, the slowest growth since the middle of 2023.  MSFT also posted a slowdown in growth in its Azure & other cloud services revenues.  The segment was up 31%, down from 33% in the prior qtr.  Many analysts stood by the technology behemoth despite the disappointing guide & Azure slowdown.  CEO Satya Nadella said that DeepSeek's R1 model is currently available thru GitHub & the company's Azure AI Foundry.  It will also eventually be accessible on Copilot+ PCs, he added.  The stock tumbled 27.53 (6%).

Microsoft stock slumps 5% on disappointing revenue outlook

Treasury yields moved lower as economic data showed slower-than-expected growth for the US in the 4th qtr.  The 10-year Treasury yield was lower by 3 basis points at 4.524%.  Meanwhile, the 2-year Treasury yield was down less than 2 basis points at 4.211%.  1 basis point is equal to 0.01% & yields & prices move in opposite directions.  The move in yields came as the Commerce Dept's gross domestic product report was weaker than expected (see above).  Yesterday, the central bank’s Federal Open Market Committee left its overnight borrowing rate unchanged at 4.25% - 4.50%, in a move that investors had been anticipating after 3 consecutive cuts since Sep 2024.  Policymakers noted in left its overnight borrowing rate  that “inflation remains somewhat elevated” & “the unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid.”  They added that the central bank would need to see “real progress on inflation or some weakness in the labor market before we consider making adjustments.”  At a press conference following the decision, Fed Chair Jerome Powell said he will not be responding to Pres Trump's demands for immediate interest rate cuts, & that he had “no contact” with Trump since the comments were made last week.  “I’m not going to have any response or comment whatsoever on what the president said,” Powell added at his press conference.  “It’s not appropriate for me to do so.”

10-year Treasury yield slides after weaker-than-expected GDP

After the Federal Reserve stood pat on interest rates as expected, investors have turned to parsing earnings reports, & in particular, the first wave of results from tech companies that have driven broader stock market gains.  Faith in Big Tech was put to the test after DeepSeek's cheaper AI model rattled assumptions about the likelihood of a payoff, the focus was on the rationale for their massive AI investments.

Markets fall as cautious Fed pauses and warns about inflation

Dow dropped 136, decliners over advancers 3-2 & NAZ retreated 101.  The MLP index crawled up 1+ to the 321s & the REIT index slid back 5 to then 398s.  Junk bond funds drifted lower & Treasuries were flattish, keeping yields little changed.  Oil was off almost 1 to the high 72s & gold was up 6 to 2773 (more on both below).

Dow Jones Industrials

The Federal Reserve held its key interest rate in check, reversing a recent trend of easing policy as it examines what is likely to be a bumpy political & economic landscape ahead.  In a widely anticipated move, the central bank's Federal Open Market Committee left unchanged its overnight borrowing rate in a range between 4.25%-4.50%.  The decision followed 3 straight cuts since Sep 2024 worth a full percentage point & marked the first Fed meeting since frequent Fed critic Donald Trump assumed the presidency last week & almost immediately made known his intentions that he wants the central bank to cut rates.  The post-meeting statement dropped a few clues about the reasoning behind the decision to hold rates steady.  It offered a somewhat more optimistic view on the labor market while dropping a key reference from the Dec statement that inflation "has made progress toward" the Fed's 2% inflation goal.  "The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid," the new language read.  "Inflation remains somewhat elevated."  A stronger labor market & stubborn inflation would provide less incentive for the Fed to ease policy.  The statement again indicated that the economy "has continued to expand at a solid pace."  Recent statements from policymakers have shown some apprehension about whether progress in bringing down inflation has stalled.  Officials also have said they want to see how the previous cuts are working their way thru the economy though most expect rate cuts this year.  In addition, the decision comes against a volatile political backdrop.  In a little over a week, Trump has cut a swath through DC policy & political norms as he has signed hundreds of exec orders that seek to implement an aggressive agenda.  The pres has backed tariffs as both an economic & foreign policy tool, ordered a wave of deportations against those crossing the border illegally & has put forth a series of deregulatory measures.  Moreover, Trump last week spoke of his confidence that he will bring down inflation & said he would "demand" that interest rates be lowered "immediately."  Though the pres has no authority over the Fed other than to nominate board members, Trump's statement signaled a potentially contentious relationship with the policymakers much like during his first term.

Fed holds rates steady, takes less confident view on inflation

Starbucks (SBUX) reported that its same-store sales slid for the 4th consecutive qtr, but the company's quarterly earnings & revenue beat expectations.  The coffee giant kicked off a turnaround plan last qtr in the hopes of reviving its US business, which has slumped over the past year.  "While we have room for improvement, we're making progress as planned, and have confidence we're on the right track," CEO Brian Niccol said.   He added that the company has seen a "positive response" to the early steps it has taken.  Those tweaks have included removing extra charges for nondairy milk options, focusing its marketing on its coffee & slashing 30% of its food & beverage menu items by the end of fiscal 2025.  Fiscal first-qtr EPS was 69 down from 90¢, a year earlier.  Net sales of $9.4B were unchanged from a year earlier.  Same-store sales fell 4%, fueled by a 6% decline in traffic to its stores.  The forecast was expecting a steeper drop of 5.5%.  Both US & intl locations outperformed expectations.  US same-store sales slid 4% as traffic to its cafes fell 8%.  Under Niccol, who took the reins in Sep, the company has been trying to turn around its US business by getting “back to Starbucks” & returning its focus to coffee & the customer experience.  Niccol also has plans for SBUX corp workforce.  He has been reorganizing the company's structure, including splitting the role of North American pres into 2 jobs.  In early Mar, the company is planning to lay off workers, although SBUX has not yet shared how many jobs will be affected.  The stock jumped 8.17 (8%).

Starbucks earnings top estimates, but same-store sales decline for fourth straight quarter

Kohl's (KSS) is cutting its corp workforce by 10%, the struggling Wisconsin-based company said.  The retailer said that closures of open positions will account for "more than half of the total reduction."  Some current employees who work at KSS corp offices are also losing their jobs, Kohl's added.  The reduction is meant to "support Kohl’s ongoing actions to increase efficiencies and improve profitability for the long-term health and benefit of the business," the company noted.  KSS has already informed employees affected by the workforce reduction.  They received "competitive severance packages to help support their transition," the retailer said.  The company has also been making changes to its real estate footprint in recent weeks.  27 "underperforming" stores across 15 states are slated to permanently close their doors by Apr, KSS previously announced Jan 9.  Its San Bernardino e-commerce fulfillment center in California is also expected to shutter the following month.  Those closures, like the corp workforce reduction, seek to "increase efficiencies and improve profitability" for KSS over the long-term.  The stock fell 37¢.

Kohl's cuts 10% of corporate workforce to improve profitability

Gold's price turned lowery in the US trading session after a very whipsaw start to the week.  Lower US rates are often seen as beneficial for gold to trade higher.   Market expectations show the Fed will likely keep interest rates unchanged in the range of 4.25%-4.50%, so traders will rather focus on Fed Chair Jerome Powell's comments on the central bank's policy outlook.  And here, traders might be in for a huge disappointment.  Powell is not expected to comment on Pres Trump's criticism of the Fed or why or how Trump calls for lower rates.  Instead, Powell is expected to repeat that the central bank remains independent & data-dependent & will focus on its dual mandate: inflation & the jobs market.  The market expectation is for Powell to deliver a dovish pause.  This should see US yields tilt lower, which opens the opportunity for gold to surge higher.

Gold dips despite dovish expectations for the upcoming Fed interest rate decision

Oil prices fell, following a rise in US crude inventories & easing concerns over Libyan supplies, while focus shifted to potential US tariffs on Canadian & Mexican imports.  Brent crude futures were down 59¢ (0.8%) at $77.90 while US crude futures were down 55¢ (0.8%) at $73.22.  The White House said Pres Trump still plans to impose 25% tariffs on Canada & Mexico on Sat.  Crude prices continue to follow the beat of Trump's tariff orchestra, with Canadian tariffs coming into effect on Sat potentially pushing US prices higher.  Canada supplies 3.9M barrels of oil per day to the US in 2023, roughly ½ of all imports for the year, while Mexico supplies 733K barrels per day.  Overall prices traded slightly lower after Libya said exports had resumed & the API reported a weekly increase in US inventories.  Additionally, OPEC+ is expected to stick with the production increases it announced in Apr.  US crude & gasoline stocks rose last week, while distillate inventories fell.

Oil Prices Fall As U.S. Crude Inventories Surge, Tariff Concerns Loom

Tech stocks led markets lower as the broader mood stayed muted after the Federal Reserve's latest interest rate decision saw the central bank keep rates unchanged at 4.25%-4.50%.  In its statement, the Fed notably removed language from its Dec statement indicating that it was making progress towards its goal of 2% inflation, stating simply: "Inflation remains somewhat elevated."  Powell pushed back on that notion, referring to the change as "language cleanup" rather than intending to send a signal.  Markets bounced off their lows of the day on Powell's comments.

Markets slide ahead of Fed decision

Dow went up 71, advancers barely ahead of decliners & NAZ was off 112.  The MLP index added 2+ to the 322s & the REIT index fell 2+ to 401.  Junk bond funds hardly budged & Treasuries had limited buying, letting yields slip lower (more below).  Oil slid lower in the 73s & gold was steady at 2767.

Dow Jones Industrials

Treasury yields were lower as investors awaited the Federal Reserve's first interest rate decision of 2025.  The 10-year Treasury yield declined by 2 basis points to 4.53%, while the 2-year Treasury was marginally lower to 4.203%.  One basis point is equal to 0.01%, & yields & prices move in opposite directions.  Investors are keenly anticipating the Fed's interest rate decision following the central bank's meeting which took place yesterday & today, & the results of which will be released later.  Expectations for an interest rate cut remain low, with traders pricing in a nearly 100% chance that the Fed will keep rates steady at a target of 4.25% - 4.5%.  Pres Trump, who Powell has a contentious relationship with, dating back to Trump's first term has already said that he will “demand that interest rates drop immediately,” during a speech at the World Economic Forum in Davos, Switzerland last week.  “The Fed must follow its legislative mandate,” former Kansas City Fed Pres Esther George said.  “Congress has told us it is to bring prices to a low and stable level. In the long run, this institution has to think about those objectives rather than be swayed by outside commentary and political pressure that will come its way, as it has for its entire existence.”

Treasury yields fall as investors await Fed’s interest rate decision

US railroad operator Norfolk Southern (NSC) posted a quarterly profit that beat estimates, helped by cost cuts implemented to improve margins & better-than-expected insurance recoveries related to a costly derailment.  NSC had taken a hit of about $1.4B in last 2 years due to a derailment in Eastern Ohio in 2023 that released over 1M gallons of hazardous materials & pollutants near the state's border.  NSC implemented voluntary & involuntary job cuts last year that helped offset some of that impact.  Insurance recoveries related to the accident exceeded expenses by $43M in the 4th qtr.  The company reported operating revenue of $2.8B for the qtr ended Dec 31, up 2% from a year earlier.  It reported an adjusted operating ratio of 64.9%, representing a 390-basis-point improvement from a year ago.  The ratio is a keenly watched metric that indicates operating expenses as a percentage of revenue.  A higher operating ratio reflects an increase in costs, suggesting lower profitability.  EPS was $3.04 for the qtr, above estimates of $2.95.  Total revenue fell 2% to $3B & analysts expected revenue of $3.02B.  The stock rose 8.41 (3%).

Norfolk Southern beats profit estimates helped by cost cuts, insurance recovery

Mortgage rates didn't move last week, but demand for new home loans continued to weaken.  Both homebuyers & current homeowners are hampered by today's higher interest rates.  Total mortgage application volume decreased 2% from the previous week, according to the Mortgage Bankers Association's (MBA) seasonally adjusted index.  The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766K or less) remained unchanged at 7.02%, with points increasing to 0.63 from 0.62 (including the origination fee) for loans with a 20% down payment.  Applications to refinance a home loan dropped 7% for the week & were 5% higher than the same week 1 year ago.  Interest rates are now 24 basis points higher than they were a year ago, so there are precious few who can benefit.  The vast majority of homeowners have mortgages with rates well below what is being offered today.  Applications for a mortgage to purchase a home fell 0.4% from 1 week earlier & were 7% lower than the same week 1 year ago.  “Purchase activity decreased slightly, but applications for FHA purchase loans were a bright spot, increasing by 2 percent,” said Joel Kan, VP & deputy chief economist at the MBA.  “New and existing-home sales ended 2024 on a strong note, and if mortgage rates continue to stabilize and for-sale inventory loosens, we expect a gradual pick up in purchase activity in the coming months.”  Mortgage rates have not moved much to start this week either, & today's Federal Reserve meeting is not expected to bring any surprises or tradeable news.  “Even [Fed Chair Jerome] Powell would be hard pressed to shake things up too much considering the mildly positive cue from inflation data and the ongoing policy uncertainty as a counterbalance,” wrote Matthew Graham, COO at Mortgage News Daily.  “That said, one can never truly rule out a volatile reaction to a Powell presser, but the odds are certainly lower this time around.”

Mortgage demand drops further, even as interest rates settle

Tech led stocks lower as the broader mood stayed muted ahead of the first Big Tech earnings & the Federal Reserve's interest rate decision.  The looming Fed policy verdict is providing reason for markets to tread carefully, even though the central bank is expected to stand pat on interest rates.  Investors will listen for answers to 2 key questions at Fed Chair Jerome Powell's press conference: How much further will the Fed cut rates & has the central bank changed its stance in light of Pres Trump's early tariff moves?

Markets are mixed while Nasdaq surges

Dow recovered 136, decliners over advancers 5-4 & NAZ bounced back 391.  The MLP index gained 4+ to the 319s & the REIT index fell 4+ to the 403s.  Junk bond funds were off a tad & Treasuries saw modest selling which lifted yields a little.  Oil rose higher in the 79s & gold snapped back 34 to 2772 ( more on both below).

Dow Jones Industrials

General Motors (GM) stock fell even as the company beat top- & bottom-line expectations for the 4th qtr, while forecasting continued strong results for 2025.  Concerns on the company’s quarterly earnings call focused on the automaker's preparation for changes under the Trump administration, including the impacts of potential tariffs on vehicle production & policy changes on electric vehicle sales & pricing, signaling an overhang on the auto industry.  Analysts have said there's a lack of enthusiasm by investors for the US automotive industry amid a slowdown in electric vehicles & autonomous vehicles, as well as regulatory volatility.  The automaker believes it can have another solid year despite industry sales slowing, a restructuring of its operations in China, & increased geopolitical & regulatory uncertainty in the US as Pres Trump begins his 2nd term.  GM's 2025 guidance includes net income attributable to stockholders of $11.2 - $12.5B, or $11 - $12 in EPS; adjusted earnings before interest & taxes (EBIT) of $13.7 - $15.7B, or $11 - $12 adjusted EPS; & adjusted automotive free cash flow of $11 - $13B.  “In our view, the guidance for 2025 leaves no room for errors, and also does not include impact from regulatory changes in the U.S., especially on tariffs and BEV support,” analysts at Bernstein said.  GM's 2025 financial guidance met or exceeded many forecasts from analysts.  Most notably, analysts were expecting adjusted earnings of around $14B.  That compares with the automaker's 2024 results of adjusted EBIT of $14.9B, or $10.60 adjusted EPS, & net income attributable to stockholders of $6B, or $6.37 EPS.  The adjusted figures & the $14B in adjusted auto free cash flow were records for the automaker, GM said.   CFO Paul Jacobson said the company's 2025 guidance does not take into account any potential regulatory changes such as tariffs on vehicle imports or tax reform.  GM's $47.7B in revenue in the 4th qtr was up 11% from the same period last year.  Jacobson said the company’s 2024 performance was “outstanding,” citing growth in its EV & traditional internal combustion engine businesses.  GM lost $1.64 per share, in the 4th qtr, which ended Dec 31, compared with EPS of $1.59 in the same period a year earlier.  Quarterly results include $5B in special charges such as $4B in noncash restructuring charges related to its operations in China & $500M in charges related to the decision to stop funding its Cruise robotaxi business.  Excluding those charges & other items, EPS was $1.92 in the 4th qtr.  The stock dropped 4.90 (9%).

GM stock falls even as company beats analyst expectations on earnings

Amid the uncertainty of fiscal policy and the persistence of inflation, respondents to the CNBC Fed Survey dialed back their expectations for interest rate cuts but still believe the central bank will ease this year.  Among the 25 respondents, 65% see 2 rate cuts in 2025, equal to the number penciled in by Federal Reserve officials in their recent forecasts & roughly equal to futures markets expectations.  But that's down from 78% in the prior survey, while 61% forecast at least 1 cut in 2026, down from 70% in Dec.  The fed funds rate is seen ending the year at 3.96%, 12 basis points higher than in the Dec survey, & 3.6% in 2026, up 16 basis points.  A basis point equals 0.01%. The terminal rate, or the long-run nominal rate, edged up again, now standing at 3.4%, one-tenth of a percentage point higher than Dec & three-tenths higher than Mar 2024.  The reduced outlook for rate cuts comes amid a decline in the probability of recession, an increase in inflation forecasts, & a mix of views on the inflationary & growth effects of the new administration’s anticipated policies.  Pres Trump's signature economic policies.  2 of his campaign promises, tariffs & immigration, are seen boosting inflation & reducing growth.  2 other policies, deregulation & tax cuts, are viewed as positive for growth & either neutral or positive for reducing inflation.  Asked to assess the total effects of Trump policies expected to be enacted, 64% say they will be somewhat or very inflationary, 23% believe they will have no effect on inflation either way & 14% say they will be somewhat deflationary.

Wall Street still sees two rate cuts this year, but conviction is getting weaker, CNBC survey finds

Nvidia (NVDA) stock rose as the AI chipmaker began to recover from a massive decline the prior day that shaved nearly $600B off its market cap.  The 17% freefall was prompted by investor anxieties related to a new, cost-effective artificial intelligence model from the Chinese startup DeepSeek.  Some analysts worried that the cheaper costs DeepSeek claimed to have spent training its latest AI models, due in part to using fewer AI chips, meant US firms were overspending on artificial intelligence infrastructure.  That created a concern among the investment community that its high GPU (graphics processing unit, or AI chip) prices could come under pressure & that demand for semiconductors could wane.  NVDA's $589B market cap decline was the largest single-day loss in stock market history.  The DeepSeek announcements drove down not only NVDA but the market at large, with the tech-heavy NAZ dropping 3%.  Chip stocks dropped across the board yesterday, but some names began to recover today.  NVDA itself didn't express much anxiety over the DeepSeek buzz, calling R1 "an excellent AI advancement."  The stock rebounded 10.31 (9%).

Nvidia surges to begin recovery after near-$600B rout

Gold prices are facing pressure for the 2nd straight day, trading around $2735, following a more than 1% drop the previous day after Chinese AI startup DeepSeek rocked the market.  The results were not small, with over $550B in market capitalization wiped out for NVDA alone.  Given the sensitivity of technology, cryptocurrencies such as Bitcoin also suffered, with Bitcoin (BTC) losing over 6.5% at 1 point among the victims of spillover in the financial market asset class.  This has benefited Pres Trump, who has again called for global tariffs.  His belief is that doing so would better protect US tech companies & shield them from China's dumping strategy.  The rule of thumb remains that tariffs are inflationary, which means higher yields, which is a headwind for Bullion.

Gold Prices Flat After Nvidia Rout Extends On Monday

Oil prices rebounded from multi-week lows as disruption to Libyan oil loading operations offset fears of weaker demand linked to soft economic data from China & rising temperatures elsewhere.  Brent crude oil futures were up 91¢ (1.2%) at $77.99 per barrel & US West Texas Intermediate crude futures were up 95¢ (1.3%) at $74.12.  Brent settled yesterday at its lowest since Jan 9, while WTI hit its lowest since Jan 2.  In Libya, local protesters prevented crude oil loading at Es Sider & Ras Lanuf ports, 5 engineers & a shipping source said, putting about 450K barrels per day of exports at risk.  If such disorder spreads, which is not unusual when Libya's oil industry is held to ransom by 1 group or another, the current National Oil Corp evaluated production of 1.4 mbpd will come under threat.  On the other hand, China, the world's largest crude oil importer, reported yesterday an unexpected contraction in Jan manufacturing activity, adding to concerns over global crude demand growth. 

Oil prices bounce back from multi-week lows on Libya supply disruption

NAZ & S&P 500 rebounded, following a steep stock sell-off spurred by concerns of over-confidence in Big Tech's potential payoff from AI investments.  Bellwether NVDA was the standout of the trading day, with shares climbing after it shaved off a record $589B from its market cap in the previous session.  Stocks began to chip away at losses booked in today's tech-led rout.  The risk to US leadership in AI raised questions about whether chipmakers & other tech names can follow thru on high earnings expectations.