Markets advance carefully after latest batch of earnings reports

Dow lost 80, advancers modestly ahead of decliners & NAZ was up 41.  The MLP index gave back 3+ to the 324s & the REIT index stayed hear yesterday's close at 406.  Junk bond funds inched higher & Treasuries were barely changed, keeping yields flattish (more below).  Oil edged higher in the 71s & gold slid back 24 to 2869 on profit taking.

Dow Jones Industrials

The Federal Reserve is still leaning toward further rate cuts this year, although uncertainty about the impact of new Trump administration initiatives on things like tariffs, immigration & regulations will need to be better understood, Richmond Fed Pres Tom Barkin said.  Along with tariffs, there is "deregulation - where is it going to hit - immigration, energy policy, geopolitics.  There is just a lot of uncertainty in the air," Barkin said.  But with inflation expected to drop further this year & the economy continuing to grow, "I start with a baseline that is pretty favorable" to further cuts, Barkin added.  "That is certainly the lean."  His comments reflect what's become a consensus view at a central bank that has decided to hold its interest rate policy steady while it awaits further data on jobs & inflation & on the outcome of Trump administration policy initiatives that may be hard to anticipate.  In just a weekend, for example, Pres Trump veered from 25% tariffs on major trading partners Mexico & Canada to a month-long delay some economists argue is likely to be extended after negotiations among the neighboring countries.  But "you want to wait and see," Barkin said, a sentiment shared this week by other Fed officials, including vice chair Philip Jefferson in his remarks.

Fed leaning toward more rate cuts amid uncertainty, Barkin says

America's trade deficit with other nations hit a fresh record last year, according to new data in the midst of Pres Trump's aggressive campaign to close the gap while promoting tariffs as a way to achieve that end.  The Commerce Dept reported the US goods deficit soared 14% to $1.2T in 2024, with imports reaching an all-time high of $365B in Dec ahead of Trump's return to office.  The report shows the US has significant deficits with several trade partners, including China, Mexico & Canada, which have been targeted by Trump for broad or additional tariffs.  The pres on Mon suspended a 25% tariff on Mexican & Canadian goods until next month.  An additional 10% levy on goods from China went into effect on Tues.  Though the new administration has mostly explained the tariffs as related to controlling illegal immigration & movement of illicit drugs, the surge in the deficit could strengthen its argument for a protectionist trade policy.

US trade deficit hits record that will be a Trump target

Treasury yields were up as investors looked ahead to Jan's nonfarm payrolls report.  The 10-year Treasury yield gained 2 basis points to 4.442% & the 2-year Treasury yield rose 2 basis points to 4.214%.  One basis point is equal to 0.01%, & yields & prices have an inverted relationship.  Investors are now looking ahead to the nonfarm payrolls report due tomorrow to provide clarity on how many people are employed in the US.  The forecast projects that 175K jobs were added last month & the unemployment rate is expected to have remained unchanged at 4.1%.  Yesterday, the ADP reported that private payrolls grew by 183K jobs in Jan, above the 150K gain predicted.  It's also up from the 176K jobs created in Dec.  Investors' worries about tariffs have eased since Mon when Pres Trump said he was slapping 25% tariffs on goods imported by Mexico & Canada, as well as a 10% levy on China.  However, Trump has since implemented a 30-day pause on tariffs on Mexican & Canadian goods, as both countries agreed to put in place measures to prevent the trafficking of opioid fentanyl into the US.  Meanwhile, China has retaliated with its own duties of up to 15% on US liquefied natural gas & select products, which will be put into effect by Feb 10.

Treasury yields are up as investors look to January’s nonfarm payrolls report

Stocks inched up as investors assessed the earnings season so far & eyed Pres Trump's fast-moving policy overhaul.  Tariff jitters that shook stocks earlier in the week may have eased, but markets are tracking incoming earnings for any company warnings.  At the same time, tech & chip-related results are being scrutinized for signals about the strength of AI demand.