Markets hesitate after Powell's comments on trade tensions

Dow edged up 29, advancers & decliners were even & NAZ slid 25.  The MLP index gave back 4+ to the 218s & the REIT index stayed near yeterday's close at 407.  Junk bond funds slid lower & Treasuries were sold which raised yields.  Oil gained 1 to the 73s & gold was off 1 to 2933 after yesterday's rally.

Dow Jones Industrials

Federal Reserve Chair Jerome Powell reiterated the central bank's commitment to bringing inflation down & signaled that policymakers aren't in a rush to push interest rates lower.  In remarks before the Senate Banking Committee, Powell called the economy “strong overall” with a “solid” labor market & inflation that is easing but still above the Fed's 2% goal.  With those conditions prevailing, he said the Fed doesn’t need to move quickly to ease monetary policy.  “With our policy stance now significantly less restrictive than it had been and the economy remaining strong, we do not need to be in a hurry to adjust our policy stance,” Powell said.  “We know that reducing policy restraint too fast or too much could hinder progress on inflation. At the same time, reducing policy restraint too slowly or too little could unduly weaken economic activity and employment.”  His comments came in the first of 2 appearances  this week on Capitol Hill.  Much of the proceeding focused on bank supervision rather than monetary policy.  Ranking Dem Sen Elizabeth Warren charged that Pres Trump's move to halt the work of the Consumer Financial Protection Bureau left consumers without a watchdog of the nation's largest banks.  Warren asked Powell who is administering consumer compliance outside of the CFPB, to which he responded, “I can say no other federal regulator.”  On monetary policy, Powell's remarks were largely in keeping with his recent statements & those of his colleagues, who are digesting a number of fiscal & monetary dynamics that make for an uncertain environment.

Fed Chair Powell says central bank doesn’t ‘need to be in a hurry’ to lower interest rates further

Shopify (SHOP) reported better-than-expected sales for the 4th qtr but missed on earnings & forecasted revenue in the first qtr to grow at a mid-20% percentage rate, which is roughly in line with expectations of 24.4% revenue growth.  “We expect the strong merchant momentum from Q4 to carry over into Q1, recognizing that Q1 is consistently our lowest [gross merchandise volume] quarter seasonally,” the company said.  Its earnings report comes as the e-commerce industry continues to digest the impact of Pres Trump's recently announced tariffs on the country’s top 3 trading partners. Trump also closed a nearly century-old trade loophole called de minimis that is frequently used by Chinese online retailers.  SHOP Pres Harley Finkelstein called the de minimis exception a “crucial” tool for small businesses that ship overseas to keep costs down & “compete on a much larger scale.”  He also called for greater reforms to the de minimis rule.  “I think rather than eliminating de minimis, countries should really try to streamline these custom processes and improve digital duty collection to make things a lot easier,” he said.  Finkelstein added that entrepreneurs are likely to be impacted by the new tariffs.  SHOP merchants can display any additional duties they may have to charge shoppers at checkout, he added.  The company expects operating expense as a percentage of revenue to be 41-42% in the current qtr, a step up from 31.5% in the 4th qtr.  EPS nearly doubled to 99¢ from 51¢ a year ago.  Revenue in the 4th qtr jumped 31% from $2.1B in the same qtr a year earlier.  The stock was up 40¢.

Shopify beats on fourth-quarter revenue, but gives mixed guidance

European Commission Pres Ursula von der Leyen said she would impose "firm and proportionate" countermeasures against the U.S. in response to Pres Trump's tariffs on steel & aluminum imports.  "Tariffs are taxes — bad for business, worse for consumers," von der Leyen said in a statement. "Unjustified tariffs on the EU will not go unanswered—they will trigger firm and proportionate countermeasures."  She added that the EU "will act to safeguard its economic interests" & protect workers, businesses & consumers.  Trump placed a 25% tax on foreign steel & aluminum in an effort to allow local producers to work without intense global competition, which allowed them to charge higher prices.  They are expected to take effect on Mar 12.  Trump imposed similar tariffs during his first term, but the move damaged relations with key allies & drove up costs for manufacturers that purchase steel & aluminum.  When he first imposed tariffs on steel & aluminum imports in 2018, the EU retaliated by placing tariffs on Harley-Davidsons (HOG), jeans, lighters, cranberry juice & bourbon.  Tensions between the 2 sides later deescalated, & the tariffs were suspended.  The pres has now expanded his steel & aluminum tariffs to cover all imports, which effectively cancels earlier tariff deals with the EU, the UK & Japan, among others.

EU says Trump's 'unjustified' tariffs 'will not go unanswered'

Stocks edged lower as investors braced for more tariff policy shifts from Pres Trump, & focus turned to inflation with testimony from Federal Chair Jerome Powell underway.  The tone is cautious in the wait for Trump to reveal his plan for universal like-for-like tariffs, promised for announcement midweek.