Markets seasaw despite Trump tariffs declaration & Nvidia's earnings

Dow jumped 429, advancers were only even & NAZ was off 39.  The MLP index slid 1 to 320 & the REIT index added 3+ to 416.  Junk bond funds were mixed & Treasuries saw more selling which increased yields.  Oil rebounded 1+ to 70 after Trump moves to end Venezuela crude deal & gold dropped 41 to 2889 on profit taking.

Dow Jones Industrials

The US economy grew at a rate of 2.3% in the 4th qt, in line with the prior reading & expectations.  The Commerce Department's Bureau of Economic Analysis (BEA) released its first revision of the estimate for 4th qtr 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 2.3% rate in the qtr.  The BEA's preliminary estimate of GDP in the qtr that was released last month also came in at 2.3%, though the forecast had expected 2.6% growth.  GDP growth slowed in the 4th qtr when compared with the 3rd qtr, which had 3.1% growth.  The BEA noted the deceleration in the 4th qtr was primarily due to downturns in investment & exports that were partially offset by an acceleration in consumer spending, while imports declined.  Consumer spending  grew 4.2% in the 4th qtr, with increases in both services & goods.  It was up from 3.7% in the 3rd quarter and 2.8% in the 2nd qtr.  Gov spending grew at a faster pace than initially estimated – it was up 2.9% in the 4th qtr, a larger increase than the initial 2.5% estimate, though it was slower than the 5.1% increase in the 3rd qtr.  Business investment declined 5.7% in the 4th qtr, a deeper drop than the initial estimate of 5.6%.  It had been relatively flat in the 3rd qtr, when it grew 0.8%.  Last qtr, investment in equipment decreased 9% while investment in structures dipped 3.2% – both steeper declines than in the initial estimate.  Personal savings as a share of disposable income came in at 3.8% in the 4th qtr, continuing a gradual decline that spanned 2024 after a 5.4% reading in the first qtr.

US economy grew during final months of Biden's presidency

Pres Trump said that his proposed tariffs on Mexico & Canada will go into effect on Mar 4, & that China will be charged an additional 10% tariff on the same date.  The sweeping 25% tariffs on imports from Mexico & Canada had been paused on Feb 3 for 1  month. But the Trump administration has recently sown confusion about whether they would go back into effect when the delays expired.  Trump clarified that they would.  He claimed that illicit drugs “are still pouring into our Country from Mexico and Canada at very high and unacceptable levels,” despite pledges from both US neighbors to boost their efforts to police their borders.  “We cannot allow this scourge to continue to harm the USA, and therefore, until it stops, or is seriously limited, the proposed TARIFFS scheduled to go into effect on MARCH FOURTH will, indeed, go into effect, as scheduled,” Trump wrote.  He also announced that China, which already faces 10% US tariffs on its products, “will likewise be charged an additional 10% Tariff on that date.”  Trump added in his post, “The April Second Reciprocal Tariff date will remain in full force and effect.”  A White House official confirmed that the new duties on Beijing mean US tariffs on Chinese imports will total 20%.

Trump says Mexico, Canada tariffs will start March 4, plus additional 10% on China

High mortgage rates & elevated home prices combined to crush home sales in Jan.  Pending sales, which are based on signed contracts for existing homes, dropped 4.6% from Dec to the lowest level since the National Association of Realtors (NAR) began tracking this metric in 2001.  Sales were down 5.2% from Jan 2024 & these sales are an indicator of future closings.  “It is unclear if the coldest January in 25 years contributed to fewer buyers in the market, and if so, expect greater sales activity in upcoming months,” said Lawrence Yun, NAR's chief economist.  “However, it’s evident that elevated home prices and higher mortgage rates strained affordability.”  While weather may have been a factor, sales rose month-to-month in the Northeast & fell in the West, which would have seen the smallest impact of cold temperatures.  Sales fell hardest in the South, which has been the most active region for home sales in recent years.  Mortgage rates were also higher in Jan.  The average rate on the popular 30-year fixed loan spent the first ½ of Dec below 7% but then began rising.  It was solidly above 7% for all of Jan, according to Mortgage News Daily.  Home prices have been easing over the last few months in certain areas, with more sellers cutting prices, but nationally they are still higher than they were a year ago.  This drop in sales also came despite the fact that the inventory of homes for sales in Jan, including homes that were under contract but not yet sold, increased by 17% compared with last year, growing on an annual basis for the 14th month in a row, according to Realtor.com.  “More for-sale inventory has the potential to generate more contract signings, but climbing home supply is not evenly distributed across the U.S.,” noted Hannah Jones, an economist with Realtor.com.  “Moreover, many areas with high demand see relatively low for-sale inventory, which limits progress towards more home sales.”

Pending home sales drop to the lowest level on record in January

Stocks were mixed as investors weighed AI chipmaker Nvidia's (NVDA) earnings report & took stock of the economy amid President Trump's latest tariff pledges.  Investors are digging into NVDA's quarterly earnings beat, which signaled plenty of scope for growth as it eased worries about DeepSeek & faltering AI demand.  The results initially met a muted response as its profit outlook raised doubts & the stock erased early trading gains to slip more than 2%.