Dow tumbled 649, advancers over decliners 2-1 & NAZ nosedived 497. The MLP index was off 2+ to the 323s & the REIT index slid back 1+ to 420. Junk bond funds saw a little buying & Treasuries were in demand, raising yields. Oil was off 1+ to the 68s as traders weigh Trump’s tariff plans & gold jumped 51 to 1899 following recent selling (more on both below).
Dow Jones Industrials
Semiconductor giant Taiwan Semiconductor Manufacturing Co (TSMC) is expected to announce a $100B investment, a White House source said. TSMC, a Taiwan-based chipmaker that builds advanced semiconductors which are used to power smartphones & artificial intelligence (AI) models, is expected to announce the investment following meetings with Pres Trump. The investment is expected to focus on advanced semiconductor manufacturing facilities over the next 4 years. TSMC has previously invested in a chip factory in Arizona with an initial $12B investment, & last Apr it announced an additional investment of $25B to add a 3rd factory at its Arizona facility by 2030 to bring its total investment there to $65B. The company also received an award of up to $6.6B in grants from the CHIPS Act for the Arizona facility as well as other federal funds from the law that aimed to bolster domestic semiconductor manufacturing in the US. TSMC said that it "looks forward to discussing our shared vision for innovation and growth in the semiconductor industry, as well as exploring ways to bolster the technology sector along with our customers."
Chip giant TSMC expected to announce $100B investment in US
The risks for higher inflation are on the rise, St Louis Federal Reserve Pres Alberto Musalem said. During a keynote address at the National Association for Business Economics conference, Musalem noted that his baseline case is for inflation to gradually move toward the central bank's 2%. This scenario requires inflation expectations to remain anchored & stable. However, “near-term inflation expectations have risen substantially over the last few weeks, and that’s something I’m watching closely,” Musalem added. The Feb reading on The Conference Board's consumer confidence index reflected the largest one-month drop since Aug 2021, as inflation expectations rise. The Institute for Supply Management's manufacturing PMI also showed a sharp increase in prices within the sector for the month. “Businesses and households are clearly more sensitive to expectations of higher inflation,” Musalem added. “That’s why the risks seem more skewed to the upside, but the baseline is for continued disinflation.” Investors came into 2025 expecting the Fed to lower rates this year. However, the central bank kept rates at their current 4.25%-4.50% range after its Jan meeting, where it noted that inflation remained “somewhat elevated.” The CME Group's FedWatch tool also shows that traders are pricing in a 93% likelihood that the Fed will keep rates at their current levels.
Inflation will move toward 2% target, but risks to outlook are rising, says Fed’s Musalem
Data from the Institute for Supply Management (ISM) show the Manufacturing PMI receding to 50.3 in Feb, down from 50.9 in the previous month & falling behind forecasts of 50.5. Meanwhile, the Prices Paid Index, which tracks inflation, advanced to 62.4 from 54.9, the Employment Index ticked lower to 47.6 from 50.3, & the New Orders Index deflated to 48.6, from 55.1. The Greenback maintains its downbeat performance at the beginning of the week, motivating the US Dollar Index to deflate to the 106.60 region.
US ISM Manufacturing PMI surprised to the downside in February
Federal Reserve rate cut bets are still on the table for Jun. Gold price is slowly but surely making its way higher as Pres Trump remains silent on tariffs. Gold's price is set to revisit the high in the Asian session near $2876 currently after a steady positive thus far. Tariffs are still set to hit tomorrow for Mexico & Canada & additional tariffs on China, they are not really triggering another flight into gold. Traders will need to look for new headlines about tariffs & there is still the chance that Pres Trump will change his mind. Meanwhile, traders are still digesting Fri's turn of events. The spat between Ukraine Pres Volodymyr Zelenskyy on one side & Pres Trump & VP JD Vance is still making headlines. The surprise move that took place afterward in London, with the UK extending several Bs in loans to be covered with the frozen Russian assets in Europe, was actually something that Pres Trump was after. With no rare earth deal in place, the televised spat in the Oval Office & now London reeling in the agreement on the frozen Russian assets, all bets could be off the table with even possibly the US withdrawing from NATO. The US 10-year benchmark rate is currently trading around 4.23%, a touch higher from its fresh low at 4.19% on Fri.
Gold props up over 0.50% at the start of the week despite tariffs being set to hit on Tuesday.
Oil prices fell about 2% to a 12-week low on reports OPEC+ will proceed with a planned oil output increase in Apr on worries what US tariffs would do to global economic growth & oil demand. The Organization of the Petroleum Exporting Countries (OPEC+) has decided to proceed with a planned Apr oil output increase, 3 sources from the producer group said. OPEC+ has been cutting output by 5.85M barrels per day (bpd), equal to about 5.7% of global supply, agreed in a series of steps since 2022 to support the market. Brent futures were down $1.48 (2.0%) to $71.33 a barrel, while West Texas Intermediate (WTI) crude fell $1.65 (2.5%) to $68.11. That puts both crude benchmarks on track for their lowest closes since Dec 6. Pres Trump will decide today what levels of tariffs he will impose early tomorrow on Canada & Mexico amid last-minute negotiations over border security & efforts to halt the inflow of fentanyl opioids. Trump has vowed to impose 25% tariffs on all imports from Canada & Mexico, with 10% on Canadian energy products.
Oil prices fall 2% to 12-week low with OPEC+ set to increase output
Stocks plummeted as investors assessed the economic
impact of the Trump administration's tariff plans after Pres
Trump indicated there was "no room left" for negotiations with Canada &
Mexico. Tech stocks led the sell-off with NAZ dropping 3%. Federal Reserve's next meeting fast approaches, & the US economy faces the test of disproving investors' fears about growth. First qtr economic growth is expected to slide following a string of weaker-than-expected economic data.
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