Markets sink as losses accelerate on looming Trump tariffs

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.

Markets waver as economic and tariff worries swirl

Dow fell 40, advancers over decliners 2-1 & NAZ slid back 77.  The MLP index added 1 to the 326s & the REIT index rose 3 to the 421s.  Junk bond funds inched higher & Treasuries saw a little buying which reduced yields.  Oil remained in the 69s & gold rebounded 48 to 2896.

Dow Jones Industrials

Bitcoin rallied over the weekend after Pres Trump announced a US strategic crypto reserve & teased new details about the highly anticipated move by his cryptocurrency industry backers.  Bitcoin was last trading above the $93,000 level, which is 19% above its Fri low of $78,226.  Over the weekend, Trump announced the creation of a strategic crypto reserve – a pivot from the “bitcoin stockpile” he previously touted – that he said will include ether, XRP,  Solana's SOL token & Cardano's ADA, in addition to Bitcoin.  Bitcoin rose as high as $95,000, while the smaller coins rocketed double digits.  It was welcome news to investors, who have been anxious for cryptocurrencies to come out of their consolidation.  Last week, bitcoin fell under the key $90K level for the first time in 3 months to, at one point, 25% below its Jan all-time high.  That break below support put it at risk of a bigger slide toward $70K.  Losses in smaller, riskier coins have been even steeper.

Bitcoin jumps nearly $14,000 in three days on Trump’s crypto reserve announcement

Treasury Secretary Scott Bessent said that Pres Trump's proposed tariffs are unlikely to raise inflation, in part because China will “eat any tariffs that go on.”  His comments come just 2 days before the tariffs are scheduled to go into effect tomorrow.  Trump is expected to impose  25% tariffs on imports from Mexico & Canada.  The pres also announced the US would impose an extra 10% duty on Chinese imports, on top of the 10% tariff he levied on the country on Feb 4.   Some economists have raised concerns about the possibility that the tariffs could lead to an increase in inflation & keep interest rates elevated into 2026.  When asked Bessent was asked what impact the tariffs could have on the average household, he said, “Well, we don’t know yet because it’s path-dependent, but what I can tell you is that I’m not worried about China,”  “China will pay for the tariffs because their business model is exporting their way out of this inflation.”  “They will eat any tariffs that go on,” Bessent added.  China’s Ministry of Commerce said Fri  that it “firmly opposes” Trump's latest tariff hike & vowed to retaliate as necessary.  After the US enacted an initial round of tariffs in Feb, China raised duties on certain US energy imports & added 2 US companies to an unreliable entities list.  Experts suggested China could take similar measures again following the addition of fresh tariffs.  “If the U.S. insists on its own way, China will take all necessary countermeasures to defend its legitimate rights and interests,” a Ministry of Commerce spokesperson previously said.

Treasury Secretary Bessent says Trump tariffs won’t cause inflation to increase

Treasury yields sat near flat as investors awaited more clarity on Pres Trump's plans to impose tariffs.  The benchmark 10-year yield Treasury yield slid 3 basis points to 4.199% & the 2-year yield Treasury yield added about 1 basis point, siting at at 4.001%.  1 basis point is equal to 0.01% & yields & prices move in opposite directions.  Trump's tariff plans are again in focus this week, with 25% duties on imports from Canada & Mexico expected to go into effect tomorrow.  Commerce Secretary Howard Lutnick said that the 25% tariff against Canada & Mexico are “fluid” which means it may be lower.  The 10% duty on China imports is “set,” he added.  Traders have expressed concerns about the effects of tariffs on the economy, as legendary investor Warren Buffett made a rare comment against Trump's policies over the weekend.  Buffett, the chairman & CEO of Berkshire Hathaway, said tariffs are “an act of war, to some degree” and could trigger inflation & hurt consumers.  “Over time, they are a tax on goods. I mean, the Tooth Fairy doesn’t pay ’em!” Buffett added.  “And then what? You always have to ask that question in economics.  You always say, ‘And then what?’”

Treasury yields are little changed as tariff deadline nears

Stocks were mixed as a looming deadline fueled uncertainty around Pres Trump's tariff plans & investors looked ahead to the monthly jobs report & key retail earnings.  Mar trading is kicking off with investors encountering more questions than answers as tariff deadlines loom, the Federal Reserve's next meeting fast approaches & the US economy faces the test of disproving investors encountering more questions.

Markets bounce back but remain lower in February

Dow climbed 291, advancers over decliners better than 2-1 & NAZ went up 137.  The MLP index added 1+ to the 321s & the REIT index added 2+ to the 207s.  Junk bond funds were mixed & Treasuries had modest buying which lowered yields (more below).  Oil slid back into the 69s after yesterday's rally on worries over tariffs & gold dropped another 42 to 2853.

Dow Jones Industrials

The Federal Reserve's preferred inflation gauge showed prices rose as expected in Jan at a pace that remains above the central bank's target level as its efforts to tamp down inflation continue.  The Commerce Dept reported that the personal consumption expenditures (PCE) index was up 0.3% from the prior month & 2.5% on an annual basis.  Those figures were in line with the estimates.  Core PCE, which excludes volatile food & energy prices, rose 0.3% for the month & 2.6% from a year ago, 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 declined slightly from 2.6% in Dec, while core PCE dropped from 2.9% last month.  Headline PCE showed that prices for goods increased 0.5% after they had been relatively flat in recent months.  Prices for services rose 0.2% last month, which was a slower pace than the 0.4% in Dec.  Wages & salaries were up 0.4% in Jan from a month ago, the same as the increase seen in Dec.  The personal savings rate as a percentage of disposable income was 4.6% in Jan, the highest rate recorded since 4.8% in Jun.

Inflation gauge favored by Fed showed prices grew as expected in January

China’s Ministry of Commerce said that it “firmly opposes” PresTrump's latest threat to ramp up tariffs on Chinese goods & vowed retaliation, if necessary.  “If the U.S. insists on its own way, China will take all necessary countermeasures to defend its legitimate rights and interests,” a Ministry of Commerce spokesperson said.  “We urge the U.S. side to not repeat its own mistakes, and to return as soon as possible to the right track of properly resolving conflicts through dialogue on equal footing.”  The statement followed Trump's announcement yesterday that the US would impose an additional 10% duty on Chinese imports on March 4, which coincides with the start of China’s annual parliamentary meetings.  The new tariffs would be on top of the 10% further tariffs that Trump levied on China on Feb 4.  Trump announced the 2 rounds of China duties were being imposed in response to the Asian country's role in the fentanyl trade.  The addictive drug, precursors to which are mostly produced in China & Mexico, has led to tens of thousands of overdose deaths each year in the US.  “In the short term, China’s response will likely include raising tariffs on select U.S. imports, adding more American firms to its unreliable entity list, and potentially further tightening export controls on critical minerals,” Neil Thomas, a fellow on Chinese politics at the Asia Society, said.  He noted he nevertheless expects Beijing’s retaliation will remain “measured,” as Chinese Pres Xi Jinping has an incentive to meet with his American counterpart & initiate negotiations to avoid measures that put greater pressure on already sluggish economic growth.  China's exports have been a rare bright spot in an otherwise slowing economy.  The US is China's largest trading partner on a single-country basis.  While Beijing may maintain a “restrained” stance, upcoming moves will likely target industries that matter the most to Trump supporters, said Alfredo Montufar-Helu, head of the China Center at The Conference Board.

China vows to retaliate as necessary after Trump threatens more tariffs

Treasury yields moved lower as investors sifted through new economic data, including inflation numbers that largely matched expectations.  The benchmark 10-year yield Treasury yield fell by about 5 basis points to 4.241% & the 10-year yield Treasury yield was down 4 basis points at 4.034%.  1 basis point is equal to 0.01% & yields & prices move in opposite directions.  The personal consumption expenditures index rose 0.3% month over month in Jan & 2.5% year over year. The core PCE index, which excludes volatile food & energy prices, also rose 0.3% last month compared to Dec & 10-year yield Treasury yield.  Those readings were in-line with expectations.  Investors are anxiously monitoring Pres Trump's various tariff threats & orders.  His plans for 25% tariffs on imports from Mexico & Canada will go into effect from Mar 4, after a 1-month pause.  Trump said that China, which is already being charged tariffs, will face an additional 10% tariff on the same data.  He also said he would impose 25% tariffs on imports from the EU but is walking back these threats after UK Prime Minister Keir Starmer visited the White House yesterday.  “I think there is a very good chance that in the case of these two great friendly countries, I think we could end up with a real trade deal ... where the tariffs wouldn’t be necessary. We’ll see,” Trump told reporters.

10-year Treasury yield eases slightly after inflation data comes in as expected

Stocks inched higher following a key inflation reading that largely met expectations & as fresh tariff threats added to uncertainty over Big Tech prospects.  Markets are heading into the last trading day of Feb facing sharp weekly & monthly losses after suffering the buffets of tariff moves.

Markets fall with selling in Nasdaq stocks leading the decline

Dow dropped 193 with selling in the PM, decliners over advancers 2-1 & NAZ plunged 530 (session low).  The MLP index was flattish in the 321 & the REIT index added 2+ to 415.  Junk bond funds fluctuated & Treasuries had limited selling, lifting yields.  Oil rose 1+ taking it over 70 & gold tumbled 30 to 280 (more on both below).

Dow Jones Industrials

Initial filings for unemployment benefits hit their highest level of the year last week in another potential signs of weakness in the labor market.  Jobless claims for last week totaled a seasonally adjusted 242K, up 22K from the previous week's revised level & higher than the estimate for 225K, according to a Labor Dept report.  The level of claims matched the highest since early Oct 2024 & comes amid questions over broader economic growth & worrying signs in recent consumer sentiment surveys.  Pres Trump has been taking aggressive measures to reduce the federal workforce through Elon Musk's Dep of Gov Efficiency advisory board.  The efforts so far have resulted in tens of thousands of jobs cuts & are expected to continue.  In DC, new claims totaled 2K, an increase of 421 (26%) according to numbers not adjusted for seasonal factors.  That is the largest number for the city since Mar 25, 2023, according to Labor Dept  records, & is consistent with a surge that began in early Jan.  However, the claims trend does not appear to be spreading to the surrounding areas.  Virginia & Maryland both saw small declines on the week.  California, which also has a large population of federal gov workers, saw a drop as well.  “This report showed a healthy gain, but not the first ripples of what likely will be a major wave of unemployment claims, both from layoffs in the federal workforce and at companies such as Starbucks and Southwest,” wrote Robert Frick, corp economist at Navy Federal Credit Union.  Continuing claims, which run a week behind, showed a small decrease and stood at 1.86M.  However, the 4-week moving average of claims, which helps smooth out weekly volatility, rose sharply to 224K, an increase of 8500.

Weekly jobless claims jump to 242,000, more than expected in latest sign of economic softening

Nvidia (NVDA), the chipmaker at the center of an AI spending boom, delivered good-but-not-great quarterly numbers, disappointing investors accustomed to blowout results.  Sales will be about $43B in the fiscal first qtr, which runs through Apr, NVDA said.  Analysts had estimated $42.3B with some projections ranging as high as $48B.  The company also warned that gross profit margins would be tighter than anticipated as it rushes to roll out a new chip design called Blackwell.  And there's the risk of US tariffs weighing on results.  The mixed outlook comes at a shaky time for the AI industry.  NVDA shares have dipped this year on concerns that data center operators will slow spending.  Chinese startup DeepSeek also has sparked fears that chatbots can be developed on the cheap, potentially reducing the need for NVDA's powerful chips for AI.  Though NVDA execs addressed most of those issues, it's become harder for the company to produce blockbuster earnings reports.  The company got $11B of revenue from Blackwell in the 4th qtr, something NVDA described as the “fastest product ramp” in its history.  “Demand for Blackwell is amazing,” CEO Jensen Huang said.  Though the company's fiscal 4th-qtr sales topped estimates, they did so by the smallest margin since Feb 2023.  Earnings, meanwhile, had the narrowest amount of upside since Nov 2022.  The stock dropped 9.42 (7%).

Nvidia Sinks After More Subdued Growth Fails to Wow Investors

Mortgage rates fell for a 6th consecutive week to the lowest level in more than 2 months, mortgage buyer Freddie Mac said.  Freddie Mac's latest Primary Mortgage Market Survey, showed that the average rate on the benchmark 30-year fixed mortgage decreased to 6.76% from last week's reading of 6.85% & the average rate on a 30-year loan was 6.94% a year ago.  "The drop in mortgage rates, combined with modestly improving inventory, is an encouraging sign for consumers in the market to buy a home," said Sam Khater, Freddie Mac's chief economist.  The average rate on the 15-year fixed mortgage fell to 5.94% from 6.04% last week.  1 year ago, the rate on the15-year fixed note averaged 6.26%.  Mortgage rates ranged from 6.91% to 7.04% in Jan & the National Association of Realtors (NAR) said that in comparison to 1 year ago, the monthly mortgage payment on a $300K home increased by an extra $50 to $1590.

Mortgage rates fall to lowest level in over 2 months

Gold prices dropped to their lowest level in over 2 weeks as the $ strengthened, with investors waiting for key inflation data that could shed light on the Federal Reserve's monetary policy path.  Spot gold was down 1.1% at $2885 an ounce, after hitting its lowest level since Feb 12 earlier in the session.  Prices hit a record high of $2956 on Mon, driven by safe-haven flows.  US gold futures settled 1.2% lower at $2895.  The direction of gold is very evident & these short-term bumps & profit-taking is just a normal part of the cycle.  The dollar index, opens new tab rose 0.7%, making greenback-priced bullion more expensive for holders of other currencies.  Investors' focus now turns to the US Personal Consumption Expenditures (PCE) index due tomorrow, expected to remain at 0.3%.  Any significant deviation from the estimated PCE data could trigger a negative reaction, based on concerns that the Fed is less likely to lower interest rates.  Markets expect the Fed to deliver at least 2 rate cuts this year, with about 55 basis points of easing priced in for 2025.

Gold hits two-week low with firm dollar, inflation data in focus
 
Oil prices rose more than 2% as supply concerns resurfaced after Pres  Donald Trump revoked a license granted to US oil major Chevron (CVX) opens new tab to operate in Venezuela.  However, investors were still keeping an eye on signs of a potential peace deal in Ukraine, which could result in higher Russian oil flows.  Brent crude oil futures were up $1.53 (2.1%) at $74.06 a barrel & US West Texas Intermediate crude oil futures rose $1.64 (2.4%) to $70.26.  The contracts had settled in the previous session at their lowest levels since Dec 10.  Markets like clarity as opposed to uncertainty.  Unless a clear path is presented on tariffs & Eastern European peace, oil prices will remain on the defensive with sporadic & spontaneous headline-based rallies.  The CVX license revocation means the company will no longer be able to export Venezuelan crude.  And if Venezuelan state oil company PDVSA exports oil previously exported by CVX, US refineries will be unable to buy it because of US sanctions.  CVX exports about 240K barrels per day (bpd) of crude from its Venezuela operations, more than a qtr of the country's entire oil output.

Oil climbs more than 2% after Trump cancels Chevron's Venezuela license

Tech stocks led the major averages lower as NVDA shares sold off following the AI chipmaker's its earnings report & investors took stock of the economy amid Pres Trump's latest tariff pledges.  Investors dug into NVDA's quarterly earnings beat, which signaled plenty of scope for growth as it eased worries about DeepSeek & faltering AI demand.  Meanwhile, more signs emerged of a sluggish US economy.  Data today showed GDP grew at an unrevised 2.3% annualized pace last qtr, confirming a slowdown from the previous qtr.

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%.

Markets struggle while safe haven gold continues over $2900

Dow dropped 188, decliners over advancers about 5-4 & NAZ slid back 48.  The MLP index remained in the 319s & the REIT index fell 2+ to the 412s.  Junk bond funds fluctuated & Treasuries had buying which reduced yields.  Oil was about even at 69 & gold added 20 to 2928 (more on both below).

Dow Jones Industrials

An ominous measure that the Federal Reserve considers a near surefire recession signal again has reared its head in the bond market.  The 10-year Treasury yield passed below that of the 3-month note in trading today.  In market lingo, that’s known as an “inverted yield curve,” & it's had a sterling prediction record over a 12- to 18-month timeframe for downturns going back decades.  In fact, the New York Fed considers it such a reliable indicator that it offers monthly updates on the relationship along with percentage odds on a recession occurring over the next 12 months.  At the end of Jan, when the 10-year yield was about 0.31 percentage point clear of the 3-month, the probability was just 23%.  However, that is almost certain to change as the relationship has shifted dramatically in Feb.  The reason the move is considered a recession indicator is the expectation that the Fed will cut short-term rates in response to an economic retreat in the future.  Though markets more closely follow the relationship between the 10 & 2-year notes, the Fed prefers measuring against the 3-month as it is more sensitive to movements in the central bank’s federal funds rate.  The 10-year/2-year spread has held modestly positive, though it also has flattened considerably in recent weeks.  To be sure, yield curve inversions have had a strong but not perfect forecasting history.  In fact, the previous inversion happened in Oct 2022, & there’s still been no recession 2½ years later.  So while there’s no certainty that growth will turn negative this time around, investors worry that expected growth from an ambitious agenda under Pres Trump may not happen.

The Fed’s favorite recession indicator is flashing a danger sign again

Mortgage interest rates dropped again last week, hitting the lowest level in 2 months, but demand for mortgages didn't respond.  Total mortgage application volume fell 1.2% from the previous week, according to the Mortgage Bankers Association's seasonally adjusted index.  The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766K or less) decreased to 6.88% from 6.93%, with points dropping to 0.61 from 0.66 (including the origination fee) for loans with a 20% down payment.  “Treasury yields moved lower on softer consumer spending data as consumers are feeling somewhat less upbeat about the economy and job market.  This pushed mortgage rates lower, with the 30-year fixed rate decreasing to 6.88%, the lowest rate since mid-December,” said Joel Kan, MBA’s VP & deputy chief economist.  Applications to refinance a home loan, which had been surging through much of Jan early Feb, fell 4% for the week but were 45% higher than the same week 1 year ago.  Last year at this time, mortgage rates were 16 basis points higher.  “Although overall refinance application activity remained fairly weak, FHA refinance applications saw an 8 percent increase over the week,” Kan added. Applications for a mortgage to purchase a home were flat for the week & 3% higher than the same week 1 year ago.  The resale market is seeing more supply, partly because homes are sitting on the market longer.  But while there are more options, prices are not easing much, as inventories are still historically low.   “Long story short, bonds are in fashion at the moment,” wrote Matthew Graham, COO at Mortgage News Daily, noting that when demand rises, rates fall. “The broadest and most common explanations have to do with expectations for a downshift in global economic growth in response to domestic tariffs and cost-cutting efforts.”

Mortgage rates drop to lowest since mid-December, but demand still falls short

Eli Lilly (LLY) said it will invest at least $27B to build 4 new manufacturing sites in the US, as demand for its blockbuster weight loss and diabetes injections soars & the company develops new drugs for other conditions.  It comes as drugmakers & companies across different industries work to build goodwill with Pres Trump, who has emphasized reshoring manufacturing to the US & reducing reliance on foreign supply chains.  He has threatened companies, and pharmaceutical businesses in particular, with tariffs if they do not manufacture products in the US.  Eli Lilly made the announcement at an event in DC, emphasizing the political undertones of the strategy.  The event featured several speakers from the Trump administration, including Kevin Hassett, director of the White House National Economic Council, & Commerce Secretary Howard Lutnick, who explicitly tied the announcement to Trump’s policies.  Lutnick said the investment is “exactly what the Trump administration is all about, which is building and manufacturing and reshoring in America, investing in America, building in America.”  He thanked LLY for “doing exactly what the president was hoping would happen.”  Lutnick added that “if you want to understand the tariff policy” of the US, “I have just articulated it.”  The move brings LLY's total US manufacturing investments to more than $50B in recent years.  The other $23B is from the company’s investments in new plants & site expansions since 2020, which has helped ease supply shortages of its popular drugs.  The stock rose 15.57.

Eli Lilly plans at least $27 billion in new U.S. manufacturing investments

Gold prices eased after a recent record rally, while investors looked towards inflation data due later this week & the latest developments on Pres Trump's tariff plans.  Spot gold fell 0.7% to $2894 an ounce.  Bullion, a preferred hedge against uncertainty & inflation, hit a record high of $2956 on Mon amid trade war concerns emerging from tariff threats.  US gold futures fell 0.4% to $2908.  Yesterday, Trump ordered a probe into potential new tariffs on copper imports to rebuild US production of a metal critical to electric vehicles, military hardware, the power grid & many consumer goods.  Investors' focus was also on the US Personal Consumption Expenditures (PCE) report, the Federal Reserve's preferred inflation gauge, due on Fri.  Higher than expected inflationary could delay further rate cuts, which is priced in; gold is 1 of the quintessential hedges against those inflationary pressures.

Gold prices slip, investors eye upcoming US PCE data

Oil prices held at 2-month lows as a potential peace deal between Russia & Ukraine continued to weigh on prices while lower US crude stockpiles provided some support.  Brent crude was down 19¢ to $72.83 a barrel & US West Texas Intermediate crude oil futures fell by 13¢ to $68.80.  Prospects for a peace deal between Russia & Ukraine are improving & the market was also watching for potential implications of a minerals deal between the US & Ukraine.  This would take us a step closer to Russian sanctions being lifted, removing much of the supply uncertainty hanging over the market.  Downside risks on oil prices increased because Pres Trump's policies, such as initiatives to support higher oil exports by Iraq.  The US & Ukraine agreed terms of a draft minerals deal central to Trump's efforts to bring a swift end to the war in Ukraine.  Supporting price, US crude stocks fell by 640K barrels last week. 

Oil holds at two-month low on rising supply concern

Stocks pared gains after Pres Trump spoke about his tariff plans at a cabinet meeting as investors also braced for Nvidia's (NVDA) crucial earnings report due out after the bell.  The leg lower in stocks & risk assets came after Trump said tariffs against the EU would include 25% on autos among other goods, while levies against Mexico & Canada will go into effect on Apr 2.

Markets climb despite tariff threats and export controls

Dow went up 119, advancers over decliners 2-1 & NAZ gained 210.  The MLP index inched up 1+ to the 321s & the REIT index stayed in the 419s, yesterday's close.  Junk bond funds barely budged & Treasuries were even.  Oil was flat at 69 & gold recovered 7 at 2926.

Dow Jones Industrials

A new analysis by the Bank of America Institute finds that small businesses appear to be gaining financial momentum, though policy changes related to tariffs could spur inflation & with it a new challenge to profitability.  The Bank of America Institute's report analyzed the bank's small business account data & found that in the 6-month period from Aug-Jan, deposit growth among small business clients surpassed total payments growth for the first time in 3 years.  "The positive is that revenues are rising and we're seeing that for the first time over the past three years where deposits are outpacing payments, so that's really good momentum entering 2025 and small business optimism is up," Bank of America economist Taylor Bowley said.  "But that doesn't mean that there isn't still risk for cost pressures to curb small business enthusiasm and growth going forward."  While inflation has slowed substantially since its 40-year high of 2022, it remains elevated & its impact on wages has contributed to continuing cost growth for small businesses.  "Revenues seem to be rising, which is a really good thing because small businesses historically operate on pretty small profit margins," Bowley added.  "But the one thing is that costs don't necessarily seem to be declining."  Bowley said that payroll is 1 of the largest expense categories for small businesses & that wage inflation as it relates to payroll has been a key factor in rising costs faced by those companies, though workforce expansion may also be a factor.  "Wage inflation is not the sole driver in terms of what we're seeing with payroll growth. It's an indication that small businesses are still able to keep people on the payroll, and also potentially expand their labor force," she continued.

Small businesses seeing revenues rise, but tariff threats loom

Lowe's (LOW) topped quarterly earnings & revenue expectations & said its sales slump should end in the year ahead.  Full-year total sales are expected to $83.5-84.5B, which on the upper end would be higher than its total revenue of $83.7B for fiscal 2024.  It said it expects comparable sales to be flat to up 1% year over year & EPS to be $12.15 - $12.40.  CEO Marvin Ellison stressed that LOW still faces “a challenging home improvement market.”  High mortgage rates have created “a significant gap between today's rates for homebuyers and the lower rates many homeowners currently enjoy.”  That's led to a “lock-in effect,” which has kept consumers from buying & selling.  Even so, LOW has pressed ahead with its own strategy, so it is “well-positioned to capitalize on the home improvement recovery and take share when the market inflects.”  Shares rose after the company’s leaders said they expected sales trends to improve, but still be roughly flat from last year.  In the 3-month period that ended Jan 31, EPS was $1.99, compared with $1.77 in the year-ago period.  Revenue fell from $18.6B in the year-ago qtr.  Adjusted EPS figure excluded an $80M pretax gain associated with the 2022 sale of its Canadian retail business, which added 6¢ per share to 4th-qtr earnings.  In the fiscal 4th qtr, trends looked better.  Comparable sales rose 0.2%, boosted by online gains, high single-digit growth among home professionals & sales related to rebuilding efforts after hurricanes Milton & Helene.  That slightly positive metric ended 8 consecutive qtrs of comparable sales declines.  It also exceeded expectations for a 1.8% decline in comparable sales.  The stock jumped 9.09 (4%).

Lowe’s beats Wall Street expectations as it starts to break out of sales slum

General Motors (GM) is raising its quarterly div & initiating a new $6B share repurchase program as the company attempts to reward investors amid slowing industry sales & profits.  GM announced it is increasing its quarterly div 25% to 15¢ per share, matching that of crosstown rival Ford (F).  The higher div is expected to take effect with the company's next planned payout, scheduled to be announced in Apr.  Under the $6B repurchase plan, $2B in buybacks are expected to be completed during the  2nd qtr.  “The GM team’s execution continues to be strong across all three pillars of our capital allocation strategy, which are to reinvest in the business for profitable growth, maintain a strong investment grade balance sheet, and return capital to our shareholders,” said CEO Mary Barra.  Barra last month suggested the company would continue to return capital to shareholders this year, pending board approval.  The automaker has announced $16B in stock buyback programs since 2023 that have resulted in the retiring of more than 400K shares outstanding.  Despite such actions & reporting strong quarterly results, including regularly outperforming expectations, shares of GM are down more than 12% this year.  The stock rose 2.46.

GM raises quarterly dividend, initiates $6 billion stock buyback

Tech stocks led the US indices higher, eyeing a comeback investors for Nvidia's (NVDA) crucial earnings & assessed the prospects for Pres Trump's deep tax cuts.  Investors are looking to potentially lift stocks more broadly, given the AI bellwether's history of bullish reactions to earnings.  But its stock has lagged the stock market so far this year, & the chipmaker's prospects face headwinds from Trump's tariff threats & export controls.

Markets mixed as consumer confidence data weighed on investors

Dow finished up 159 in choppy trading, advancers over decliners 3-2 & NAZ dropped 260.  The MLP index slid back 1+ to the 319s & the REIT index jumped 5 to 415.  Junk bond funds continued to be mixed & Treasuries had heavy buying which sharply reduced yields.  Oil remained weak, down 1+ to 69, & gold tumbled 39 to 2923 on profit taking (more on both below).

Dow Jones Industrials

An expensive stock market didn’t prevent traders from getting more bullish as investors increasingly bet that the bull run could keep chugging along, according to Charles Schwab's new quarterly client survey.  The bulls continue to outnumber the bears among traders by 51% to 34%, said the survey, which polled 1040 active traders last month.  Young traders under the age of 40 especially showed a spike in optimism, with bullishness jumping to 59%.  That compares to 47% in the 4th qtr.  The positive sentiment came even as 2/3 of the traders believe the market is overvalued.  “It’s clear that the majority of traders believe there’s some froth in the market but on balance they also feel like there’s still more room for the bulls to run,” said James Kostulias, head of trading services at Charles Schwab.  “More than half of traders plan to move additional money into stocks in Q1.”  While bullishness indicates positive views on the market, it can also be seen as a contrary indicator when there are signs of excess.  In terms of sectors, traders are most bullish on energy, tech, finance & utilities.  These sectors are typically beneficiaries under the Trump administration due to potential deregulation.  The survey also detected a significant drop in the number of traders who believe a recession will occur in the US, only a 3rd of the respondents called it “somewhat likely,” compared to 54% in the prior qtr.  The majority of traders also didn’t see a reacceleration in inflation, with 2/3 of them seeing price pressures holding steady.

More traders turn bullish despite market showing signs of fatigue, Schwab survey says

US banking sector profits rose 2.3% to $66.8B in the 4th qtr of 2024, a bank regulator reported, as it also announced moves to update how so-called problem banks are tracked.  In its latest quarterly report, the Federal Deposit Insurance Corporation (FDIC) said it is revising its "problem bank" list to say only how many banks have been downgraded by regulators.  The FDIC will no longer disclose how many assets are held at those banks.  FDIC Acting Chair Travis Hill said that the practice of disclosing how many assets are at problem banks, first established in 1990, has become problematic because the growth of large firms has made it "comparatively easier" to identify when a big bank is added to the list.  Hill said disclosing assets could spur a bank run if the public saw a large jump in total assets on the list & tried to determine which large firm was deemed problematic by watchdogs.  Bank supervisors may also be reluctant to downgrade a large bank, knowing the jump in total assets at problem banks could spark instability, Hill added.  The FDIC reported 66 problem banks in the 4th qtr, down from 68 the prior qtr.  Overall, the banking sector reported healthy numbers, posting a 5.6% increase in 2024 year-long profits to $268B.  The FDIC said the boost in 4th-qtr profits was mainly due to recent short-term interest rate cuts, which helped boost net interest income by $3.8B for banks, as interest expenses shrank more than interest income.  The amount of funds banks set aside for potential losses was also down, dipping 5.5% from the prior qtr to $22B & unrealized losses on securities held by banks jumped 32.5%, & now total $482B.  However, that level is only 1% higher than levels seen 1 year prior.

US bank profits climb as regulator adjusts 'problem bank' tracking

Nvidia (NVDA) stock continued its recent slide as investors weighed potential delays in the ramp-up of its AI Blackwell chips & a report of possible new export rules from the Trump administration.  The stock dropped after a reported that the Trump administration is looking to further tighten US export rules on the chip sector in an effort to restrict China's advancement in the AI space.  Trump is looking to sanction specific Chinese companies & further restrict intl companies from maintaining semiconductor gear in the country.  The news comes more than a month after Chinese firm DeepSeek introduced new, cost-efficient AI models that rocked US markets.  NVDA stock fell 3.65.

Nvidia drops as investors weigh Trump export rules, Blackwell delays

Gold's price has hit a new all-time high yesterday at $2956, just hours before the Trump administration issued more details on upcoming tariffs.  The precious metal trades at $2940 currently, after Pres Trump's administration communicated it plans to impose more limitations on China's technological developments.  A tougher stance on semiconductor restrictions & pressuring other allies to corner China is part of that strategy.  The news creates a negative tone in gold markets today.  Traders are fleeing into bonds as a safe haven, which is pressuring yields for more downside (inverse correlation bond price to yield).  Equities are also being slaughtered, with red numbers across the board from Asia to Europe, including  US equities.

Gold consolidates Tuesday's losses with markets digesting latest tariff move from President Trump

Oil prices fell 3% to a 2-month low on weak economic news from the US & Germany that fed fears of slower energy demand, along with signs from several countries that oil output was on track to increase.  Brent futures fell $1.99 (2.7%) to $72.79, while US West Texas Intermediate (WTI) crude fell $1.92 (2.7%) to $68.78.  Brent was on track for its lowest close since Dec 23 & WTI for its lowest since Dec 10.  US data showed consumer confidence in Feb deteriorated at its sharpest pace in 3½ years, with 12-month inflation expectations surging.  Analysts said Pres Trump's stated plans for higher tariffs have raised inflation worries at the US Federal Reserve.  This could lead the Fed to keep interest rates higher, which in turn could slow economic growth & energy demand.  Trump said tariffs against Canadian & Mexican imports scheduled to start on Mar 4 are on time & on schedule, which could actually boost oil prices by reducing supplies from both countries.  Also weighing on oil prices, the German economy shrank by 0.2% in the final qtr of 2024 from the previous qtr.  German election winner Friedrich Merz ruled out a quick reform to state borrowing limits known as the "debt brake," which some investors have urged to boost the economy.

Oil Hovers at 2-Month Low

Stocks fell when Pres Trump revived tariff threats & potential toughening of China curbs weighed on market optimism & the chances of interest rate cuts.  Consumer confidence also plummeted in Feb, notching its biggest monthly decline in more than 4 years as 12-month inflation expectations jumped & recession fears escalated.