Markets flip positive as Trump tariffs take effect

Dow settled down 670 with selling into the close which pared a midday rebound, decliners over advancers 5-2 & NAZ gave back 65.  The MLP index continued weak, down 5+ to the 317s, & the REIT index was off 5 to the 416s.  Junk bond funds slid lower & Treasuries were sold in the PM, taking yields higher.  Oil rebounded & finished steady at 68 & gold rose 22 to 2923 (more on both below).

Dow Jones Industrials

Pres Donald Trump is pushing back against Canadian Prime Minister Justin Trudeau, calling his tariffs "very dumb," saying that "when he puts a Retaliatory Tariff on the U.S., our Reciprocal Tariff will immediately increase by a like amount!"  Trump made remarks were after Trudeau slammed the Trump administration's new 25% tariffs.  Trudeau previously announced 25% retaliatory tariffs on American goods in response to Trump's tariffs that went into effect today on Canadian imports.  "So today the United States launched a trade war against Canada, their closest partner and ally, their closest friend. At the same time, they are talking about working positively with Russia, appeasing Vladimir Putin, a lying, murderous dictator. Make that make sense," Trudeau said.  "Canadians are reasonable, and we are polite, but we will not back down from a fight, not when our country and the well-being of everyone in it is at stake," he continued.  "I want to speak directly to one specific American. Donald, in the over eight years you and I have worked together, we've done big things," Trudeau added.  "And now we should be working together to ensure even greater prosperity for North Americans in a very uncertain and challenging world. Now, it's not in my habit to agree with the Wall Street Journal. But Donald, they point out that even though you're a very smart guy, this is a very dumb thing to do. We – two friends fighting – is exactly what our opponents around the world want to see."  Trump signed an exec order authorizing an additional 25% tariff on imports from Canada & Mexico, & an additional 10% tariff on Chinese imports.  Energy imported from Canada, including oil, natural gas & electricity, would be taxed at an additional 10%.  The retaliatory tariffs Canada is imposing on $155B of US goods went into effect today.  Canada will start with tariffs on $30B worth of American goods, followed by tariffs on $125B of American products in 21 days.

Trump responds to Trudeau's rebuke of hard-hitting tariffs officially going into effect

A US economy praised for its surprising resilience to a pandemic, high inflation & rapid interest rate hikes faces a new challenge from Pres Trump's self-declared trade war, seen by economists as a recipe for fewer jobs, slower growth & higher prices.  The fallout, assuming Trump does not backtrack in the face of falling stock markets & cracks to consumer & business sentiment, is expected to be broad, deep & time-consuming as the world's largest economy adjusts to the overnight shock of a 25% tariff on most goods coming from Mexico & Canada, both close trading partners & geographic neighbors, & an additional 10% duty on imports from China.  Canada & China have announced retaliatory tariffs on US imports, while Mexico is expected to do so this coming weekend.  A price shock on its face, the tariffs could also begin to kill demand, said Diane Swonk, chief economist at KPMG, particularly if consumers retreat & firms facing heightened uncertainty curb investment and hiring.  The move also risks unintended consequences - if, for example, banks tighten credit on small businesses instead of extending suddenly expensive customs bonds.  A recession by the start of next year is not out of the question, Swonk said, with some analysts expecting a downturn could sweep the continent given the dependence of Canada & Mexico on exports to the US market.  Retaliation could further deepen the impact.  "We've got now multiple trade wars on multiple fronts," Swonk said.  Her analysis shows the effective tariff rate spread across roughly $3T in US imports might rocket to 16% by early 2026 from a current baseline of about 3% if Trump follows thru on all his threats.  "That would be the highest rate since 1936," during the Great Depression, and "gets you flirting with stagflation" - the toxic mix of weak growth, high joblessness & persistent inflation that epitomized the 1970s.  While the US economy is ordered differently now than in the 1930s or 1970s, the sweep of Trump's actions & the uncertainty about what comes next still unnerved markets that had hoped he was only bluffing about tariffs to gain leverage in negotiations with trading partners.

Storm clouds gather over US economy as Trump kicks off trade war

Federal Reserve Bank of New York Pres John Williams said that Trump administration tariffs will have some impact on driving up price pressures but there is still a lot of uncertainty how this will all play out.  “I do factor in some effects” from tariffs on inflation that will play out over the year, Williams said at an event in New York.  He views monetary policy as being in a “good place” & “I don’t see any need to change it” right now.

Fed's Williams: Tariffs may push up inflation, rate policy in good place

Gold prices rose, driven by a weaker $ heightened safe-haven demand amid escalating trade conflicts following Pres Trump's imposition of new tariffs.  Spot gold was up 0.6% at $2911 an ounce.  Bullion has gained nearly 11% so far this year & hit a record high of $2956 on Feb 24.  US gold futures settled 0.7% higher at $2920.  The implementation of tariffs brings a high level of uncertainty to the markets, & safe-haven products like gold continue to do well.  Trump's new 25% tariffs on imports from Mexico & Canada today.  He also doubled duties on Chinese goods to 20%. China hit back immediately with additional 10%-15% tariffs on certain US imports from Mar 10 & a series of new export restrictions for designated US entities.  Canada retaliated with 25% tariffs on $30B worth of US imports with immediate effect today.  The US dollar index fell 0.6%, hitting its lowest level since Dec & making $-priced gold less expensive for buyers holding other currencies.

Gold rises on weaker dollar, trade war fears after Trump tariffs

Oil prices dropped again as traders faced up to a double whammy of new tariffs & plans to boost production in a number of OPEC countries.  Brent crude futures, the intl benchmark, fell 1.3% to $70.68 a barrel, putting them down 3% so far in Mar & West Texas Intermediate futures, the US benchmark, were down 0.9% to $67.74, bringing their loss in Mar to around 3% as well.  Both are more than 5% down in 2025.  Pres Trump confirmed  that 25% tariffs on Canada & Mexico were “all set” to take effect today.  He also signed an order increasing levies on China by another 10%.  Several members of OPEC+ expect to start raising production next month.  In total, 8 countries will begin restoring output, adding about 2.2M barrels a day over 18 months.

Oil Prices Drop Again

US markets eliminated all of their post-election gains as stocks responded to fresh tariffs on Canada, Mexico & China.  Rising fears of a full-on trade war drove yesterday's sell-off after Pres Trump said there was "no room left" for Canada or Mexico to strike a deal to mitigate promised tariffs.  Stocks are retreating as markets assess the likely impact of Trump's broad tariffs on America's top trading partners.  The measures, fresh 25% tariffs on Canada & Mexico, & a doubling in China duties to 20%, were signed into effect today.  Comments by John Williams (above) were refreshing & brought back buyers in the PM.

Markets retreat on fears Trump tariffs will lead to a global recession

Dow dropped 674, decliners over advancers a hefty 5-1 & NAZ sank 186.  The MLP index tumbled 8+ to the 314s & the REIT index fell 4+ to the 416s.  Junk bond funds were a little lower & Treasuries had limited buying which lowered yields.  Oil was off 1 to the 67s & gold rose 15 to 2916.

Dow Jones Industrials

Pres Trump imposed tariffs on Canada & Mexico and an additional levy on China on today, escalating tensions with key trading partners.  The US began imposing a 25% tariff on goods from Canada & Mexico today, & an additional 10% levy on Chinese imports as Trump looks to curtail drug trafficking & illegal immigration.  Earlier this year, the administration delayed these tariffs to allow Canada & Mexico time to negotiate trade deals aimed at addressing US border security & halting the flow of drugs like fentanyl.  Last week, Trump reaffirmed his decision to impose the levies, stating that "drugs are still pouring into our Country from Mexico and Canada at very high and unacceptable levels."  "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, adding that "China will likewise be charged an additional 10% Tariff on that date."  He also teased other tariffs launching Apr 2, but did not offer details.  Shortly after his restoration to power, the White House said Trump is working "to hold Mexico, Canada, and China accountable to their promises of halting illegal immigration and stopping poisonous fentanyl and other drugs from flowing into our country."  These levies are sending a message "that the flow of contraband drugs like fentanyl to the United States, through illicit distribution networks, has created a national emergency, including a public health crisis," the White House continued.

Tensions escalate with key trading partners as Trump's sweeping tariffs take effect

Treasury Secretary Scott Bessent projected confidence in Pres Trump's expansive plans to tariff foreign nations even as the stock market slumped in reaction to the first round of levies on Canada & Mexico.  “Over the medium term, which is what we’re focused on, it’s a focus on Main Street. Wall Street’s done great, Wall Street can continue to do fine, but we have a focus on small business and consumers,” Bessent said. “So we are going to rebalance the economy.”  Bessent argued that there would be a transition period as the tariffs kick in this month & next, but he argued that the market selloff was only temporary.  “With the China tariffs, I am highly confident that the Chinese manufacturers will eat the tariffs — prices won’t go up,” Bessent added.  “With Canada and Mexico, I think we’re in the middle of a transition, and as you mentioned, Honda moving to Indiana is a great start.”  So far, Trump has imposed 25% tariffs on all Mexican imports & most Canadian ones — except for energy products, which face a 10% rate.  He also has doubled his new charge on China to 20%, while 25% tariffs on steel & aluminum imports are due to take effect next week.  He's also pledging to implement reciprocal levels of tariffs on foreign nations, & to place additional levies on lumber, pharmaceuticals, semiconductor chips, copper & auto imports, beginning as soon as Apr 2.

Bessent shrugs off tariff sell-off, says Wall Street isn't the focus

Best Buy (BBY) posted fiscal 4th-qtr earnings & revenue that topped expectations, but CEO Corie Barry projected that prices for US consumers would rise as Pres Trump's tariffs on China & Mexico go into effect.  Barry said China & Mexico are the company's top 2 supply chain sources, with about 55% & 20% of its products sourced from those countries, respectively.  “Trade is critically important to our business and industry. The consumer electronic supply chain is highly global, technical and complex,” Barry added.  “We expect our vendors across our entire assortment will pass along some level of tariff costs to retailers, making price increases for American consumers highly likely.”  Barry added that the company directly imports only 2-3% of its products & that it's reviewing & adjusting its supply chain sourcing. The company typically carries 6 weeks of supply at a time & that she expects pricing changes to affect the 2nd thru 4th qtrs of the fiscal year.  “The giant wild card here, obviously, is how the consumers are going to react to the price increases, in light of a lot of price increases potentially throughout the year and a general consumer confidence that is showing a little signs of weakness at the moment,” CFO Matt Bilunas said.  4th-qtr EPS was 54¢, compared with $2.12 during the year-ago period.  Adjusting for a noncash goodwill impairment charge related to Best Buy Health & 4th-qtr EPS was $2.58.  Comparable sales, revenue from online sales & stores open at least 14 months, rose 0.5% year over year for the qtr, excluding the additional week in fiscal 2024.  BBY had forecast a change ranging from flat to down 3%.  In the US, quarterly comparable sales rose 0.2% year over year.  Full-year fiscal 2025 revenue came in at $41.5B, down 4.4% from $43.4B in fiscal 2024.  Fiscal 2025 had 1 fewer week than the prior-year period, which the retailer estimates added $735M in revenue to its fiscal 2024 total.  For fiscal 2026, the company issued full-year guidance of $41.4 - $42.2B in revenue - comparable sales growth of 0% - 2% year over year.  “We believe consumer behavior will be largely similar to last year – remaining resilient but still dealing with high inflation that is driving expenses up across their lives, making them value focused and thoughtful about big ticket purchases. And, at the same time, we continue to see a consumer that is willing to spend on high price point products when they need to or when there is technology innovation,” Bilunas said.  BBY said the guidance does not account for the impact of recent or proposed tariffs.  The stock fell 12.93 (15%).

Best Buy shares plunge as CEO warns price increases are ‘highly likely’ due to Trump tariffs

Markets eliminated all of their post-election gains as stocks deepened their sell-off with fresh tariffs on Canada, Mexico & China now officially in effect.  Notably, NAZ is set to close down at least 10% from its record closing high on Dec 16, which would mark correction territory for the tech-heavy index.  Rising fears of a full-on trade war drove yesterday's sell-off after the pres said there was "no room left" for Canada or Mexico to strike a deal to mitigate promised tariffs.  Stocks are retreating as markets assess the likely impact of Trump's broad tariffs on America's top trading partners.  The measures, fresh 25% tariffs on Canada & Mexico, & a doubling in China duties to 20%, were signed into effect today.

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.