A look at the day ahead in U.S. and global markets from Mike Dolan
Old and new economy stocks keep Wall Street pumped up this week as tech and steel sectors advance on a mix of tariff news and an artificial intelligence buzz, with Treasuries in thrall to Federal Reserve boss Jerome Powell’s latest trip to Congress.
U.S. President Donald Trump raised tariffs on steel and aluminum imports on Monday to a flat 25% “without exceptions or exemptions,” in a move he hopes helps struggling U.S. firms in the sector but which risks sparking a multi-front trade war.
Steel imports account for 23% of American steel consumption in 2023, according to American Iron and Steel Institute data, with Canada, Brazil and Mexico the largest suppliers.
Trump also said he would, within two days, follow Monday’s action with reciprocal tariffs on all countries that impose duties on U.S. goods, looking at tariffs on cars, semiconductors and pharmaceuticals.
And in another aside, he said he had spoken to Chinese President Xi Jinping since taking office on January 20 – without offering details on the topics of their conversation.
The upshot of the tariffs was a lift to U.S. steelmakers on Monday, with shares in overseas rivals taking another marginal hit on Tuesday. Thyssenkrupp and Salzgitter in Germany, for example, were down 1% each earlier.
The lift to U.S. metals firms – with the likes of Nucor, U.S. Steel and Steel Dynamics gaining 4% on Monday and Alcoa up 2% – helped the benchmark S&P500 recover early losses on Monday and end higher.
Currency markets appeared to brush the steel tariffs aside, with the dollar only marginally higher. Gold climbed to a another record high, however, with spot gold briefly hitting $2,942.70 per ounce before retreating.
Stock futures gave back some of those index gains ahead of Tuesday’s bell, in part due to rising long-term Treasury yields as Powell prepared his semi-annual congressional testimony and ahead of the week’s big debt sales.
AI EXCITEMENT
But stocks were buoyed by a new leg higher in tech on Monday, too. AI chipmakers Nvidia and Broadcom rose almost 3%.
Some of the latest AI excitement came from news that a consortium led by Elon Musk offered $97.4 billion to buy the nonprofit that controls OpenAI – a twist in the billionaire’ s fight to block the AI startup’s transition to a for-profit firm. Musk’s auto giant Tesla lost 3% on the report.
Broader optimism in U.S. stocks comes from the latest tallies on the corporate earnings season – now more than half way through.
With more than 60% of S&P500 firms having reported fourth quarter updates, the annual aggregate profit growth for the index is tracking close to 15% – significantly higher than the 10% expected on January 1. At almost 5%, annual revenue growth is also higher than pencilled in at the start of the year.
Those sorts of profit gains, still brisk economic growth, tight labor markets and rising import tariffs all give the Fed ample cause to pause its credit easing campaign.
Powell is likely to indicate that in his testimony later in the day – with markets now only fully priced for one rate cut this year and not before September.
While Friday’s news of an unexpectedly large pickup in U.S. wage growth last month was one reason for those tempered rate expectations, there were also offsets on Monday. The New York Fed’s latest household survey saw one-year inflation expectations holding steady about 3%.
The International Monetary Fund said on Tuesday it was too early to assess the impact of the Trump tariff plans.
But with crude oil prices rising again and another heavy week of Treasury auctions and inflation data ahead, 10-year yields pushed back above 4.5%.
Part of that backup was related to the slightly bizarre Trump reference at the weekend to possible fraudulent Treasury debt accounting – another aside that went largely unexplained but was related to Musk’s ‘Department of Government Efficiency’ examination of Treasury accounts.
Elsewhere, Chinese mainland and Hong Kong stocks slipped back on the mounting tariff war news – cooling a recent rally on the China DeepSeek AI development.
But also worrying was news that China’s car sales fell 12% in January from a year earlier. That was the first decline since September and the biggest drop in almost a year as automakers braced for both tariffs and price wars amid intense worldwide competition. Shares in Chinese automakers Xpeng and Geely tumbled up to 10%.
In Europe, stock indexes were firmer.
In company news, BP reported a sub-forecast quarterly profit that was the lowest in four years as the oil giant promised to reset its strategy following news investor Elliott Management had built up a stake in the firm.
On Monday, BP’s shares jumped 7% on expectations Elliott’s acquisition of the undisclosed stake would enforce change.
Key developments that should provide more direction to U.S. markets later on Tuesday:
* US January NFIB small business survey
* Federal Reserve Chair Jerome Powell’s semiannual monetary policy testimony before Senate Banking, Housing and Urban Affairs Committee. Fed Board Governor Michelle Bowman, New York Fed President John Williams and Cleveland Fed chief Beth Hammack all speak. Bank of England Governor Andrew Bailey speaks
* EU Commission President Ursula von der Leyen meets U.S. Vice President JD Vance in Paris
* US corporate earnings: Dupont De Nemours, Super Micro Computer, Coca-Cola, Marriott, AIG, Assurant, S&P Global, Ecolab, Eversource Energy, Gilead, Edwards Lifesciences, Humana, Eversource, Masco, Welltower etc
* U.S. Treasury sells $58 billion of 3-year notes
(Editing by Bernadette Baum)
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