What’s happening: US stocks settled on a mixed note after recording sharp gains earlier during the session on Tuesday.
What happened: Wall Street equities received a boost in early trading on Tuesday from data showing a moderate increase in producer prices in December.
The Nasdaq 100 turned lower as the session progressed, as investors turned their focus towards CPI and corporate earnings data.
Why it matters: Major US indices have been on a downward trend since December, with the Dow Jones index shedding more than 5% from its record highs last month and the S&P 500 nearing its two-month lows.
Market sentiment towards US stocks has been impacted by speculations of the Federal Reserve adopting a cautious stance on its monetary policy this year due to expectations of inflationary pressures.
With President-elect Donald Trump warning of heightened tariffs on imports from several countries, import duty paid by US companies is expected to rise by as much as 5% per month. Trump is all set to take oath as the 47th President on January 20.
The yield on the benchmark 10-year Treasury note remained near 14-month highs, weighing on market sentiment.
Investors also digested economic data released on Tuesday which showed factory gate prices in the US rose 0.2% in December, easing from 0.4% in November and coming in lower than market expectations of 0.3%.
The US RealClearMarkets/TIPP Economic Optimism Index dipped to 51.9 for January, compared to a 40-month high of 54 in the previous month. The data also missed market estimates of 55.1.
Seven out of the eleven sectors on the S&P 500 moved higher, with utilities shares leading the gains on Tuesday. Shares of Eli Lilly fell around 6.6% after the company projected downbeat sales of weight-loss drug Zepbound for the fourth quarter.
Boeing’s shares shed around 2% on Tuesday after the company reported a decline in deliveries to their weakest level since the pandemic.
The Dow Jones index gained 221.16 points, or 0.52%, to close at 42,518.28, while the S&P 500 rose 0.11% to settle at 5,842.91 on Tuesday. The Nasdaq 100 fell 0.13% to 20,757.41.
What to watch: Investors now await the consumer price index data, scheduled for release on Wednesday and quarterly earnings reports from big banks. Markets are expecting big banks to report strong earnings, driven by robust trading and dealmaking. The annual inflation rate in the US is expected to increase for a third straight month to 2.9% in December, versus 2.7% in the previous month.
Context: The EUR/USD forex pair gained on Tuesday, as investors assessed the European Central Bank’s monetary policy outlook.
Details: The euro fell to its weakest level since October 2022 against the US dollar on Monday, as investors scaled back projections of interest rate cuts by the ECB due to rising concerns over persistent inflation and the impact of new US President Donald Trump’s policies.
The EUR/USD forex pair recovered sharply on Tuesday, mainly on weakness in the US dollar. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell more than 0.6% to 109.27 on Tuesday.
The EUR/USD gained around 0.6% to reach 1.0309 on Tuesday, while the EUR/GBP forex pair added about 0.5% to 0.8440. The STOXX Europe 600 Index fell 0.08% to close at 508.28.
What to watch: With no major economic report scheduled for today, investors await the release of data on balance of trade on Thursday. Analysts expect the Eurozone to record a trade surplus of €8.5 billion in November, widening from €6.8 billion in October.
Data on Eurozone’s current account and inflation rate will be released on Friday. Analysts expect the region’s annual inflation rate to accelerate for a third consecutive month to 2.4% in December, from 2.2% in November.
Other Markets: Asian trading indices traded mixed this morning, with Japan’s Nikkei 225 and Hong Kong’s Hang Seng up by 0.27% and 0.19%, respectively, and China’s Shanghai Composite down by 0.22%.
US President-elect Donald Trump announced plans to meet Russian President Vladimir Putin “very quickly” after taking office next week. The news sent the RUB/USD pair higher in forex trading this morning.
South Korea’s unemployment rate rose to 3.7% in December, the highest since December 2021, exerting pressure on the KRW/USD forex pair.
The American Petroleum Institute said that US crude oil inventories shrank by 2.6 million barrels in the week ending January 10, compared to a decline of 4.022 million barrels in the previous week. US crude stockpiles contracting for the fifth straight week sent the WTI prices higher this morning.
Japan’s Reuters Tankan sentiment index rose to +2 in January, from a reading of -1 in the previous month, lending support to the JPY/USD forex pair.
India’s total passenger vehicle sales rose 11.4% year-over-year to 270,704 units for December, compared to a 4.3% increase in November. However, the INR/USD fell in forex trading this morning.
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