Stocks globally traded flat, and U.S. Treasury yields rose as investors reacted to President Trump's tariff increase on steel and aluminum imports, and Fed Chair Powell's cautious approach to rate cuts.
A gauge of global stocks recovered from early losses to trade flat, while U.S. Treasury yields advanced on Tuesday, as investors weighed the latest U.S. tariff escalation and Federal Reserve Chair Jerome Powell signaled a cautious approach to rate cuts. President Donald Trump on Monday intensified tariffs on steel and aluminum imports to 25% from 10%, revoked country exceptions and product-specific exemptions, and vowed to announce retaliatory tariffs globally within days.
However, Trump also hinted at an exemption for Australia and stated that the steel and aluminum measures would only take effect from March 4, fostering the perception among some investors that the tariffs are part of a negotiation tactic. Mexico, Canada, and the European Union condemned the move on Tuesday, with the European Union asserting that the 27-nation bloc would implement 'firm and proportionate countermeasures'. On Wall Street, the S&P 500 eked out a slight gain after reversing its earlier decline. Powell indicated that the central bank was in no hurry to adjust its policy stance, emphasizing that it was not the Fed's role to comment on tariff or trade policy, but to react to their impact on the economy. 'Valuations are elevated, company guidance is measured, inflation is persistent, government policy is uncertain, tariff talk is ongoing, and global tensions are elevated. So in aggregate, the level of uncertainty is high, which implies increased volatility,' stated Terry Sandven, chief equity strategist at U.S. Bank Wealth Management. A surge of nearly 5% in Coca-Cola shares helped propel the Dow Industrials into positive territory following the beverage company's quarterly earnings report. The Dow Jones Industrial Average rose 123.24 points, or 0.28%, to 44,593.65, the S&P 500 gained 2.06 points, or 0.03%, to 6,068.50, and the Nasdaq Composite fell 70.41 points, or 0.36%, to 19,643.86. The pan-European STOXX 600 index climbed 0.23% to close at a record high, led by bank stocks. Treasury yields continued their upward trend after Powell's testimony, as investor focus shifted to the latest consumer price index reading on Wednesday. The yield on the benchmark U.S. 10-year note advanced 4 basis points to 4.535% and has climbed for four consecutive sessions, its longest run of gains in a month. Markets have gradually scaled back expectations for rate cuts from the U.S. central bank this year, largely anticipating the Fed to hold rates steady at its March and May meetings. For the June Fed meeting, markets are projecting a 51% probability of a cut of at least 25 basis points, down from 63.6% a week ago, according to CME's FedWatch Tool. The dollar index, which tracks the greenback against a basket of currencies, declined 0.41% to 107.92, with the euro appreciating 0.53% to $1.0361. Against the Japanese yen, the dollar strengthened 0.31% to 152.46, while sterling firmed 0.62% to $1.2443. 'We've seen a lot of volatility come off of tariff headlines in the last two weeks,' said Helen Given, FX trader at Monex USA in Washington. 'But what we're seeing now is that those headlines and those announcements are not necessarily an indication that these tariffs are actually going to be levied, at least not at the time that we think that they might be.' Oil prices ascended to a two-week high on concerns regarding Russian and Iranian supply, although the tariff announcement somewhat tempered gains. U.S. crude settled up 1.38% to $73.32 a barrel, and Brent settled at $77 per barrel, up 1.38% on the day
GLOBAL STOCKS TARIFFS FEDERAL RESERVE TREASURY YIELDS OIL PRICES DOLLAR INDEX
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