US Futures Fall, Dollar Rallies in Sign of Caution: Markets Wrap

This content was published on February 11, 2025 - 01:40

6 minutes

(Bloomberg) — US equity futures fell while the dollar and gold rallied in a sign investors are retreating from risk after President Donald Trump imposed 25% tariffs on all US imports of steel and aluminum.

Contracts for the S&P 500 and Nasdaq 100 both declined around 0.2% Tuesday, while an index of the dollar was slightly higher after gaining ground on Monday. Support for haven assets briefly pushed gold above $2,921 Tuesday for the first time.

A gauge of Asian equities was little changed. Australian and South Korean shares were slightly higher after Monday declines. Markets in Japan are closed for a holiday, which means there will be no Treasuries trading in Asia after muted moves in US yields Monday. Equity futures were flat in Hong Kong.

The broadly defensive moves come as Trump set tariffs on steel and aluminum shipments from all countries, including major suppliers Mexico and Canada, from March 4 but said he would consider an exemption for Australia. The president earlier said he would announce reciprocal tariffs this week on countries that tax US imports.

“The tariffs are not something that we will completely dismiss or ignore,” said Hartmut Issel, head of APAC equities and credit for UBS Wealth Management, speaking on Bloomberg Television. A mixed allocation of US stocks, high-grade bonds and gold “should give us a proxy against all of these tariff risks,” he said.

Aside from the global trade picture, investors will also be focused on this week’s key inflation data and Fed Chair Jerome Powell’s testimony before Congress. Expected inflation rates over the next year and three years ahead were both unchanged in January at 3%, according to results of the New York Fed’s Survey of Consumer Expectations published Monday.

“Inflation data, Powell’s congressional testimony, and tariffs are poised to drive the market story,” said Chris Larkin at E*Trade from Morgan Stanley. “If the S&P 500 is going to break out of its two-month consolidation, it may need a respite from the types of negative surprises — like DeepSeek, tariffs, and consumer sentiment — that have tripped it up over the past few weeks.”

Technology again led a rally on Wall Street, as Nvidia Corp. extended a five-day surge to 15% while Meta Platforms Inc. rose for a 16th session. United States Steel Corp. and Alcoa Corp. followed a move higher in metals. An index of American-listed Chinese shares rose for a third day.

Hedge funds emerged as big buyers of US stocks last week, shifting away from a previously bearish stance in the wake of stronger-than-expected earnings reports. They snapped up US equities at the fastest pace since November, resulting in the heaviest net buying of single stocks in more than three years, according to Goldman Sachs Group Inc.’s prime brokerage report for the week ended on Feb. 7. The activity was heaviest in the information technology sector.

The S&P 500 rose 0.7% Monday while the Nasdaq 100 climbed 1.2%. The yield on 10-year Treasuries was little changed at 4.5%. The Bloomberg Dollar Spot Index gained 0.2%. Gold topped $2,900 an ounce. Oil advanced from near its lowest levels this year as shrinking Russian production eased concerns over a glut.

The resilience of stocks in the face of tariffs may invite further trade escalations, making equity pullbacks likely, according to Deutsche Bank AG strategists including Binky Chadha.

They noted these pullbacks require the same playbook as for geopolitical shocks, which have historically seen sharp but short-lived selloffs, with equities typically bottoming even as the event continues and recouping losses before any de-escalation.

In such scenarios, equities would typically weaken 6%-8%, moving lower for three weeks before gaining strength for three weeks.

“For investors, the greatest market risk likely lies in policy unpredictability,” according to Christian Floro at Principal Asset Management. “Given this environment, diversification is essential to manage portfolio risk and capture opportunities as companies, countries and markets adjust.”

Key events this week:

Fed Chair Jerome Powell gives semiannual testimony to Senate Banking Committee, Tuesday
Fed’s Beth Hammack, John Williams, Michelle Bowman speak, Tuesday
US CPI, Wednesday
Fed Chair Jerome Powell testifies to House Financial Services panel, Wednesday
Fed’s Raphael Bostic and Christopher Waller speak, Wednesday
Eurozone industrial production, Thursday
US initial jobless claims, PPI, Thursday
Eurozone GDP, Friday
US retail sales, industrial production, business inventories, Friday
Fed’s Lorie Logan speaks, Friday

Some of the main moves in markets:

Stocks