Futures for major U.S. stock indexes indicate a higher opening on Tuesday, suggesting a rebound in stocks following losses in the previous session. Investors may seize the opportunity to invest in technology stocks, now slightly more affordable after Monday’s sector-wide decline.
Particularly, Nvidia (NVDA) is seeing a pre-market increase of 3.3% after experiencing a significant drop of 17.0% during yesterday's trading. However, enthusiasm for buying might be tempered as traders anticipate the Federal Reserve's upcoming monetary policy announcement on Wednesday.
The Fed is widely expected to maintain current interest rates, but the statement accompanying the decision will be scrutinized for any indications regarding future rate expectations. Recent economic indicators have sparked concerns about interest rates remaining unchanged for an extended period. Nevertheless, many economists predict the Fed will resume rate cuts in the first half of the year.
CME Group's FedWatch Tool presently indicates a 74.5% probability that rates will decrease by at least a quarter point post the Federal Reserve's June meeting.
On Monday, U.S. stocks mostly closed lower, with technology stocks experiencing significant losses due to persistent selling pressure. The Dow Jones Industrial Average rose by 289.33 points, or 0.7%, to 44,713.58. In contrast, the S&P 500 decreased by 88.96 points, or 1.5%, to 6,012.28, and the Nasdaq dropped by 612.47 points, or 3.1%, to 19,341.83.
Earnings-related concerns contributed to the decline in tech stocks, propelled by the emergence of China's cost-effective AI model, DeepSeek, which has surpassed ChatGPT on Apple's App Store. This development has raised apprehensions about the potential loss of leadership by U.S. AI companies.
The rise of DeepSeek is challenging Silicon Valley's heavy investment in AI and the sustainability of U.S. technological dominance in artificial intelligence. As noted by ING, "This technology could potentially revolutionize the industry, prompting questions regarding the significant investments by traditional tech giants, known as the Magnificent 7, in AI development."
Nvidia's stock dropped nearly 17%, Micron fell by 11.7%, AMD saw a decline of 6.4%, and Cisco decreased by 5%. Shares of Alphabet, Intel, Tesla, and Microsoft also concluded the day with notable losses.
Conversely, companies such as PepsiCo, Apple, Amgen, Costco, Meta Platforms, Microchip, AstraZeneca, Starbucks, PayPal, and Texas Instruments recorded moderate to strong gains.
The outlook for interest rates continued to weigh on Wall Street ahead of the Federal Reserve meeting. Additionally, in economic news, new home sales in December exceeded expectations, according to the U.S. Commerce Department. Sales surged 3.6% to an annual rate of 698,000, following a 9.6% increase to a revised rate of 674,000 in November. Economists had anticipated a 0.9% rise to a rate of 670,000 from the initially reported 664,000 for November.
**Commodity and Currency Markets**
Crude oil futures are up $0.92, reaching $74.09 per barrel after falling $1.49 to $73.17 on Monday. Meanwhile, gold futures are rising $12.90 to $2,751.30 an ounce after a $40.50 decline to $2,378.40 in the previous session.
In currency markets, the U.S. dollar is now trading at 155.39 yen, compared to 154.51 yen at Monday's New York close. Against the euro, the dollar stands at $1.0424, down from $1.0492 yesterday.
**Asian Markets**
Asian equities traded mostly lower during thin trading on Tuesday, with markets in China, South Korea, Taiwan, and Indonesia closed for the Lunar New Year holiday.
Trade tensions lingered as Scott Bessent, President Donald Trump's Treasury Secretary nominee, advocated for new tariffs, warning of significant consequences for middle-class Americans if tax cuts lapse at year-end.
The U.S. dollar gained strength after Trump announced plans for extensive tariffs on steel, aluminum, copper, semiconductor, and pharmaceutical imports to boost domestic production.
Gold remained stable in Asian trading ahead of the Federal Reserve and European Central Bank meetings later this week. Oil prices regained some ground but remained near a two-week low following weak economic reports from China.
Japanese markets experienced a downturn, particularly in technology sectors, due to concerns over the introduction of a Chinese AI model. The Nikkei 225 Index fell 1.4% to 39,016.87, while the broader Topix Index saw a slight decrease to 2,756.90.In today's market developments, Softbank—a prominent investment firm heavily involved in the technology sector—experienced a notable decline, dropping 5.2%. Similarly, Advantest saw a sharp 11.1% decrease, while Tokyo Electron fell by 5.7%.
In Hong Kong, the Hang Seng Index saw a marginal increase of 0.1%, closing at 20,225.11 amidst reduced trading activity due to the holidays. Among notable performers, Alibaba Group Holding rose by 1.2%, and Tencent increased by 1.4% as confidence surrounding China's AI capabilities rose.
Meanwhile, Australian markets experienced a slight dip ahead of the anticipated release of fourth-quarter CPI data scheduled for Wednesday. The S&P/ASX 200 index decreased by 0.1% to 8,399.10, with declines led by property developers, energy, and tech stocks. The All Ordinaries Index also dropped by 0.2%, settling at 8,644.50. Across the Tasman Sea, New Zealand's S&P/NZX-50 Index fell by 0.3%, closing at 12,957.15.
**Europe**
European stocks saw mostly positive movement on Tuesday as investors prepared for upcoming meetings of the Federal Reserve and the European Central Bank. A lighter economic calendar saw French consumer confidence climb to 92 in January, up from 89 the previous month. Additionally, Spain's Economy Ministry announced plans to raise its GDP growth target beyond the current 2.4%.
The German DAX Index increased by 0.8%, the UK's FTSE 100 Index advanced by 0.6%, and France's CAC 40 Index gained 0.5%. Notably, German media company Freenet AG rose more than 1% following the appointment of Robin John Andes Harries as the new CEO. Siemens Energy rallied 3% after reporting heightened sales and earnings in the first quarter and adjusting part of its 2024/25 financial year forecast upwards.
In the biopharmaceutical sector, Basilea Pharma added 1.3% after announcing a 20% year-on-year increase in global sales of its antifungal product, Cresemba, reaching $533 million from October 2023 to September 2024. SAP SE saw a 0.5% rise as the company upgraded its operating profit and sales outlook for the year.
Contrarily, SThree faced a 2.5% drop in London following a decline in fiscal 2024 profit before tax to £67.64 million, down from £77.91 million the previous year. French engineering and technology consultancy Alten SA jumped 9% after reporting a revenue increase of 1.8% in 2024. In contrast, Netcompany Group A/S plummeted 17% due to fourth-quarter revenues falling short of expectations.
**U.S. Economic News**
A recent Commerce Department report revealed an unexpected sharp decrease in new orders for U.S. manufactured durable goods for December, largely attributed to a decline in transportation equipment orders. Durable goods orders fell by 2.2% in December, following a revised 2.0% drop in November. Economists had projected a 0.8% rise, differing significantly from the earlier reported 1.2% downturn for November.
Excluding the decline in transportation equipment, durable-goods orders rose by 0.3% in December after a 0.2% dip in November. Orders sans transportation were anticipated to increase by 0.4%.
Additionally, Standard & Poor's is expected to release a report on home prices in major metropolitan areas for November at 9 AM ET. The Conference Board is set to issue its consumer confidence report for January at 10 AM ET, with expectations of a climb in the index to 106.3, from December's 104.7. At 1 PM ET, the Treasury Department will announce the results of the month’s auction of $44 billion worth of seven-year notes.