March S&P 500 E-Mini futures (ESH25) are down -1.45%, and March Nasdaq 100 E-Mini futures (NQH25) are down -1.79% this morning as risk sentiment took a hit after U.S. President Donald Trump announced tariffs on Canada, Mexico, and China.
President Trump turned his tariff threats into reality on Saturday, imposing 25% tariffs on Canada and Mexico and 10% on China. Canada’s energy products will be subject to a 10% tariff. Trump said he imposed the tariffs under the International Emergency Economic Powers Act, citing the “major threat of illegal aliens and deadly drugs killing our Citizens, including fentanyl.” Trump stated that he plans to hold talks on Monday with Canada and Mexico before the tariffs take effect. The levies are set to take effect on February 4th.
Market participants look ahead to a new round of corporate earnings reports, remarks from Federal Reserve officials, and a slew of U.S. labor market data this week.
In Friday’s trading session, Wall Street’s major equity averages closed lower. Deckers Outdoor (DECK) tumbled over -20% and was the top percentage loser on the S&P 500 after the UGG bootmaker’s FY25 revenue guidance failed to meet investors’ lofty expectations. Also, chip stocks lost ground after Treasury yields advanced, with Nvidia (NVDA) dropping more than -3% to lead losers in the Nasdaq 100 and Advanced Micro Devices (AMD) falling over -2%. In addition, Walgreens Boots Alliance (WBA) plunged more than -10% after the drugstore chain suspended its quarterly cash dividend amid restructuring efforts. On the bullish side, Atlassian (TEAM) surged nearly +15% and was the top percentage gainer on the Nasdaq 100 after the company posted upbeat FQ2 results and lifted its FY25 revenue growth forecast.
Data from the U.S. Department of Commerce released on Friday showed that the core PCE price index, a key inflation gauge monitored by the Fed, came in at +0.2% m/m and +2.8% y/y in December, in line with expectations. Also, the U.S. employment cost index, a key gauge of U.S. labor costs, rose +0.9% q/q in the fourth quarter, in line with expectations. In addition, U.S. December personal spending rose +0.7% m/m, stronger than expectations of +0.5% m/m, while personal income grew +0.4% m/m, in line with expectations. Finally, the U.S. Chicago PMI stood at 39.5 in January, weaker than expectations of 40.3.
Chicago Fed President Austan Goolsbee commended the latest inflation data on Friday, particularly noting continued progress in reducing price growth in housing. “If you feel like we’re continuing on this path of inflation coming down to 2% then, to me, that opens a door for rates to be a fair bit lower than they are today once we’re 12 to 18 months in the future,” he said in an interview on CNBC. At the same time, Fed Governor Michelle Bowman said, “I would like to see progress in lowering inflation resume before we make further adjustments to the fed funds target range.”
Meanwhile, U.S. rate futures have priced in an 86.5% probability of no rate change and a 13.5% chance of a 25 basis point rate cut at the March FOMC meeting.
Fourth-quarter corporate earnings season continues, and investors await new reports from prominent companies this week, including Alphabet (GOOGL), Amazon (AMZN), Palantir Technologies (PLTR), Merck (MRK), PepsiCo (PEP), Advanced Micro Devices (AMD), Pfizer (PFE), Paypal (PYPL), The Walt Disney Company (DIS), Qualcomm (QCOM), Arm Holdings (ARM), Uber Technologies (UBER), and Eli Lilly (LLY). According to Bloomberg Intelligence, companies in the S&P 500 are expected to post an average +7.5% increase in quarterly earnings for Q4 compared to the previous year.
Market watchers will also be closely monitoring the U.S. January Nonfarm Payrolls report this week for fresh clues on the health of the jobs market. Other noteworthy data releases include the U.S. JOLTs Job Openings, Factory Orders, ADP Nonfarm Employment Change, Exports, Imports, Trade Balance, the S&P Global Services PMI, the ISM Non-Manufacturing PMI, Crude Oil Inventories, Initial Jobless Claims, Nonfarm Productivity (preliminary), Unit Labor Costs (preliminary), Average Hourly Earnings, the Unemployment Rate, the University of Michigan’s Consumer Sentiment Index (preliminary), and Consumer Credit.
In addition, a host of Fed officials will be making appearances throughout the week, including Bostic, Daly, Jefferson, Barkin, Goolsbee, Bowman, Waller, and Kugler.
Today, all eyes are focused on the U.S. ISM Manufacturing PMI, which is set to be released in a couple of hours. Economists, on average, forecast that the January ISM manufacturing PMI will be 49.3, unchanged from December.
Also, investors will focus on the U.S. S&P Global Manufacturing PMI, which stood at 49.4 in December. Economists expect the final January figure to be 50.1.
U.S. Construction Spending data will be released today as well. Economists foresee this figure coming in at +0.3% m/m in December, compared to 0.0% m/m in November.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.537%, down -0.66%.
The Euro Stoxx 50 Index is down -1.51% this morning after U.S. President Donald Trump imposed trade tariffs on Canada, Mexico, and China and warned of similar measures against the European Union and U.K. Trump told the BBC on Sunday that a deal could be “worked out” with the U.K., but remained adamant that tariffs on European goods “will definitely happen.” The EU pledged a firm response, raising concerns about the possibility of a global trade war. Automobile stocks, which are particularly sensitive to trade duties, led the declines on Monday. Technology, industrial, and mining stocks also slumped. Meanwhile, data from European Union statistics agency Eurostat released on Monday showed that Eurozone inflation edged up in January but stayed on a projected path that could enable the European Central Bank to implement further interest rate cuts. Separately, a survey revealed that the Eurozone’s struggling manufacturing industry showed early signs of stabilization in January. Investor focus this week is also on the Bank of England’s monetary policy decision, with the central bank widely expected to cut its benchmark rate by 25 basis points to 4.50%.
ECB Governing Council member Francois Villeroy de Galhau said on Monday, “Looking at the economic news, there are some rather positive elements, there is a recovery of purchasing power ... however, the decision of Mr. Trump to impose strong tariffs will increase economic uncertainty.”
Eurozone’s Manufacturing PMI, Eurozone’s CPI (preliminary), and Eurozone’s Core CPI (preliminary) data were released today.
Eurozone January Manufacturing PMI has been reported at 46.6, stronger than expectations of 46.1.
Eurozone January CPI stood at +2.5% y/y, stronger than expectations of +2.4% y/y.
Eurozone January Core CPI came in at +2.7% y/y, stronger than expectations of +2.6% y/y.
Japan’s Nikkei 225 Stock Index (NIK) closed down -2.66%, while mainland China’s financial markets were closed for a holiday.
Japan’s Nikkei 225 Stock Index closed sharply lower today, logging its worst session in four months as U.S. President Trump’s decision to impose tariffs on Canada, Mexico, and China dampened sentiment. Japanese automobile stocks plummeted on Monday after new U.S. tariffs on Mexico, Canada, and China heightened concerns about their U.S. sales of cars manufactured in the North American trading partners and the potential for further escalation in trade conflicts. Financial stocks also weighed on the index. A private-sector survey released on Monday showed that Japan’s factory activity contracted at the fastest rate in 10 months in January due to weak demand. Meanwhile, a summary of opinions from the Bank of Japan’s January meeting showed that concerns over the impact of Trump’s policies and the U.S. economic outlook were major topics of discussion. “The policies of the new U.S. administration will gradually become clear, and they are likely to affect Japan’s economy in various ways. However, the resilience of Japan’s economy as a whole has increased enough to withstand some downward stress,” one of the BOJ’s nine policy board members stated at the meeting. The summary also showed that the board believes further interest rate hikes are necessary. In other news, Japan’s Economy Minister Ryosei Akazawa stated on Monday that the country’s underlying inflation was approaching 2%. In corporate news, Konami Group surged over +14% after the video game developer raised its full-year earnings and dividend forecasts. The Nikkei Volatility Index, which takes into account the implied volatility of Nikkei 225 options, closed up +20.26% to 24.63.
The Japanese January au Jibun Bank Manufacturing PMI arrived at 48.7, weaker than expectations of 48.8.
China’s Shanghai Composite Index was closed today for the Lunar New Year holiday. Mainland China’s financial markets will reopen on Wednesday, February 5th.
Pre-Market U.S. Stock Movers
Megacap technology stocks are moving lower in pre-market trading, with Apple (AAPL) and Microsoft (MSFT) down more than -1%.
General Motors (GM) slid over -6%, and Ford Motor (F) fell about -4% in pre-market trading after Jefferies said in a research note that the legacy automakers appear to be the most affected by the announced tariffs.
Cryptocurrency-exposed stocks are slumping in pre-market trading, with the price of Bitcoin down more than -4%. MicroStrategy (MSTR) is down more than -5%. Also, MARA Holdings (MARA) is down over -6%, and Bit Digital (BTBT) is down more than -7%.
Cloudflare (NET) dropped over -2% in pre-market trading after Baird downgraded the stock to Neutral from Outperform.
Stratasys (SSYS) climbed more than +10% in pre-market trading after reporting better-than-expected preliminary Q4 revenue.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Monday - February 3rd
Palantir (PLTR), NXP Semiconductors N.V. (NXPI), IDEXX Labs (IDXX), Equity Residential (EQR), Tyson Foods (TSN), Clorox (CLX), Everest (EG), Healthpeak Properties (DOC), Aecom Technology (ACM), Saia (SAIA), Woodward (WWD), Bellring (BRBR), Kyndryl Holdings (KD), Fabrinet (FN), Rambus (RMBS), MGIC Investment (MTG), NewJersey Resources (NJR), NewMarket (NEU), Cabot Corp (CBT), Alliance Resource (ARLP), Twist Bioscience (TWST), J & J Snack Foods (JJSF), NAPCO (NSSC), Capital Southwest (CSWC), Kforce (KFRC), KKR Real Estate (KREF), RBB Bancorp (RBB), Johnson Outdoors (JOUT), Flexsteel (FLXS).
