US Stocks Mixed Again on Tariff Threats – Dow Down 0.4%
US stock markets experienced another mixed trading day yesterday as fresh tariff threats from President Trump hit the newswires and his tax cut plan passed in Congress. The Dow dropped 0.43%, while the S&P closed near flat, up just 0.02%, and the Nasdaq gained 0.26%. Treasury yields fell further, with the 2-year yield losing 2.3 basis points to 4.072% and the 10-year yield down 4 basis points to 4.254%. The dollar regained some of its recent losses, with the DXY gaining 0.3% to move back up to 106.49. Oil prices continued to decline, reaching fresh annual lows, with Brent down 0.37% to $72.75 and WTI off 0.20% to $68.79. Meanwhile, gold experienced a rare quiet day, closing up just 0.07% at $2,916.54.
Fed Rate Cut Expectation Pulled into June
US markets have seen increased volatility over the past few weeks, and expectations for Federal Reserve rate cuts have shifted significantly from just a month ago. Previously, markets had been pricing in just one cut in September, but a sharp drop in recent data prints has now pushed expectations towards a potential rate cut as early as June, with another possible in September. However, market dynamics in recent weeks appear to have changed. Equities had previously rallied as yields decreased, but this is no longer the case. The benchmark 10-year yield has fallen by over 11% from its high this year, yet stocks have not responded as many investors had hoped. This has led some market participants to speculate that a larger correction could be on the horizon.
US Data in Focus for Traders Today
The macroeconomic calendar is busier today, with a strong focus on US data in the final session. The first half of the day sees little scheduled, but activity picks up once European markets open. Swiss GDP data and Spanish flash CPI figures are due shortly after the European open, and traders expect corresponding market movements. However, the main focus for most investors will come shortly after the New York open, with the release of US preliminary GDP data alongside the usual weekly unemployment claims update. Given recent disappointing data prints, investors will be watching closely to see whether GDP falls below the anticipated 2.3% increase or if weekly claims significantly deviate from the expected 222,000 figure. Durable goods orders data is also set for release at the same time, though the other reports are likely to dominate sentiment.
